In the contemporary Western world, cards have established themselves as the prevailing mode of payment for daily transactions, business purchases, and more. Notably, in Germany, my country of origin, credit cards are owned by over 56.62 per cent of individuals aged 15 and above, while an impressive 94.01 per cent possess debit cards. Similar patterns can be observed throughout Europe, the United States, and more.
Conversely, Southeast Asia presents a distinct scenario, within which I have actively operated in the fintech and payment services sector for nearly a decade. This region exhibits a substantially higher proportion of unbanked and underbanked individuals, reaching 70 per cent. Consequently, the overall adoption of cards among the general population has remained relatively limited, with a preference for cash as the primary means of payment.
Nonetheless, the advent of the pandemic has catalysed significant transformations within the payments landscape across Southeast Asia. I have personally witnessed an increasing receptiveness to digital payment methods among consumers.
As per Visa’s Consumer Payment Attitudes Study 2022, more than half (56 per cent) of the respondents have diminished their reliance on cash since the onset of the pandemic, instead embracing cashless alternatives such as mobile wallets, QR codes, and other emerging technologies.
The persisting challenge against card adoption
Despite the growing trend towards cashless transactions, the widespread acceptance of cards among the average Southeast Asian consumer continues to face certain challenges. Countries such as Indonesia, the Philippines, Thailand, and Vietnam, which have significant unbanked or underbanked populations, exhibit a strong preference for mobile wallets like GoPay, GrabPay, or TrueMoney.
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This preference is driven by the inherent convenience offered by mobile wallets, predominantly provided by emerging fintech companies. With just a smartphone and a mobile number, consumers can swiftly begin using their mobile wallets without needing a bank account or a protracted verification process.
Furthermore, mobile wallets enjoy broad acceptance among a diverse array of online and offline merchants, particularly in the realm of e-commerce, where the market is projected to reach a substantial US$200 billion by 2026.
From a business standpoint, especially for the 70 million micro, small, and medium-sized enterprise (MSME) owners that constitute 97.2 per cent to 99 per cent of the total businesses in Southeast Asia, adopting mobile wallets (and, to a certain extent, QR codes) as payment options present a significantly more convenient choice.
In Indonesia, the government has proactively introduced a universal QR code system known as QRIS (Quick Response Code Indonesian Standard) to standardise QR code-based payments for MSMEs across the nation. This initiative empowers business owners to accept payments from any operator, whether from banks or non-bank entities. The registration process for QRIS is relatively straightforward, accessible online, and requires minimal documentation.
Other side of the coin: Potential opportunities
While card adoption faces challenges in Southeast Asia, there is still future potential for further growth in the region. Fintech and non-bank institutions are exploring novel applications for card-based solutions, such as virtual cards.
Virtual cards offer advantages over physical cards by eliminating the need for physical presence and bank accounts, making them ideal for global online transactions and a wider variety of use cases, such as BNPL loans.
Furthermore, the resurgence of international travel as borders reopen presents opportunities for increased cross-border spending. Outbound Southeast Asian travellers, mainly from Indonesia and the Philippines, are showing a recovery trend based on keyword search data from Google in Asia, indicating potential growth in leisure and business spending.
While mobile wallets and QR-code-based payment solutions primarily target the domestic market, cards issued by major companies like Mastercard or Visa are widely accepted by a larger number of merchants worldwide, offering a higher level of convenience, especially for travellers.
Also Read: Shouldering the responsibility of digital payment security
At the end of the day…
The dynamic digital payment landscape in Southeast Asia holds significant potential for flourishing card adoption and promoting financial inclusion. The emergence of diverse fintech and non-bank players in the market has disrupted the traditional monopoly of card issuance by traditional banks.
This influx of new participants creates an environment ripe for innovation, particularly in the backend operations of card services. By leveraging technological advancements and optimising processes, these players can drive operational efficiency, seize business opportunities, and enhance customer experiences.
It is within businesses’ discretion to determine whether their target market aligns with the use of cards. However, if there is alignment, there is ample room for further innovation and development of card services in Southeast Asia, surpassing the existing boundaries of what has been accomplished thus far. In this context, international players like Marqeta, Unit, and Galileo have paved the way for card adoption among fintech and their users.
As their Southeast Asian counterpart, Ayoconnect has recently introduced a similar offering with white-label virtual cards. They are leveraging their PCI-DSS compliance and Mastercard’s extensive card network to enhance the potential for card adoption and promote financial inclusion in the region.
As the region continues to evolve, the adoption of cards has the potential to transcend limitations and redefine financial inclusion, providing consumers with convenience and security while fostering economic development. With the right mix of innovation, collaboration, and regulatory support, Southeast Asia can unlock the true potential of card adoption, empowering businesses and individuals.
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