Money, for all intents and purposes, is nothing. It could be a grain of sand, a pebble or a loose piece of paper with a historical figure on it. The value that people agree to place on it has absolutely nothing to do with the physical value of money. The value of money is derived as a bartering tool and for the past 3,000 years has allowed civilisations to trade goods and services in much quicker succession than ever. Moving into the 20th century, money in the form of cash is slowly being eradicated by the advent of credit cards.
Now, as many e-commerce businesses are vying for competitiveness in Money 2.0, the idea of a digital wallet will eliminate the traditional method of money transactions, simplifying and compacting the way goods and services are bought and sold.
Ask yourself this: Is there still a need for your fat wallet stuffed to the brim with multiple credit cards, a stack of bills, spare change and dozens of loyalty cards? Can technology reduce or eliminate the need for these necessities? Can technology eliminate the need for a wallet at all? First, there is the advent of Near Field Communication (NFC), in which radio communication by close proximity enables secure data transfer, which increasingly allows the wallet to become obsolete.
Jared Newman of TIME Magazine wrote of NFC, “Imagine if, in addition to all the things your smartphone does now, it could also act as your keys to the real world. Instead of fumbling through a wallet for your credit cards, coupons, gift certificates, plane tickets, membership cards and receipts, you could simply tap your phone to a terminal. All the necessary information would load automatically, and then you’d confirm your identity with a thumbprint or PIN.” And this was in 2012.
Fast-forward three years and your phone is now more powerful than ever.
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What the big players are doing
A few technological giants have all recognised a need in the market for transactions to be easier and safer. Apple is slowly implementing its much anticipated Apple Pay and Google with Google Wallet. While in February of this year, South Korea’s household brand Samsung purchased LoopPay, a Boston-based digital wallet firm, which will be integrated in all new Galaxy S6 and S6 edge smartphones, called Samsung Pay.
Samsung Pay will be using magnetic secure transmission (MST) technology, which allows the majority of retailers to accept it without any change to existing hardware or infrastructure. The Samsung Pay service will also use NFC while the additional MST technology will allow the phone to talk to old-school credit card swipe readers even when NFC technology isn’t present.
Banks have to move beyond cash and checks
In similar fashion, banks have also started to integrate digital payments platforms as part of their banking services, an addition that has been very well received within certain Asian countries, most notably in Singapore. MasterPass, a global digital payments platform launched by MasterCard, was first launched in Singapore in June 2014.
With this technology, consumers can “connect” their MasterPass wallet with a merchant, and complete a checkout in one-click. Luxola, Shaw Theaters, Singapore Airlines and many other Singapore-based online merchants have started to accept MasterPass payments, while Asia-based payment technology providers such as AsiaPay, eNETS, MC Payment and WireCard have opened up access to MasterPass for all their merchants.
Dash, a mobile money service by Standard Chartered and SingTel, has partnered with big chain merchants in Singapore such as 7-Eleven, ACE Insurance, Pizza Hut and KFC to offer these alternative payment options to customers. With this growing trend, other banks have followed suit, pushing out their own digital wallet apps: OCBC’s Pay Anyone and DBS’ PayLah and MobilePay.
The transition to payments made through digital wallets has been a popular approach taken by most of Asia’s biggest banks, and the seemingly warm reception of Singaporean merchants to this new technology is a sign of expansive efforts to make digital payments available all throughout Asia.
Problems with digital wallet
There are however a few considerations that come with introducing the concept of digital wallets in Asia.
The two key problems are – access to financial services for consumers and the lack of connectivity or card acceptance infrastructure, despite the readiness of consumers to go digital. For the former, high barriers to cross-border remittances in the region complicates the electronic payment procedure. With discrepancies in legalities and currency exchange (especially in and out of China), it is far more difficult to regulate electronic payments accurately and efficiently.
More so, a large numbers of people who are still currently unbanked make it difficult for digital wallet technology to fully penetrate developing economies compared to its developed counterparts; the transition is made to be much harder when a large segment of the population is left out of the process, giving less incentive for banks and retailers to make the full switch.
As for the latter, lack of infrastructure in the majority of Asian nations makes it impossible to have electronic payments of any sort at all. In the Digital Evolution Index, MasterCard ranked 50 countries on their readiness for digital commerce.
What can be done
Among the six surveyed countries in Southeast Asia, three of them (Vietnam, Indonesia and the Philippines) were ranked only 45th, 46th and 47th respectively. To work around this infrastructure, mobile point-of-sale terminals must take necessary steps of implementation to allow smaller market-stall and street-vendor merchants to accept payments in the form of credit and debit cards before the digital revolution can even begin to take place.
The way society transacts is beginning to change drastically. With the advent of new technologies such as NFC and commercialised cloud storage, removing the physical wallet and replacing it with a digitised wallet on your mobile devices is fast becoming the norm rather than the exception. With the large number of retail businesses and consumers that are constantly transacting with each other coupled with the high penetration of mobile devices in the region, whether it be local, citywide, or cross-country, Asia as a region is beginning to warm up to the idea of digital transactions.
The transition to digital wallets in Asia is no longer a question of if, but when.
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