Southeast Asia’s mobile payments face shakeout as market booms

Mobile e-payment logos are seen at a street food stall in Ho Chi Minh city in Vietnam, October 15, 2019. Picture taken October 15, 2019. (Reuters)
Updated 17 October 2019

Southeast Asia’s mobile payments face shakeout as market booms

  • Payment firms race to build up scale in fragmented market
  • Mobile payments market to grow 7-fold to $109 bln by 2025 - Nomura

HO CHI MINH CITY/HONG KONG/SINGAPORE: Just next to Ho Chi Minh City’s financial district, two dozen street vendors’ stalls display colorful adverts for e-wallets backed by private equity firm Warburg Pincus, ride-hailing firm Grab and Singapore sovereign wealth fund GIC, among others.
Between them, the stalls — selling everything from crab soup to Vietnamese Banh My sandwiches — accept payment from most of Vietnam’s 28 different e-wallets, which also allow users to make cash transfers through their mobile phones.
The wallets, which hope to take advantage of Vietnam’s plan to become a cashless economy by 2027, compete fiercely to gain many users to help them to turn a profit, a battle for market share replicated across Southeast Asia.
Not all of them will survive. Already, the region’s crowded mobile payments sector is starting to shrink, with each national market expected to support only two mass e-wallets, according to consultancy Oliver Wyman.
“The e-wallets spend a lot of money on attracting customers and retaining them, getting them to use the wallet in their daily life,” said Duncan Woods, head of Oliver Wyman’s Asia Pacific retail and business banking practice.
“When you’ve got so many of them out there, it’s about who’s got the deepest pockets,” he said.
Southeast Asia has at least 150 e-wallet license holders, and firms including Grab, Go-Jek, Tencent Holdings, Ant Financial, Singapore Telecom, AirAsia and dozens of fintech firms are fighting for dominance.
Many have the cash. Grab plans to invest $500 million in its Vietnam business, with payments a focus area. Softbank’s Vision Fund and GIC invested $300 million in e-wallet VNPAY’s parent company in July, and e-wallet Momo raised $100 million from Warburg Pincus in January, according to news publication DealStreetAsia.
Some are using the cash to build scale, others to buy it, as they race to secure a dominant position in a mobile payments market estimated by Nomura to grow seven-fold to $109 billion by 2025.
Softbank-backed Grab is in talks to merge its Indonesian digital payments firm, OVO, and Ant Financial-backed Dana, both of which are among Indonesia’s top five e-wallets, to bulk up and power ahead of rival Gojek, sources said.
In Vietnam, e-wallet Vimo merged with payment processer mPOS and rebranded as NextPay in June — and kicked off a $30 million fundraising round and an ambitious growth plan.
“We expect to be present across Vietnam and win 50% of the market with 300,000 acceptance points by 2023 from 60,000 merchants now,” NextPay’s CEO Nguyen Huu Tuat said, while noting that getting customers to change their habits was a challenge.
Street sellers in Ho Chi Minh City echoed this view, despite government efforts to change behavior.
Some wallets, including the partnership between local firm Moca and Grab, offer buyers discounts of up to 30% if they use their wallet, stallholders said.
“I want to comply with the government’s cashless plan although I’m not very fond of it, so I offer ‘morning cash, afternoon card’” one merchant, Huong, said when Reuters visited her noodle stall.
Attracting users is essential as a tipping point looms.
“E-wallet consolidation at a regional and local level is highly likely as products mature and consumers migrate to those who offer the most services,” said Phil Pomford, an APAC general manager at fintech firm FIS.
“One likely play would involve one of the big global and/or regional super apps consolidating services across South East Asia.”
The region’s largest players, including ride hailing-turned super apps Grab and Go-Jek, are betting that becoming the main payment method will bind consumers into their networks and offer them higher margin services — a model that Alibaba and Tencent pioneered in China.
“One of the reasons our payments business has seen such success is because we’ve had a very intentional strategy of developing the largest merchant network, whether it’s offline, it’s online or whether it’s on-demand,” Grab’s president, Ming Maa told Reuters.
Others have looked to use an e-wallet as an add-on to their existing businesses. Users of AirAsia’s BigPay wallet can earn AirAsia travel rewards by using the wallet, which they also hope can become a mainstream payment method.
Tencent and Alibaba and its affiliates have primarily focused on Chinese tourists using their wallets in Southeast Asia and have also each invested in wallets in almost every market in the region.
Grab says it is the only digital payments provider in Southeast Asia with access to e-money licenses in six major economies, making it the furthest on with a regional approach.
Some observers are still skeptical however.
“Many e-wallets’ business model seems to be: 1) gain a lot of customers and their data. 2) question mark. 3) be very profitable,” said Dmitry Levit a partner at VC firm Cento, which has invested into several payment-processing companies, but stayed away from wallets.
Go-Jek is not worried about competition from other wallets or incumbents, said Aldi Haryopratomo, CEO of Go-Pay, the company’s payment platform.
“By being the payments provider that connects the driver to the bank, we are able to make sufficient margin. And if you always think about competition and threat from the banks, then you are thinking that the pie is fixed,” said Haryopratomo.
“But in Indonesia, the pie is actually getting bigger.”


Emirates trims Boeing shopping list amid 777X delays

Updated 20 November 2019

Emirates trims Boeing shopping list amid 777X delays

  • The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion
  • But Emirates’s purchases overhaul reduces the order to 30 planes

DUBAI: Emirates Airline on Wednesday slimmed down its purchasing plans with Boeing amid delays in delivering an order of 156 of the new long-range 777X aircraft, substituting instead 30 of its 787-9 Dreamliners.
The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion, but the overhaul reduces that to 30.
At the same time, Emirates is cutting its 156-strong order of the larger 777X to 126 planes.
The restructuring means that the carrier now has just 156 aircraft ordered from Boeing, compared to 196 previously in both firm orders and initial agreements, an airline spokeswoman confirmed to AFP.
“Emirates reduced its 777X order of 156 to 126 and substituted them with the Dreamliners,” Emirates president Tim Clark told a news conference at the Dubai Airshow.
Boeing said the airline will update its order book “by exercising substitution rights and converting 30 777 airplanes into 30 787-9s.”
Emirates said in a statement that for the 777X, it “will enter into discussions with Boeing over the next few weeks on the status of deliveries.”
Emirates in 2013 signed a $76-billion contract for 150 Boeing 777X twin-engine aircraft, powered by GE’s new GE9X engine, in what was the single largest order by value in the history of US commercial aviation.
The order was subsequently increased to 156 planes.
The 777X was originally scheduled to take off on its first test flight this summer, however its development has been slowed by issues with the engine and Boeing has pushed back the timeframe to early 2021.
The delays also hit as Boeing is in the process of completing changes required by regulators on the 737 MAX, which has been grounded worldwide after two crashes that resulted in 346 deaths.