Payments

Mobile – The Innovation Platform of the 21st Century

by Elena Mesropyan · April 26, 2018

MEDICIGlobal Head of Content

“More than half the world’s mobile subscribers live in Asia-Pacific – mostly in China and India. Although the region has reached its peak in terms of subscriber growth, Asia-Pacific will account for almost two-thirds of new subscribers globally by 2020, with most of the incremental growth coming from the two dominant markets, India and China. By 2020 there will be more than 3.1 billion mobile subscribers in the region, or three-quarters of the population.” – The Mobile Economy, Asia-Pacific 2017, GSMA

GSMA reports that in 2016, mobile technologies and services generated 5.2% of GDP in the APAC region, which translated into a contribution of $1.3 trillion of economic value. By 2020, mobile technologies and services are expected to contribute $1.6 trillion (5.4% of GDP) in economic value, as countries benefit from the improvements in productivity and efficiency brought about by increased take-up of mobile services and adoption of new mobile technologies such as M2M. The mobile sector also makes a substantial contribution to the funding of the public sector, with approximately $166 billion raised in 2016 in the form of taxation.

Mobile technology and services are playing an increasingly dominant role as main mediums for consumption. Mobile phone manufacturers, hence, are becoming the most disruptive forces in the payments market and beyond, given that the number of smartphone users worldwide is predicted to be over 2.5 billion by 2019. Smartphone manufacturers around the world now have an unprecedented opportunity to win a game they may have not even been interested in just a couple of years ago. Apple, Xiaomi, Huawei, Samsung, etc. – all major phone manufacturers around the world – are now actively pushing proprietary payments solutions embedded in their smartphones. It is worth mentioning that those are the largest smartphone manufacturers in the world, each with a strong market position that imposes a significant threat to everyone else.

Ruling out manufacturers, two dominating e-commerce powerhouses are betting on digital, and mobile, in particular, to reach every corner of the region and world.

“Digital commerce in Asia-Pacific is reaching a tipping point. The region has rapidly become the world’s largest retail e-commerce market, driven by the burgeoning economies in China, India, Japan, and Korea. Moreover, a combination of market and demographic factors means that e-commerce in the region’s developing markets, particularly in Southeast Asia, is primed for rapid growth. A Google study estimates that the total first-hand e-commerce market in Southeast Asia is expected to reach around $88 billion by 2025 (a CAGR of 32%) with the potential to reach up to $120 billion. Given the lack of fixed line access in many of these markets, mobile is often the key access point for the internet; as a result, the share of e-commerce transactions completed through mobile grows ever larger.” – GSMA

“While dominant players have emerged in some markets (such as Alibaba and JD.com in China), other markets are still developing; as a result, the e-commerce market structure remains highly fragmented in the region.” – GSMA

While APAC has the biggest consumer market in the world with a significant mobile reach, the rest of the world is not far behind. A significant part of the global population lives in a mobile-first world, consuming or at least performing a research on a range of financial services on smartphones. Consumers want to use smartphones to make mobile payments with smartphone manufacturers playing an increasingly important role in the payments landscape. Moreover, very successful alternatives to conventional banks are mobile-only and over a third of global online transactions are now mobile. In addition, ~90% of mobile data traffic will be from smartphones by the end of 2021.

Mobile will become a primary platform for payments and insurance businesses – some of the most successful technology companies are specifically tailoring their solutions for mobile devices to offer the best experience on a smartphone. PayPal and Venmo can arguably be placed among the benchmarks of mobile payments services delivering a superior mobile experience. In fact, some estimates predict that more than one in three people in the world will be using smartphones within the next two years and, by 2019, almost 200 billion transactions a year will be made via mobile phones and tablets. With insurance, some new very interesting solutions are specifically built to address circumstances that require mobility of the user (while traveling, on the airplane, on the move). Examples include Cuvva, Sure, Cover, Slice, and many others.

Mobile as a platform holds a promise of a new leap in innovation strategies for businesses around the world.

“The large-scale societal adoption and use of digital technologies is a key driver of measurable economic, social, and cultural value, including increased productivity, a rise in employment rates, improved security, and greater capacity to tackle social and environmental issues. However, there are still 2 billion people without access to the mobile internet. As challenges around infrastructure, affordability, consumer readiness and content are addressed, an additional 600 million people are expected to gain access to the mobile internet across the region by the end of the decade, bringing the total to 2.6 billion, and accounting for just over 63% of the population.

Mobile technology provides access to tools and applications that help address these issues, and enables new technologies and innovations to build more efficient and environmentally sustainable societies.” – GSMA