Southeast Asia is the fastest-growing region in the world for mobile payments, according to a report published by US-based mobile payments firm Boku on Thursday. Mobile wallet adoption is being driven by the surge in online retail and services offered by apps like Grab and Gojek, with an expected growth rate of 311% between 2020 and 2025, registering a total of 439.7 million wallets in use across the region by 2025.
“Southeast Asia is one of the most rapidly digitalizing regions in the world. In 2020, the region added 400 million new internet users, with more than 70% of the region now online. Together with consumption trends brought about due to lockdowns during the pandemic, that has led to a familiarity with e-commerce and an exponential rise in mobile wallet use,” said Boku’s vice president and general manager of APAC, Loke Hwee Wong.
“This is also because the region was heavily dependent on cash and bank transfers before mobile wallet use, and the convenience and accessibility, especially with stored value mobile wallets, will see Southeast Asia leapfrog the rest of the world in mobile payment adoption,” he said in a press release.
Here are four key takeaways from the report.
#1: Chinese mobile wallets will not be impactful beyond their home market
Major Chinese wallets have been actively expanding around the world. For instance, Tencent’s WeChat Pay received a permit to operate its mobile wallet business in Indonesia last January. Alibaba’s Alipay is already in regional markets like Singapore, Vietnam, Hong Kong, and South Korea, as well as countries in Europe and North America.
Despite their international footprint, the report’s authors highlighted the “mostly limited” global impact of Chinese wallets, as Chinese tourists are largely unable to travel internationally and spend money overseas due to pandemic-related restrictions, hindering Chinese fintech giants from establishing deeper roots in emerging markets in Asia.
#2: E-commerce is the primary driver for growth in mobile payments
While China will remain the leading location for e-commerce growth in East and Southeast Asia for the next five years owing to its expansive market size, Indonesia and the Philippines will become increasingly significant in the online shopping space, providing a shot in the arm for various mobile payment channels that operate in these countries.
#3: QR codes are gaining traction in the payments scene
With countries like Singapore, Indonesia, Vietnam, and Thailand each launching national QR code payment schemes over the years, the protocol is set to dominate the payments scene in Southeast Asia. In mid-June, Thailand and Malaysia announced a QR payment linkage program that allows consumers from either country to perform cross-border transactions in real-time. The move came shortly after Thailand inked a similar QR payment partnership with Singapore and Vietnam in April.
With Southeast Asia being home to 290 million unbanked people, the report’s authors emphasized that the low usage of card payments may translate to a high cost of building card infrastructure such as point-of-sale terminals. In comparison, getting QR code payment channels up and running is a cheaper and simpler process.
#4: Super apps are here to stay, but other routes can also lure customers
Many standalone digital wallets that are not part of a super app ecosystem have gained traction over the years, pointing to the importance of developing a smooth user experience and general merchant acceptance for fintech channels to take off.