While the growth of Alibaba and Alipay as well as Tencent and WeChat pay in China is well known, there have been questions about whether a similar model can succeed outside of China. Local players as well as those Chinese giants themselves are starting to show that a super-app may well succeed in other markets in Asia too.
Just a few years ago, few would have expected airlines and transport companies to power financial services. Now, however, they’re doing just that.
“BigPay is our version of a challenger bank,” said AirAsia founder Tony Fernandes, with “low cost transparency and value to the unbanked. It’s no different from AirAsia. In financial services, there is insurance, banking. We see a similarity between AirAsia and fintech - low fees, transparency and volume. The similarity is uncanny.”
The 5-year goals, Fernandes said, are to create a payment system that allows interoperability, to make moving money easily and to build a lending platform. “We hope BigPay will make Southeast Asia a much smaller place.”
A key advantage that BigPay has, Fernandes said, is the ability of AirAsia to get its 140 million customers onto the platform. “There are not many ASEAN brands with our database. Our customers use remittance services and are overcharged - high exchange rates, ripped off. Many customers have difficulty getting access to capital - we want to start a lending platform.”
Grab aims to grow from a Super App to a Super wallet
As it expands, said Grab Financial Group senior managing director Reuben Lai, Grab has two objectives: To take consumers from offline to online, and to support small businesses.
It is well along towards reaching its goals. “We are now the largest payments ecosystem in Southeast Asia,” Lai said. “We have access to money across six economies, with 600,000 merchants. We have the largest consumer base, 138 million downloads. We have world class partners – Mastercard, Chubb, Credit Saison, UOB, Maybank, SM Group, Kasikorn Bank. We have pieces of the puzzle in place to transform commerce in Southeast Asia, to level the playing field for small business owners.”
To serve its customers better, Lai announced the launch of Grow with Grab, which he described as a comprehensive financial services offering to support small and medium businesses in Southeast Asia. “We want them to be able to generate more earnings, to give them the ability to have the capital go grow their businesses, to ensure that their business, their families are well-protected using microinsurance.”
The approach, Lai said, is to make Grab’s products customised, affordable, transparent and easy to use. Small business are able to accept Grab Pay via QR, and Grab Pay is integrated into point of sale devices. Additionally, Grab Pay Online enables Grab Pay to be accessible for ecommerce in Southeast Asia, so that consumers who don’t have a bank account can transact using their Grab Pay wallet.
Grab has also started providing SMEs with loans, which will help them overcome a key barrier to expansion. Grab is starting with Singapore, he said, and it is in the midst of applying for licensing in other markets.
Lai also announced the launch of Pay Later, which enables consumers to make instalment payments. In developing economies, he said, more than 90 percent of consumers do not have access to credit cards. “We want to smooth out cash flow volatility. We will first launch in Singapore. We will be extending across Southeast Asia.”
And finally, Grab launched a microinsurance platform which enables drivers to buy customised products.
The result, Lai said, is that ‘Grow with Grab’ offers a comprehensive financial services platform for small businesses, with transparent pricing that can serve small businesses in Southeast Asia and provide the tools to grow.
The Big Chinese Players Continue their Relentless Expansion
Along with competing against global and domestic card schemes as well as financial institutions, upstarts such as BigPay and Grab Pay will need to contend with growing behemoths from China. If anything, Tencent and Ant Financial are only increasing the pace of their overseas expansion and Alipay may have gained the upper hand in this battle by end of 2018.
Already, said Tencent Senior Director Wendy Sun, WeChat Pay covers more than 40 markets overseas and can support 16 currencies. Chinese travellers, who took 149 million overseas trips in 2018, can pay in RMB and have no need to exchange foreign currency.
To push its expansion further, she said, Tencent is continuing to add new products.
WeTax Refund, for instance, offers tax refunds in a service embedded in WeChat. Along with being available in 83 airports in 20 countries, it offers tax refunds at home for Chinese travellers who have visited any of 27 different countries and deposits their refund in RMB into their WeChat account. “This year we want to open Southeast Asian countries to accept the refund,” Sun said
In Hong Kong, Tencent launched its wallet in 2016. It also launched a service in October 2018 that allows Hong Kong users to use their wallet in China. It currently supports one million merchants in China who can accept Hong Kong wallets.
Tencent has also launched We Remit, a cross-border remittance product for workers in Hong Kong from Indonesia and the Philippines. Sun said that “We Remit gives helpers a hassle-free real-time remittance service in their smartphone.” .
In Southeast Asia, Sun said, Tencent received an e-money license from the central bank in Malaysia in 2017. “We have 20 million users in Malaysia. To make our service attractive, we tried to create use cases which use the local culture. We launched a money packet solution, to send to your friends during the local festive season. Last year, users sent more than 2 million packets.” Moreover, customers can make offline transactions in places such as supermarkets and Starbucks, as well as making online purchases for services such as airline and bus tickets.
As Tencent continues its expansion overseas, Sun said “we have a lot of solutions to solve the pain points of our users with our financial technology.” In developing solutions, Tencent, focuses on three questions: “what product to the customer, what value-added services to the customer, what is the differentiator we can bring to the market. Our strategy is to connect everything – connect people, connect partners. In China we created a powerful ecosystem. That is the same approach when we build up overseas.”
(1) active digital users as defined by the FI
(2) estimated based on indirect data such as active ratios, total customer, growth, or retail digital user base
(3) ‰ of total population is defined as the growth of digital users per month divided by total country population and measured in per mille = 1/1000
(4) To determine ‰ for multi-regional FIs we aggregated the number of population by country.
Source: Asian Banker Research
Growing Alipay by making Payments more Local
A key lesson he’s learned as Ant has expanded, Ant Financial president of international business growth Douglas Feagin said, is that the customs in different countries are very local. As one example, Ant started working on a money market fund with Paytm in India. Responding to suggestions from Paytm, however, it switched to Paytm Gold. "It’s been really successful, something we would not have thought of. Paytm is the biggest store of gold in the country.”
One key challenge, he said, has been KYC. Some countries have tiered KYC systems, allowing onboarding with limited KYC and then adding a higher level of KYC as balances increase. In other markets, KYC can be a key limitation. The use of biometric identification is growing, he observed, and can transform a mobile payments system. “You’re going to see more rapid development in many markets. Biometrics, it’s safer, easier.”
Feagin said he believes “we’re in the first inning of development of mobile payments. Our partners are using ride-sharing, mobile top-up, to get it started. That is only the tip of the iceberg. When you get people to adopt, build a merchant network, then people see the whole ecosystem as having more use. You’ll see a dramatic transformation in Southeast Asia in the next few years.”
The segment that will change the most, Feagin believes, is small business. “Small business owners today are running their business and taking cash. They have no way to market, they can’t transform that customer to something online. With mobile payments, they can do all those things. They can maintain that relationship. We can offer other services, lending to the small business. The small business owner is going to be completely transformed.”
A big part of the next wave of technology, Feagin believes, is artificial intelligence. Blockchain is also going to be huge, he said, and even more transformational. The development will come from making the existing payment infrastructure more efficient and user-friendly, rather than from cryptocurrency.
What’s next, he said, is the ability to serve a broader range of consumers and do more. “In nine markets, we’ve started to offer more services. We’ll do more on the lending side and the ability to save. On the business side, the acquisition of World First, they have multi-currency, transact on a global basis. We plan to build that out more broadly.”
“Our mission is about financial inclusion,” he said in conclusion. Globally, 1.7 billion people are excluded from financial services. “I would hope to bring that to less than 1 billion. If we can play a part, we’ll feel good.”
Exploring New Data Sources
While financial services platforms are growing, domestic ecommerce platforms are moving into new services and gaining ground as well.
Although Flipkart in India started as a bookstore, said head of engineering pricing Srinivas Chamarthy, it is entering new verticals day by day and in the 10 years since it launched has moved into “everything”. “We’re one of the biggest e-commerce players in India. (We have) millions of active users, categories, products.”
Going forward, Chamarthy said, a key new revenue opportunity for Flipkart as well as for banks is likely to be microloans for individuals and peer-to-peer loan. “Information that shows the repayment capability is not being shared,” he said. ”If banks can get that, (there will be) microloans, millions of dollars of lending.
A key driver of growth, Chamarthy said, is data. “We use a lot of data, to predict what our customers would like to buy, the price point, how to show the customer what they would like.” While Flipkart has plenty of data, he said he still wants more. “I would love to see defaulter information, more than repayment. Are they going beyond their capability. Reward the people who can take the extra step. That would build loyalty. And it would build fintechs.”