The full version of Michael’s article appeared first in Mobile Payments Today
Grab, southeast Asia’s leading ride-hailing company made headlines recently when it announced that it will be entering the fintech space with its launch of a credit based digital payments company. This move comes as they struggled to find a suitable partner in Singapore to deliver the truly mobile payments experience its customers demanded. The Singapore based company currently dominates the regional market with 70% market share and a loyal customer base that global players like Uber struggle to rival. This move will expand its role beyond transport and enable users to pay for goods and services in shops and restaurants using GrabPay, the company’s mobile wallet.
Grab’s experience of a fragmented payments market reflects a much broader problem – and one the payments and mobile industry have barely started to address. Wallet solutions such as Singtel Dash are carrier specific and most countries have multiple large carriers, thus a merchant needs to integrate and manage each one to cover a territory. Alongside this merchants are quickly realising that if they rely on card based payments they hit a new challenge – universal consumer mobile adoption on one hand and low credit and debit card usage on the other.
So what has attracted the world’s leading digital brands to rush to adopt truly mobile payments like Alipay and DCB, and prompted Grab to launch its own payment platform and how can the payments industry learn from their rapid adoption to drive monetisation on the mobile channel?
- Global reach: As companies like Amazon, Spotify and WWE have quickly realised – mobile payments such as carrier billing and credit based systems where customers can pay their bill in cash or top up, allow them to monetise across multiple territories where banking penetration is low, but mobile use is almost universal. In fact, Grab co-founder, Hooi Ling Tan, pointed out that nine in ten people in southeast Asia do not own a credit card and that 75 per cent of its population is unbanked. This problem isn’t limited to Southeast Asia. Globally, the reliance on card payment methods is failing merchants and their ability to further monetise. Despite the fact that there are five billion phone owners globally, there are only 1.5 billion credit card owners. This difference highlights how a truly mobile payments solution offers an opportunity to create a global network 5x larger than Visa or MasterCard. In doing so carriers and payment providers would open up m-commerce for the huge sections of the population who are unbanked, creating amazing opportunities for merchants and brands.
- Recognition of changing consumer behaviour: Developments in innovative markets including Japan and China provide examples that banks, merchants and especially mobile carriers in other parts of the world can learn from In Japan DCB – now accounts for 50% of all online purchases. Carriers in Japan have also worked to promote the use of DCB to consumers and merchants, particularly through partnerships with high profile brands – such as DOCOMO’s work with Amazon. By offering access to new services the carrier is delivering new products and brands to the consumer and driving conversion for the merchant. These truly mobile payments reduce friction in mobile payments – DCB offers up to 10x the conversion of other payment methods. This is because it uses the mobile network’s billing platform to allow a customer to securely add a charge to their mobile phone bill with no data input and just one click. This is particularly attractive for consumers who increasingly want to use their mobile to make purchases and engage with services on the go.
- Challenges in the existing payments market: The recognition from the world’s largest brands of the potential of DCB presents both an opportunity and a challenge. In the current market, mobile operators are too fragmented to exploit the potential network of 5bn users to enable a single point of access for merchants – thus Grab has had to build their own payments platform. As money becomes digital, those brands with customer reach will automatically become financial institutions. We’ve seen Uber launch a credit card, Facebook has launched P2P payments, and Grab has joined this trend. The payment industry is at risk of becoming disintermediated unless it starts to address the behavioural trends of customers.
Grab has been failed by the payments sector – so it found its own solution. Companies like Uber face these very same problems globally as they are too reliant on card as their primary payment method and are frustrated by the fragmented carrier payment options. Across the world credit card and banking penetration is too low, yet in almost every region it remains the default payment method for m-commerce. Fundamentally it is critical that the payments industry starts to look at incorporating alternative payment options into more traditional payment networks and platforms. Carriers and regulators have a significant role to play to realise the growth opportunity offered by enabling a single point of connectivity. At the same time, the industry needs to drive better regulatory frameworks to govern the roll out of these new payment options to build customer trust and adoption.