Many Asian retailers may have questions about mobile payments: How do mobile payments work? What is the latest technology available? … And when will mobile payments become a reality? Bill Gajda, head of Global Mobile Product, Visa Inc. tells Retail in Asia: Visa mobile payments are a reality today. He also addresses many retailers’ questions about the latest payment method and talks about Visa’s experience and strategy in this area.
RIA: What are some of the latest trends and innovations in the mobile payments industry in Asia?
Bill Gajda (BG): Asia is a diverse market because of its size and varying degree of economic development. Interestingly, Asia has been named as the world’s largest market for smartphones, accounting for 40 percent of the world’s smartphone sales1. According to IT research firm Ovum, at least one billion people in the Asia-Pacific region will be connected to the internet using their mobile phones by 20152.
Mobile commerce in the region is expected to continue its robust growth as Asians continue to lead the world when it comes to the love of mobile shopping. An InMobi Mobile Shopping and Mobile Commerce study, conducted between February and March 2011, determined that 80 percent of mobile web users in Asia-Pacific made purchases via their mobile devices3.
In some developing markets in Asia, a large proportion of consumers own mobile devices but they do not have formal banking relationships due to the lack of suitable banking infrastructure and services. Hence, at Visa, we have a vision for mobile payments and financial services that has been developing over the course of many years. But it has only been recently that a clear picture has emerged of Money Money’s full promise and potential.
It is a process that will literally transform the daily financial lives of billions of people; how they will pay, be paid and send funds to friends and family. A process that has the potential to provide billions of unbanked consumers around the globe with access to financial services. This process is very consequential and requires a great deal of thoughtful planning and hard work. It also requires great vision and a tolerance for trial and error. Above all else, it will require a spirit of partnership.
The moment of convergence has arrived, when the power of global payment networks, can be integrated with some of the world’s most advanced mobile communications networks.
RIA: Are Asian businesses and consumers accepting these new payments? Do they accept this new payment method quickly? Does adaptability vary in different Asian countries?
BG: There is already significant momentum and adoption of advanced mobile services in many countries in the Asia-Pacific region, and consumer demand for those services is high. This mindset has paved the way for the first market deployments of mobile payments and related services. The first commercial programs are now running in the North Asia region.
For example, Visa has recently reached a historic milestone in South Korea with 100,000 mobile payment accounts. In South Korea, the number of Visa account holders with SIM-based mobile payment solution is now more than 100,000. The solution, which is considered the largest commercial implementation of Visa payWave for mobile, was created in partnership with HanaSK Card, one of Visa’s partners in the mobile industry, and in collaboration with leading mobile network operators and financial institutions in Korea.
Adaptability of mobile payments varies by market, and is dependent on the existing mobile and financial services infrastructure in each market:
- In developed nations where the majority of consumers already use digital currency for everyday purchases, Visa expects to see a continued migration from cash and check to electronic forms of payment. We are seeing "cash only" merchant segments beginning to accept digital currency including fast food, taxis, vending machines, and mass transit. Mobile services enhance the consumer payment experience by enabling them to better manage their financial accounts, receive timely information about their transactions, and receive merchant offers that are tailored to their location and lifestyle.
- In emerging economies, the convergence of mobile and financial networks is having a profound impact on the lives of unbanked and financially underserved consumers. Mobile financial services have the potential to empower consumers in emerging economies by bringing the security, reliability and global interoperability of digital currency to millions of unbanked consumers, and to geographies where digital currency does not exist today.
RIA: What are some of the major challenges in the mobile payment industry in Asia at present?
BG: The mobile payment industry needs to realise the full potential of mobile money – and this is more than simply bringing together two networks. It is about taking the knowledge, the business cultures and the consumer insights that have allowed mobile operators and global financial networks to thrive in parallel – and to blend those together to create powerful new platforms.
Visa believes in partnerships that are rooted in some basic principles that have been fundamental to the growth of digital currency over the past several decades. And these principles are security, reliability, scalability and global interoperability.
Visa is acutely aware of the investment required to ensure the security of electronic transactions and understands how much damage both in monetary and in psychological terms can be caused by fraud. Reliability is fundamental to Visa’s value proposition. And embedded in the very DNA of Visa’s global network is the vision of scalability through an open, interoperable global platform that allows merchants, cardholders and financial institutions in every part of the world to efficiently participate. Security and maintaining the integrity of the global payments system will remain a key focus as Visa extends its payment products and services.
Regardless of market type, Visa looks to partner with financial institutions and mobile network operators to bring security, reliability, scalability and interoperability to mobile payments worldwide. The differences in mobile channel and payments infrastructure in developed versus emerging markets lead to a bifurcated strategy.
In mature markets, Visa enhances consumer payment experience, offers consumers more control and a way to better manage financial accounts.
For billions of people considered financially underserved in emerging markets, partnerships have the potential to fundamentally change lives by simplifying access sources of income, bringing more simplicity and security to daily financial transactions, whether purchasing groceries, paying bills, sending remittances to family, or simply making deposits to their new savings accounts.
RIA: How will the latest payment solutions change retail businesses and consumer behavior in Asia?
BG: The question on everyone’s mind is "When will mobile payments become a reality?" The answer is, "Visa mobile payments are a reality today." As part of our mobile initiative, Visa is developing mobile services in several key categories: Payments (point-of-sale and remote), personal payments, value-add services, marketing, and acceptance. Visa is actively collaborating with stakeholders in the wireless and financial services industries to deploy mobile payments and financial services. Programs are currently under way in some countries in Asia.
There are thousands of different handsets in use today with a vast range of features and functionality. This provides a huge potential for retail businesses to offer location-based services for consumers. For example, using location-based technology, the mobile payments application on customer’s mobile phone will show consumers nearby merchant locations where they can redeem exclusive offers and find the nearest ATM location. Such location-based services allow retail businesses greater sophistication in their marketing outreach to consumers, while increasing merchant foot traffic, loyalty and customer satisfaction. In turn, consumers can enjoy mobile offers that are tailored to lifestyle and location.
RIA: What is Visa’s next generation of payments solutions? And what is Visa’s innovation strategy in the ecommerce and mobile space?
BG: Earlier on 11 May 2011, Visa announced the next generation of payments solutions that will replicate the ease, reliability and security of Visa point-of-sale payments within traditional and digital eCommerce, mobile commerce and burgeoning social networking commerce environments. The new offerings are expected to include a secure cross-channel digital wallet and a range for customised mobile payments services that address the specific requirements of geographic markets around the world, including markets in Asia.
In recent weeks, the spotlight has been cast on how mobile is becoming a critical channel for payments and financial services. On the heels of announcing Visa’s next generation of payments solutions on 11 May, we have also made two announcements that will contribute significantly to our development of a global, comprehensive payments solution that enables consumers to transact wherever, whenever and using whatever device they choose.
First, we’ve acquired Fundamo – a leading provider of mobile financial solutions for mobile network operators and their partnering financial institutions in emerging and hybrid economies. Fundamo will help grow our business and drive financial inclusion in key geographic markets. This acquisition will also enable us to offer the benefits of fully enabled virtual Visa prepaid accounts to millions of unbanked and under-banked consumers, in addition to the 1.8 billion current Visa accounts worldwide.
Secondly, we’ve announced a five-year extension of our commercial agreement with Monitise – a leading provider of mobile money solutions. The alliance will accelerate the deployment of Visa’s next generation of payments solutions in key geographies worldwide, enabling consumers to use their mobile phones to securely purchase goods and services, make payments, receive tailored alerts and offers, and transfer money between accounts.
In fact, we have already created a mobile banking solution that enables Visa clients and processing partners to quickly and efficiently offer Visa’s suite of mobile services to their customers.
Together, the strategic alliance with Monitise and the acquisition of Fundamo, enable Visa to mobilise existing Visa payments for the full spectrum of consumers ranging from existing Visa account holders in developed markets to mobile financial services for unbanked and under-banked consumers in developing economies.
It includes a secure cross-channel digital wallet and various customised mobile payment services that address the specific requirements of geographic markets around the world.
RIA: Visa launched the Visa-Monitise JV in India last year. Can you tell us a little about how this partnership works and how retailers and consumers benefit from such a partnership?
BG: The Visa-Monitise joint venture announced in May 2010 provides a technology platform for financial institutions and mobile network operators in India to offer a range of mobile financial services to consumers.
The joint venture builds on an existing partnership between Visa and Monitise4, and will give providers of financial services in India a platform to accelerate the delivery of mobile financial services such as banking, bill payments, mass transit ticketing, mobile top-up and others to consumers. This helps both retailers and consumers to displace the inefficiencies of cash.
The range of mobile devices in India is vast – from high end smart phones that can support graphically rich user interfaces to simple "feature phones" that only support basic text protocols. We understand that this joint venture must support a broad range of access technologies because mobile financial services aren’t relevant for just one segment in India; we believe there is relevance across the board and will cater to the needs of each segment.
On 9 June 2011, Visa announced a new five-year extension of our strategic agreement with Monitise. The agreement is designed to accelerate the deployment of mobile financial services for current Visa account holders in markets worldwide with a focus on India, Russia, Brazil and Mexico.
RIA: How does Visa see the Asia market? How much growth does Visa expect in this market?
BG: Asia is a key growth region for Visa. We see tremendous opportunity in both emerging and developed markets. In the last quarter of 2010, a total of 571 million cards were issued in Asia, compared to the 685 million issued in the US during the same period. We believe that partnerships and alliances in Asia are important to Visa. In India, for example, Visa has developed a unique payment solution for the unbanked and under-banked Aadhaar holders. Over the next four years, the authority plans to increase the Aadhaar holders to 600 million residents.
At Visa, we believe that innovations in electronic payments can extend the reach of financial institutions and financial services to the underserved segments in society. In India, for example, 48 percent of all adults do not have access to financial services. As the pace of economic growth increases, there is a growing need for formal banking services. With a large dispersed population, mobile banking services can help to reduce the need for consumers to be within reach of a physical bank. With more than half a billion mobile phone users, Visa is leveraging the mobile opportunity to provide financial institutions the means to deliver banking services to the customers. With technology providers like Monitise, Visa is providing this unbanked population with platforms to displace the inefficiencies of handling cash with the convenience and security of electronic payments.
At the same time, there is already significant momentum and adoption of advanced mobile services in many countries in the Asia-Pacific region, and consumer demand for those services is high. In the developed markets in Asia, there is the opportunity to enhance the payment experience through mobile banking and other value-valued services, like alerts and offers. Wireless technology provides a unique ability to deliver timely and relevant information to consumers in ways traditional channels cannot.
Bill Gajda is the head of Global Mobile Product, at Visa Inc., the world’s largest retail payment network. Gajda oversees Visa’s mobile product and commercial strategies and activities. In this role, he manages a global initiative to build alliances, develop and implement mobile services and platforms that enable the next generation of payments and financial services. Prior to joining Visa in Feb. 2010, he served as chief commercial officer for the GSMA. He led strategic initiatives including Mobile Money, Mobile Money Transfer, Mobile Advertising, Strategic Partnerships, Mobile Innovation and Business Development.
Taking Stock is Retail in Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.