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Asia Pacific Payments Trends
Global Payments Summit 2013
June 7, 2013
Singapore
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
McKinsey & Company |
Globally, payments represent close to 1 trillion EUR in revenues,
out of which 33% are generated in APACGlobal banking revenues, %, 2011
100% = EUR 3,100 billion
Retailaccounts
Corporateaccounts
Credit cardissuing
Cardacquiring
E-purse/prepaid
34
35
25
5 1
SOURCE: McKinsey Payments Map
NorthAmerica
Europe
APAC
LatAm
Other
25
25
33
15
2
100% = EUR 930 billion
70
Other bankingrevenues
Payments& accounts
30
Pre-tax profits margin 20-25% (equivalent to EUR 180-230 billion operating result)
McKinsey & Company |
Commercial CA
Latin America
200
1
5
8
15
EMEA
370
11
43
41
41
APAC
14
32
4
49
Consumer credit
card issuing
Consumer CA
Merchant acquiring
Commercial credit
card issuing
26
~04
37
33
North America
320
41
31
Percent of total revenue pool within geography, 2011, USD Billion
Regions have different sources of revenues
Co
ns
um
er
Co
mm
erc
ial
430
SOURCE: McKinsey Payments Map
McKinsey & Company |SOURCE: McKinsey Global Payments Map
898
37%
27%
18%
17%
2010
28%
37%
22%
13%
606
+8% p.a.
Asia-Pacific
North
America
Europe2
LatAm1
2015
15
14
2
CAGR,
2010-15
PercentGrowth 2010-15
USD billions
10%
7%
57%
293
26%
Asia-Pacific will account for 50% of global payments revenue
growth, excluding accounts, over the next 5 years.
1 LatAm – Argentina, Brazil, Chile, Colombia, Mexico
2 Europe – EU27 excluding Luxembourg, Cyprus, Malta, Bulgaria and the 3 Baltics plus Norway, Russia and Switzerland
Global payments revenues
excluding accounts
USD billions
5
3
McKinsey & Company |
Pay later cards account for over 50 percent of the total
revenues in Asia
Payment revenues excluding accounts, 2010
USD billions
45
27
16
12
153
42
Fees
Net interest
income
TotalOthers1
(fees)
Debit
cards
(fees)
10
Cheque
and cash
(fees)
Transfers
(fees)
Pay later
cards
87
1 Includes prepaid, digital, e-money, float
4SOURCE: McKinsey Global Payments Map
McKinsey & Company |
UK
Hong Kong
Singapore
Korea
Australia
Germany
Japan
Portugal
Spain
Brazil
Poland
Italy
Malaysia
South AfricaKSA
Turkey
Russia
Finland
Thailand
China
Kenya
Indonesia
MexicoCanada
US
France
Belgium
India
Ch
eq
ue
Ele
ctr
on
ic
Card transaction per capitaFinland 30,8Canada 45,3US 46,9France 50,2Belgium 52,9UK 53,2Hong Kong 53,7Singapore 55,5Korea 58,9Australia 61,7Germany 68,6Japan 75,0Portugal 77,2Spain 80,4Brazil 85,0Poland 88,4Italy 88,5Malaysia 92,3South Africa 92,4Saudi Arabia 93,4Turkey 93,7Russia 94,7Mexico 96,2Thailand 97,2China 97,8Kenya 98,1Indonesia 99,4India 99,6
Cash’s share of total transactionsPercent
Electronic share of non-cash transactionsPercent, transactions per capita
SOURCE: McKinsey Payments Map
Consumers display very different behavior, with Nordics historically
leading the way in digitalization for payments
Card & cheque
Full electronic
Cash & paper
Cash & electronic
McKinsey & Company |
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
Percent holding bank account
Percent banked using electronic payments
0,90,80,70,60,50,40,30,20,10
Vietnam
India
Indonesia
Kenya
UAE
KSA
China
Thailand
Russian Federation
Turkey
South Africa
PolandMalaysia Italy
Japan
Brazil
Spain
Germany
Belgium
Korea
UK
France
Australia
Sweden
US
Finland
Singapore
Despite relatively high share of banked population, share of people using
electronic payments remains low
SOURCE: Worldbank, McKinsey Payments Map
235515152033384754697097101124
230248269280304337
378393430
699
VietnamIndiaIndonesiaKenyaUAEChinaThailandRussiaTurkeySouth AfricaMalaysiaItalyPolandBrazilJapanSpainGermanyBelgiumFranceUKKoreaAustraliaUSSwedenFinlandSingapore
Transactions per capita, 2011
Relatively few banked Malaysians use electronic payments…… resulting in low non-cash numbers compared to best
McKinsey & Company |
3
Retail payments landscape in Asia is likely to driven by 6 major trends
7
Supplier driven push to drive usage of existing form factors –
credit and debit cards 1
Shift in consumer behavior towards digital transactions and
payments2
Emergence of multiple stored value solutions to electronify low
ticket transactions
Rapid electronification of remittances (especially cross border in
select corridors)4
Enhanced stress on innovation to win5
6Changing player landscape – emergence of non-traditional players
and innovative partnerships
McKinsey & Company | 8
Supplier driven thrust along with regulatory support could accelerate
growth of credit & debit card usage
1. Push on credit and debit cards
▪ Higher credit card penetration
▪ Increased debit usage
▪ Faster terminalization
POS adoption at merchants
▪ Deployment of new technology to meet
merchant needs
▪ Enhanced solutions, reward programs and promotions
EMV Chip + PIN for better security
▪ Industry wide initiative to roll out
EMV Chip + PIN for
debit an credit cards
Enhanced card value propositions▪ Rewards for debit card
with improved features e.g., linked credit,
installment plans
▪ Higher credit card penetration leveraging all data - internal and
third party
Tax incentives to consumers and merchants▪ Tax incentives by
income deduction (e.g. Korea) or VAT refund (e.g., Argentina, Colombia)
McKinsey & Company |
73
339
250
16
166125
42
115
5
2015
162
2010
44
2008
15
Prepaid
Online
Mobile
114%
13%
49%
13%
15% 15%Developed Asia1
Developing Asia2
23% 23%
178%
288%
81%
36%
69% 30%
17% 17%
1 Australia, Japan, S.Korea, Taiwan, Hong Kong and Singapore
2 China, India, Indonesia, Malaysia and Thailand
SOURCE: McKinsey Global Payments Map; IDC New Media market model; Passport Internet retailing report; eMarketer
Asia Pacific B2C ecommerce report
CAGREmerging payment flowsUSD billions 2008-10 2010-15
2. Growth in digital payments
9
Emerging payments, particularly mobile, will experience extremely
strong growth.
McKinsey & Company | 10
Fully functioning “digital wallets” could
leapfrog payments evolution across markets
Payment processing
Travel and More
Payment forms
▪ Credit and debit cards
▪ Prepaid card accounts
▪ Gift cards (closed loop)
▪ Private label credit
▪ Loyalty schemes
▪ Rewards currencies
▪ Unsecured credit
▪ Etc.
Local value storee.g. PayPal account balance
Offers, from▪ Pre-screened sources e.g.
Alliance Data
▪ Offers engines e.g. Groupon
Paid banner advertising
SOURCE: McKinsey Payments Practice
Network Payment Card
“Clipped”
offers
Offers
poolAdvertising
‘Social’ layer
Reviews, shared experiences, etc.
Digital wallet application(accessed through browser or app)
Private Label Card
Loyalty Card
Gift Card
Online and offline purchase tools(i.e. the consumer toolkit at “buy”)
Pre-purchase inputs (i.e. acquired
during “consider” and “evaluate”)
Payments
& banking
Retail
Online
marketing
Telecom
(MNO, handset)
Legend: Industries involved
Primary direction
of data flow
2. Growth in digital payments
Secure connection:
� Internet via MNO
� Internet via Wifi
� NFC
� SMS
Secure connection:
� Internet via MNO
� Internet via Wifi
� NFC
� SMS
Data e.g., aggregated
personal, transactions,
activity
McKinsey & Company | 11
Emergence of multiple solutions in stored value could electronify low
ticket payments
Multiple uses of prepaid cards to replace cash
2010 annual load, USD billions
1
China
89
57
23
5 3
2
India
7
0
3
1
1
Gift
B2B/B2C benefits & payroll
eMoney/transportation
Fuel
Travel
CEPAS example (Singapore) –promoting common standards
▪ Contactless ePurse
Application (CEPAS) is
a nationwide
interoperable
micropayment platform
in Singapore
What is it
▪ In the past, Singapore
had three multi-
propose stored value
cards (MPSVC)
– NETS Flash Pay
card
– EZ link card
– Concession card
CEPAS standard will
allow an interoperable
platform that all
MPSVC issuers will
move to
What are the benefits
3. Stored value instruments
Due to its tax benefits,
prepaid cards for
employee payroll and
benefits has been the
most popular in China
Fuel prepaid card is the
main growth driver in
India as they are used for
expense management by
transport fleet owners
McKinsey & Company | 12
Players will innovate across four dimensions to use in
cross-boarder remittances
Customer segments
Channels
Partnerships Corridors
4. Remittances
US – Ho-Chi-Minh city corridor accounts for 56% of total remittances to Vietnam. DongA and Sacombankhave focused on this corridor to capture disproportionate share
▪ Wells Fargo reports higher PPC for remittance customers
▪ Globe focuses on offshore Filipino workers
▪ Web based remittance product branded ‘AxisRemit’ web based
▪ Transfer moneys from any local bank account to Axis Bank account in India
▪ Even non-Axis Bank customers can avail of this facility▪ Tie-ups with large local
players in key NRI markets (tie-up with Lloyds Bank in UK and Wells Fargo in USA)
▪ Partner banks / agencies initiate remittance via branches (cash) and online (CASA accounts)
▪ Money sent to ICICI Bank account in India
McKinsey & Company |
Six “markers” are essential for successful innovation in payments
Marker Value step change
Walmart: Leading development of U.S. reloadable prepaid sector by leveraging revenue generated from store traffic and increased retail sales to lower and simplify pricing on MoneyCard
M-Pesa: Thoughtfully expanded role of Safaricom agents in Kenya to become largest cash-in / cash-out network in the country
PayPal: Gain traction by being dominant payment mechanism for eBay marketplaces, then expanded into eCommerce payments and merchant acquiring from scale base of users
Cardlytics: Focused on bringing value to merchants through increased customer acquisition and targeted marketing; consumer value in cost savings and “surprise & delight” offers from new stores
Xoom: Tailored disbursement options for online remittances to preferences of receive markets to cover (i) account-to-account and (ii) cash pick-up preferences by country
AliPay: China’s online payments leader solved major issues of trust through “escrow-based” payment process where buyers were guaranteed satisfaction of goods before transaction is settled
Marker Beyond cost
Marker Established infrastructure
Marker Adapt to market context
Marker Adjacent revenues
Marker Niche markets first
1
2
3
4
5
6
5. Innovation
13
McKinsey & Company |
Several non-traditional players are emerging across Asia
� Objective: Churn reduction, increasing ARPU
� Asset: client billing relation, SIM
� Objective: increasing sales and market share
� Asset: smartphone, applications library
� Objective: increasing traffic, payment revenue
� Asset: online content, flexible software solutions
� Objective: increasing traffic, increasing subscribers
� Asset: payment infrastructure, global standards
Innovative partnerships emerging▪ Telcos and Banks specially for financial inclusion - E.g., Vodafonre and HDFC bank, Globe telecom (GX
change) partnership with Philippine savings bank, etc.
Online players
Telcos Handset manufact-urer/platform
Mobile phone
Card systems
6. Competitive landscape
14
McKinsey & Company |
Key questions FOR DISCUSSION
15
▪ What are the key barriers to consumer adoption of electronic
instruments? What changes (regulatory, consumer behavior)
could lead to an inflection point in adoption?
▪ How do you see the future of credit and debit cards across Asia? What will drive electronification
of micro-payments?
▪ Which digital models are likely to succeed
across markets? What is the biggest opportunity and challenge in making the economics of digital
payments work?
▪ Who are the players best positioned to capture
the payments opportunity in Asian markets?
What are the markers of success?
▪ Do you seen greater collaborative eco-systems emerging to deliver end-to-end value to customers?
