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Emerging markets to drive innovation in payments industry


The payments landscape in emerging markets is poised to transform as growth in electronic payments accelerates due to disruptive market players and alternative business models, PwC says.

The growing economic power of emerging markets—home to 85% of the world population—and their potential to leapfrog developments in mature markets will aid the creation of a payments ecosystem. That will set the pace for markets worldwide.


PwC’s report Emerging Markets: Driving the payments transformation shows that the key factors shaping this transformation include the impact of technology, shifting customer expectations, changing global demographics, the rise of e-commerce, and growing regulatory supervision.

The transformation will also be characterised by convergence across markets focusing on products and solutions, as well as by technology and business/ operating models linked to payments, which will be global in nature and reach.

The report looks at the dynamic nature of emerging markets, especially payments, which creates challenges that have never confronted the developed world but also open up opportunities for innovation and growth.

“Over the next decade, we expect to see even faster changes in the payments industry, and emerging markets will be at the forefront of this transformation,” said Vilaiporn Taweelappontong, Lead Partner for PwC Consulting (Thailand).

“Nearly 90% of people under 30, which account for 75% of the online transactions, live in emerging markets. This tech-savvy generation has transformed digital solutions from being a convenience to an essential part of how people transact.”

Emerging markets are a sweet spot to drive growth in the payments industry due to a large unbanked population and a renewed push to connect people to the financial system, Vilaiporn said.

The need for financial inclusion

Two billion adults worldwide are unbanked, and some of the lowest rates of financial penetration are in emerging markets, according to a PwC study.

For many without bank accounts, reaching branches in geographically remote communities remains difficult.

To address this challenge, there has been a rapid expansion of new technologies and innovations including e-banking and mobile money. This has helped to create pockets of strength even in less financially inclusive countries.

Commenting on Thailand’s payments landscape, Vilaiporn said the country would soon launch a government-backed national e-payment system to propel the e-commerce industry. This aims to make Thailand a cashless society.

“A combination of digital native expectations and the government’s desire to boost financial inclusion to reduce the use of cash would ultimately fuel growth in e-payments.”

Regulators are realising the huge costs, risks and inefficiencies that come with cash transactions. They have come to recognise the importance of e-payment methods in promoting access to formal credit and savings instruments.

“This explains why a number of measures are now being taken at a national level to build a sustainable electronic payments ecosystem. Many governments have also opened their markets to non-bank players aimed at furthering financial inclusion.”

The payments ecosystem will also be redefined by regulatory interventions, which are balancing the disruption of alternative payment service providers (PSPs) with the reliability of traditional players.

Regulators must also put in place measures to manage security and fraud on these new payment networks.

With the proliferation of smartphones and tablets, emerging markets are driving the growth in e-commerce spending, Vilaiporn said.

In Thailand, the value of the e-commerce market was forecast at 2.1 trillion baht in 2015, a 3.65% rise from a year earlier, according to Thailand’s Electronic Transactions Development Agency (ETDA).

The national e-payment programme together with the country’s digital economy policy would give support to online payments.

During its first phase, an electronic money transfer service will be launched and made available at major Thai banks, media reports said.

The second phase will allow electronic payments for products and services, personal income tax returns, as well as subsidies and welfare services.

New payment concepts are rapidly developing based on mobile infrastructure initiated by PSPs and online retailers. If these models prove popular, they could displace traditional cash with other electronic modes of payments.

“The adoption of new innovations would help create new revenue channels and reduce overheads, positively impacting bottom lines for both businesses and governments.”