Historically dormant long-tail opportunities involving micro, small and medium-sized enterprises are in the process of being picked up across Asia-Pacific, with the players involved now presenting a challenge to cards-based incumbents.
The region is marked by large numbers of digital payment-reluctant micro and small-scale merchants, particularly in the less-developed markets. These merchants have traditionally been difficult to onboard due to cost-prohibitive POS terminals and merchant fee pricing. However, a few developments are emerging to counter these difficulties and help expand the potential of the merchant-acquiring market regionally.
The first is the growth and spread in smartphone uptake and access to the internet. Not only are easier digital payments enabled by smartphones via apps or digital wallets, but the acceptance of digital payments via smartphone is now a reality for merchants. Simple software additions and specialised apps can turn any smartphone into a POS terminal for a fraction of the cost of traditional terminals. This is allowing for greater merchant onboarding across the region. Merchants are more likely to offer digital payment options if there is a consumer appetite for it too. Unbanked or less-affluent consumers who may not have access to credit and debit cards are able to pivot from cash to digital payments via smartphone-enabled payment methods, thus creating a virtuous cycle effect when it comes to the volume of merchants and consumers.
The second development is regulation surrounding prices. Many markets have brought in caps on the MSC (Merchant service charge, synonymous here with MDR: Merchant discount rate), which prevent merchants from being charged excessively for accepting digital payments. Sweeping caps are not common practice in the region but are rather tied to the scale of a business, the industry of the merchant and the types of payments being accepted.
One such example is India, where the government has implemented a 'zero-MDR' policy on RuPay and UPI (Unified Payments Interface) transactions and subsidises acquirer fees. Despite criticisms of the policy, the hope is that acquiring banks will promote such payment methods, and merchants will be encouraged to sign up to offer them. It should be noted that UPI is recognised currently as the fastest-growing payment platform in the world.
The third significant development is the emergence and growth of QR codes. In a region where certain markets may still be experiencing difficulties in financial inclusion, and significant portions of national populations do not have a bank account and thus do not hold cards, the QR code offers an alternative payment method for all. All one needs to make or receive a QR code-based, encrypted and instant payment is a mobile device with an inbuilt camera. China has embraced the QR code, which now underpins its cashless economy to the tune of $5 trillion annually. It is easy and affordable to set up and offers a high level of reliability.
Covering 15 key markets, Merchant Acquiring Asia-Pacific, from which the above is excerpted, provides essential business intelligence on the region's payments landscape – plus country-level insight underpinned by extensive market data. This 359-page report, packed with market-leading data and commentary on merchant acquiring in the Asia-Pacific region is available to order now.
The Weekly News Digest from Verisk Financial Research highlights significant developments that have recently occurred in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value that is often missing from the rolling news cycle.
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