Taken globally, the electronic payments industry is almost as fragmented as the mobile messaging industry for platforms like WeChat (China), Line (Japan), Viber (Philippines), and others.
In North America, PayPal and its subsidiaries Venmo and Braintree play a dominant role in the electronic payments market. In Africa, Kenya’s M-PESA is the top player. It serves as a means of economic exchange for consumers without bank accounts, and operates as a mobile savings platform for millions of consumers who don’t have access to the traditional banking system. Alibaba’s Alipay and Tencent’s WeChat Wallet play a major role in the Chinese market.
The electronic payments industry has been growing and changing with rapid advances. Today’s market landscape is regionally fragmented, but it is huge from the global aspect.
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All over the world, less than 20% of the payments completed by both consumers and businesses in 2014 crossed international borders. The information is based on the McKinsey’s 2015 payments report. Asia represented almost 40% of the $1.8 trillion in total payment industry revenue in 2014. The region is expected to count for nearly 45% of the revenue initiated by the global payments industry by 2019.
Though the Asian payments market seems to be unified to some extent, the reality is something else. From the regional point of view, the electronic payments market is characterized by disparities in technological adoption and intensity of regulatory oversight.
Companies in the payments industry looking for dominance in the Asia-Pacific and Southeast Asia regions meet additional hindrances in the form of regulation. Like some electronic payments companies from North America had difficulty expanding their services to other regions, the majority of payments service providers in Asia experience the same. The innovation in the payments industry in Asia is based on seamlessness. Most payments companies focus on making the process of payment processing as frictionless as possible.
The market for electronic payments and other financial technology products is large and is becoming even larger. Based on the McKinsey report, in Asia alone, payments revenue generated from all sources is expected to increase more than 40% between 2014 and 2019.
The bad thing is that, currently, it’s not clear what path a payments company should choose to achieve global dominance.
Simply copying the business models that have worked in Europe, the Americas and Africa, is not enough for Asia: to be successful, the products and services built should be adapted to local context and market conditions.