Rachel Hunt, ACI: The pace of change across Asia-Pacific is driving intense competition and innovation in payments

Rachel Hunt, Marketing Director of Asia-Pacific & Japan for ACI Worldwide, is a keynote speaker at the upcoming Global Payments Summit 2015, which will take place between 26 and 27 August 2015 in Singapore. During her presentation, Rachel will discuss findings from ACI’s brand new survey on the impact of the shared economy and digital payments in Asia and how deploying digital-based services will offer competitive edge and promote financial inclusion.

In your opinion, what are the key drivers motivating merchants to expand their ecommerce business into Asia-Pacific?

Asia is a large and rapidly growing region with a rising middle class, increasing internet access and extensive mobile usage. The region is becoming increasingly attractive to businesses, especially to ecommerce companies that thrive on global and scalable business models.

The growth potential for mobile shopping is significant in the region (1): Asia-Pacific smartphone penetration is highest in Hong Kong and Singapore at 87%, followed by Malaysia (80%), Australia (75%) and China (71%).

According to Supply Chain Asia, Southeast Asia’s consumers are already visiting online retailers 41 times for every single visit to traditional platforms. As expected, online retailers, which have already gained market share on brick-and-mortar stores, will flourish as more and more users in Asia have internet access.

While the availability of various payment options is important, providing a seamless and cohesive experience across various channels, will be a key differentiator. The recent global study conducted by Ovum and commissioned by ACI showed that more than 38% of Asia’s banks, retailers and billing organizations were already investing in developing an omni-channel experience for customers and that 20% planned to invest in the near future.

However, the use-cases of ecommerce in the region can be very surprising. A large number of small businesses are increasingly using social media to distribute their goods, in remote areas, which will drive a need for in-app or in-chat payments. A staggering 40% of 16 to 64 year olds using the internet were on WeChat in Asia-Pacific as well as many other chat platforms (Line, Snapchat…)

Which are the most challenging markets in Asia-Pacific region to tap into for an e-tailer in terms of regulation and/or industry fragmentation, cultural differences and payment methods?

The key difference of doing business in Asia compared to Western Europe or North America is the diversity of cultures and fragmented regulatory environment. There are even fewer commonalities in the business environment.

There is a lack of trust in traditional payment methods due to some historical fee structures and high incidence of fraud in these schemes. Customers in India do not have trust in the transit facilities for delivery of products and thus, this resulted in CoD as the most preferred mode of payment of online buyers (2). As a result, e-tailers who use unreliable third-party delivery companies encounter high return rates and orders to fake addresses.

In Thailand, while payment solutions have improved over the years, consumers still have reservations towards online payment solutions. 62% of online shoppers are reluctant to give their credit-card information online (3). Assuring internet users of the safety of online payment transactions and data entries on ecommerce websites could further increase consumer willingness to shop online, as fear of fraud is the main reason for the majority of internet users to not buy online.

There are of course clear logistics issues servicing many of these vast geographic and sometimes remote areas. As most emerging Asian markets are large and fragmented with poor logistics infrastructure, local logistics companies only have partial coverage in large countries like India and China and are generally viewed as unreliable. This has forced ecommerce companies to build their own logistics systems at enormous cost and time outlay. China’s Alibaba, which owns Taobao, has invested in local logistics and delivery businesses.

Finally, given the introduction of so many new payment methods, supporting such a diversity of schemes adds complexity and cost. This is why ACI has focused on delivering the concept of any-to- any payments, in order for our customers, bank or merchants, to adapt more efficiently.

Could you provide 3 successful business models in mobile money industry across Asia-Pacific?

There is no doubt that China is a global pioneer in digital payment innovation and is already the largest user base globally for digital wallets. AliPay and WeChat are to date only available in China but are preparing further expansion across Asia. These models have been incredibly successful on a domestic level and it will be interesting to see if they can get traction cross-border.

For many, banks remain the most trusted providers for payment services. Recent ACI research shows that in many payment product categories, such as contactless cards and real-time clearing and settlement, banks naturally hold an advantage, with 68% and 66% of consumers agreeing that existing financial institutions are the most capable providers (4). Many banks are developing innovative payment schemes to compete with the ‘fintech” competition. These include Axis Bank, ICICI, DBS or OCBC to name a few.

The disadvantage for banks in the region, unlike the new “fintech” entrants, is that they themselves are not digital native. As payments increasingly converge towards real-time, mobile and social payments formats, these require flexible payments engines. However, these are often legacy systems that require substantial workarounds to support innovation, which is a costly option.

Although the characteristics of fraud cases follow some universal patterns, each and every region faces unique challenges. Could you mention the most common fraud types and overall impact upon businesses in Asia-Pacific?

One clear trend in Asia is the growing incidence and size of payment fraud, especially as customer transactions are increasingly completed either online or via mobile. Asia leads in m-payments with Japan, South Korea and China all-embracing digital wallets on a huge scale. Online banking is also growing rapidly. Many banks have additional authentication methods in place for Internet banking transactions but are still lagging behind for mobile phone transactions, including payments.

Banks need to bolster their mobile defenses. That is the bottom line. Digital wallets are increasingly prevalent in Asia and more and more transactions will be generated from smartphones. Fraudsters follow the money: we have seen this already in Europe with the introduction of the EMV standard, fraud migrated towards Card Not Present. The situation becomes more complex as Asia moves towards real-time or immediate payments. Prior to real-time payments, these non-card transactions allowed banks a window of opportunity to analyze risky transactions and withhold where necessary. This window will/ has disappeared with real-time payments and banks will need to a have real-time fraud strategy in place.

In addition, credit card fraud remains high in many countries in the region. Indeed, China’s credit card fraud is among the highest in the world.

While Asian markets vary significantly and each country is unique in terms of the fraud problems and challenges, the solutions are the same: customer education is key and so are the systems to accurately detect and prevent fraudulent transactions themselves.

Any perspectives on mobile payments going forward in Asia-Pacific?

The Asia-Pacific region has certainly seen an active response to the mobile payments interphase.

The clear rising preference of mobile transactions in Asia thereby highlights a vast potential of innovative payment solutions in the future, that may affect the reliance on traditional banking institutions to carry out transactions. This holds great power in context of Asian markets, not only for sophisticated banking customers, but also in developing markets where banking infrastructure may not be directly accessible.

This is why person-to-person (P2P) payments have emerged so strongly in the Asia-Pacific region. The concept of transferring money, with or without an intermediary, not only brings convenience to the customer, but also brings a great deal of opportunity for new stakeholders in the industry that may not be traditional banking players. Mobile payments is one of the hottest “innovation’ area and boasts the largest number of “fintech start-ups”. This can add complexity and even confusion, and customers will migrate towards services which provide the best experience, strongest security, in the most ubiquitous manner.

What is your key message at the upcoming Global Payments Summit?

Mobile wallets, real-time infrastructures, m-commerce and complex payment fraud incidents are no longer distant industry trends but real market dynamics for Asia-Pacific. We will be delivering our research findings from a new study on Digital Payments and the Shared Economy in Asia, in collaboration with IDC at the Global Payment Summit, as we believe Asia is leading payment innovation.

Asia-Pacific’s FSIs, processors and retailers will need to transform their payment infrastructures to support any-to-any payment flows and offer innovative value-added services in a secure environment to compete. This transformation will not only allow regional participants to reduce cost and support regional economic growth but also position them as leaders in the global payment ecosystem.

As the partner of choice, ACI enables banks and merchants to deliver more value to customers through new services, with a real-time, any-to-any, customizable user experience in a secure environment.

1) Retail & e-Commerce 2015, Supply Chain Asia

2) E-Commerce Industry In India Worth USD 13.5 Billion In 2014: Will Cross USD 16 Billion In 2015, DazeInfo, Mar 19, 2015

3) Tapping full potential of ecommerce in Thailand. The Nation. February 17, 2015

4) Ovum The Future of Payments 2015: Financial Institutions

About Rachel Hunt

Rachel Hunt is Marketing Director of Asia-Pacific & Japan for ACI Worldwide. Based in Singapore, Rachel is responsible for the management and direction of all aspects of marketing in Asia-Pacific. Rachel has 20 years’ experience in financial services technology having held roles with banks, industry vendors including Temenos and Perot System, as well as having provided consultancy services for over a decade at independent research firms, such as IDC and Tripliii.

About ACI Worldwide

ACI Worldwide, the Universal Payments company, powers electronic payments and banking for more than 5,600 financial institutions, retailers, billers and processors worldwide. ACI software processes USD 13 trillion each day in payments and securities transactions for more than 300 of the leading global retailers, and 18 of the top 20 banks worldwide.