Cashless payments take flight on mobiles in Asia

ASIA'S population has embraced the Web, but the vast majority are still within the unbanked segment, locking them out of online transactions. Several mobile startups have discovered alternative ways to bring cashless services to those without bank accounts via their phones.

Speaking at the NUS Enterprise InnovFest conference, Nearex co-founder, Mahesh Goel, said that the region's developing markets continue to suffer from the lack of access to formal banking facilities but users have come up with unusual ways of going cashless, despite many not having bank accounts. Nearex is a local startup.

In some countries, where the majority of users are on pre-paid phone lines, users are substituting their mobile airtime for cash, and are using it to barter for goods with small merchants.

Others are sending airtime to each other, as a way of sending funds, because they don't have the ability to transfer cash to each other, he said.

The birth of microfinancing services such as M-Pesa has been useful in helping to bring services such as bill payment to the unbanked, but M-Pesa isn't preferred by small merchants just yet, when compared with the immediacy of cash payments, said Mr Goel. M-Pesa (M for mobile, pesa is Swahili for money) is a mobile-phone based money transfer and microfinancing service used mainly in Kenya and Tanzania.

Nearex makes a small point-of-sale (POS) device which allows a shopkeeper to accept payments from a pre-paid Nearex cash card. When tapped on the POS device, funds are debited from the card, and the POS device transmits payment data via GSM networks to credit the seller's account.

Nearex hopes that the POS will catch on in countries here, as well as in unbanked segments in Africa and the Middle East.

Elsewhere in Asia, the potential for cashless transactions go beyond brick-and-mortar stores.

Thai payment technology firm 2C2P's CEO, Piyachart Ratanaprasartporn, said the majority of users don't have credit cards, but e-commerce is sharply on the rise.

2C2P provides a payment gateway for sites, and processes credit card payments for them, similar to what PayPal does. Merchants can place a 2C2P form on their sites, which will allow users to pay via the channel.

Mr Ratanaprasartporn pointed out that for the 620 million people in South-east Asia, cash is still king for the low income masses. Most have no access to formal banking services, even fewer have credit cards, at about 60-70 per cent of the region, he reckoned.

Yet, the e-commerce market continues to explode here, driven by the young population's access to the Web on mobile phones. In 2012, the B2C (business-to-commerce) e-commerce market in Thailand was worth US$3.3 billion, with just 35 per cent of those transactions going over credit cards, he said.

Figures from one of Thailand's largest e-commerce stores, Tarad Rakuten, highlight the momentum in the country. Tarad saw sales increase by 71 per cent over the last three months of 2013, and the number of visitors to the site was 93 per cent higher over the period, compared with the corresponding period the year before.

Mobile sales, however, showed the most dramatic increase. Tarad saw mobile-based sales increase 637 per cent over the period, and mobile traffic increase by 564 per cent. The majority of payments are still via cash, and primarily conducted over cash-on-delivery (COD) but that method isn't sustainable, said Mr Ratanaprasartporn.

"With COD, buyers don't have to commit to the goods, so it's risky for sellers. Often, the delivery man steals the money, as well," he said.

Furthermore, for cash or basic inter-bank fund transfers, the paper trail can be a nightmare. Many sellers in the region don't have formal transaction processes, meaning individual cash payments or fund transfers need to be matched to the corresponding sale before receipts can be issued.

2C2P has placed about 20,000 cash collection points across Thailand where users can top up their accounts by cash. This allows them to pay for goods on sites which accept 2C2P payments without needing credit cards or bank accounts. This process is invisible to the merchants accepting 2C2P payments, since 2C2P acts at the middleman between them and consumers.

Last year, Thai mobile telco AIS launched a virtual credit card together with MasterCard, offering users a 16-digit credit card number that they can punch into websites. But unlike a traditional, physical credit card, the virtual card is tied to their mobile, and users need to top up the value in the virtual account through their mobile phones before transacting.

Gigi Gatti, senior consultant financial services with the Grameen Foundation, said that the mobile phone has triggered a seismic shift in cashless activity in the Philippines.

Ms Gatti, who is based in the country, said that just 30 per cent of the 100 million people in the Philippines has access to formal financial channels. "The others have no means to pay their bills, or to receive money from family working abroad," she said, of the 10 million overseas Filipino workers, who in 2013 sent US$22.8 billion back home.

Around 37 per cent of municipalities have no bank offices, and just 12,000 ATMs (automatic teller machines) and 9,000 physical bank offices are scattered across the 7,000 islands that make up the Philippines. Despite the lack of banking infrastructure, the mobile phone penetration there is an astounding 112 per cent. Around two billion SMS messages are sent a day, she said.

With the far lower friction to getting a mobile phone compared with setting up a bank account, preferences have naturally tilted in favour of e-wallets by the country's two main telcos, Globe and Smart, said Ms Gatti. She pointed towards a mobile money effort called Banko, run by the Bank of the Philippine Islands (BPI) and Globe. The mobile-based savings bank offers users services like sending money, paying for bills and loan applications via their phones.

It kicked off retail operations in 2010, and it now has 15,000 mobile money agents, which helped facilitate 614 billion pesos (S$17.3 billion) in transactions in 2012. Mobile money agents are third party stores which take cash for loading into mobile bank accounts. As at April 2014, over 561,000 user accounts have been created, she said.