Global
Great Payments Transformation

A tectonic shift: The rise of Asia as a payments superpower  

By Egidio Zarrella, Clients and Innovation Partner, KPMG China and David Sayer, Global Head of Banking, KPMG International


By now, it should be clear that the center of the payments universe is unmistakably moving east. The facts are undeniable: in 2010 alone, Asia’s share of global payment transaction volumes on general purchasing cards increased from 26 percent to 31 percent. By 2015, Asia’s purchasing volume is expected to be double that of the United States.

A tectonic shift

From emerging to leading

In part, this massive shift reflects the changes underway across Asia. Population growth, while moderated, continues to spike; more people equates to more transactions. Much of Asia (China in particular) is also experiencing increasing levels of affluence and a growing middle class, which is leading to higher levels of consumerism and greater household liquidity. Rapid urbanization is also acting as a catalyst for transaction volumes as more people move into cities and start paying for everything from rent to transportation.


But much can also be said about the impact of mobile on the payments ecosystem. Asia’s consumers and businesses already enjoy widespread access to the newest mobile devices and – with device prices continuing to fall – these innovations are increasingly being snatched up by even the poorest of citizens.


Mobile has also led to greater use of micropayments as new app-wielding citizens start to consume services and products in ‘bite sized’ pieces (one renminbi, for example, can buy a farmer access to local weather forecasts or a thermometer from online auction house Alibaba.com). This is resulting in increased upward pressure on transaction volumes.

Policy drives change

Of course, governments have also played a key role in driving the growth of payment transactions in Asia. China’s leadership, for example, has prioritized payments, outsourcing and cloud computing in the recent 12th Five-Year Plan, thereby encouraging the development of the payments ecosystem. Interestingly (and in stark contrast to most western governments), China views the development of their mobile network as a critical infrastructure play – more important in many ways than the building of roads, rails or ports. As such, the government has invested heavily to ensure that mobile solutions will be available to their entire population of 1.4 billion.


China’s leadership clearly recognizes that a functional, efficient and secure payments system is key to maintaining growth. Indeed, as the Governor of the People’s Bank of China, Zhou Xiaochuan, noted, “The extensive development of China’s payment system in recent years, and its safe and efficient operation, has effectively supported and promoted economic and social development for the country.”


“Payments providers around the world should be paying close attention to the Asian markets as the impacts of this tectonic shift start to transform the industry. Those with global operations or ambitions will need to quickly start considering how best to approach and participate in this vibrant yet complex market.”


David Sayer, Global Head of Banking, KPMG International


Sprinting down the road

Given the rapid – and seemingly sustainable – pace of change in the east, it should come as no surprise that the payments sector in Asia is on the verge of leapfrogging their peers in the west. Indeed, with little to no ‘legacy’ infrastructure to upgrade, many of Asia’s leading payments organizations have found themselves well placed to take immediate advantage of the latest systems and technologies.


Moreover, Asian payments participants have quickly turned challenge into advantage: Asia’s higher transaction volumes have led to lower costs for customers, even while the region’s rapid adoption of mobile has pushed payments infrastructure out to the most remote of villages.


The bottom line is that the agenda of the global payments industry is now largely being driven by the east and, if foreign players are not quick to assess the impact of this tectonic shift, they may find themselves struggling to compete in this bold new world.


What to expect at Sibos

It is rather fitting that this year’s Sibos conference is being held in Japan. Those attending should expect to hear much discussion about the rise of Asian leadership over the global payments industry. Participants from the west will want to carefully consider the advances being made in Asia and – where possible – come to Sibos with a practical plan for turning the region’s advantages into opportunities.

 

 

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