In 2020, about 70.6% of people in Japan were using mobile wallets. By 2025, it’s expected that more than 123 million individuals will be using them. Japan has been encouraging the use of mobile payments, especially during the Tokyo Olympics in July-August 2021, to attract tourists and new visitors. This has led to more use of contactless payment machines and the promotion of digital wallets throughout the country.

AliPay in China has 1.2 billion customers, with digital wallet penetration in China reaching 83.6% in 2020. However, mobile wallet penetration is still less than 50% in Malaysia, Singapore, Indonesia, and India. In particular, Malaysia and Singapore have 4.5 million customers, with mobile and digital wallet penetration standing at around 30%.

Research shows that in 2020, a large number of adults in various countries were using mobile wallets. For example, in China, Malaysia, and Thailand, the percentage was as high as 84%. In the Philippines, South Korea, Indonesia, and Singapore, the numbers ranged from 61% to 81%. This widespread use of digital and mobile wallets in the APAC region is a clear trend that is continuing to grow without any signs of slowing down.

The State of Mobile Payments Market in Malaysia and Indonesia

In Malaysia, there are three companies competing in the mobile wallet industry. They are trying to attract over 20 million people who will start using mobile payments in the next five years.

GrabPay is currently leading the market in the APAC region because it has been around for a longer time compared to its rivals. It also has a super-app feature and is better at getting more businesses to join its platform.

Touch’ n Go, originally used for paying road tolls, has been acquired by GrabPay, owing partly to an investment from Ant Financial. Boost, the “pure-play” Malaysian e-wallet app, has also grown in recent years. 

Headquartered in Singapore, GrabPay has more than 35% market share. GrabPay purchased Favepay, an app recognized for its rewards program and capacity to effortlessly integrate existing card settlements. DBS PayLah!, Singtel Dash, and EZ-Link all benefit from the stickiness they have as the state-owned bank, telco, and transportation systems for Singapore, respectively, benefiting from the positive brand equity of their mother companies.

Indonesia is a mobile payments market defined by high competition, with five mobile wallets fighting for dominant market share. Due to rapidly expanding market opportunities, competition is particularly intense, with infusions of foreign equity capital financing and aggressive marketing campaigns.

ShopeePay, a new e-wallet in Indonesia, has quickly become the second most popular choice for people. It offers great cashback, customer promos, and easy-to-use QR codes. Showcasing the benefit of mobile and digital wallets bundling unique and varied products and services within their core wallet offering.

For merchants, this market represents a considerable growth opportunity. Therefore, accepting various payment methods is essential. Across Singapore, Malaysia and Indonesia, widespread acceptance of digital wallets such as Boost, Shopee, and Touch and Go is driving increased awareness and usage by customers.

Mobile Wallets’ Ease of Use Increases Spending

Financial institutions that have launched mobile budgets notice their customers spend more as consumers utilizing mobile wallets tend to be dedicated consumers. The speed and convenience of mobile payments motivate people to reuse the same payment many times over. Commitment is also enhanced when customers can easily share information about their payment method with peers facilitating simple and quick money transfers.

As the customer base grows, businesses benefit from mobile wallets being the preferred payment choice for most customers. For instance, 23% of Nigerians use mobile wallets. Statistics show that many customers are willing to pay extra for the convenience they provide.

As a result, businesses that have set up mobile wallets can benefit from loyal and consistent customers. This leads to making more money, fewer abandoned purchases, and more repeat purchases.

Regulators Safeguard Mobile Wallets Customers

Mobile wallets are preferred in emerging markets with high mobile phone penetration and a significant unbanked population because conventional financial institutions have been slow to adapt to changing customers’ demands. In addition, increased collaboration from governments and central banks has regulated mobile wallets and protected customers while promoting innovation. This has driven increased trust in the usage and acceptance of mobile wallets.

The Philippines, for instance, is pushing for enhanced security with Know Your Customer (KYC) guidelines and other security strategies. In 2020, the Bangko Sentral ng Pilipinas received 20,000 consumer complaints. Out of these, 13% were about unauthorized and fraudulent transactions related to deposits, credit cards, e-money services, and remittances.

In response, the Bankers Association of the Philippines (BAP) has drafted new laws to protect mobile wallet customers and impose fines on those who breach them. This level of governmental support has had a positive effect on the overall adoption and credibility of mobile wallets.

In 2020, Bank Indonesia, the country’s central bank, issued a regulation on payment systems. The regulation, which came into effect in early 2021, was published as part of BI’s initiation to reform Indonesia’s payment system. The regulation sets new standards for providers providing payment services and infrastructure for such services and increased governance risk compliance criteria. 

Collaborations Will Drive Future Mobile Wallets Uptake

APAC is a quickly expanding e-commerce market with a growing middle class. This fact makes it extremely attractive for merchants. However, it still has significant wallet fragmentation, with varying regulations and laws across different jurisdictions. This makes it hard for cross-border brands to manage their products effectively.

Merchants can make things easier by partnering with a mobile payment provider that offers standardization and optimization. However, the mobile wallet industry as a whole still needs to follow government and central bank regulations. These regulations focus on ensuring safety, transparency, interoperability, and consumer trust in digital and mobile wallets.

By working together and having better rules, banks and non-traditional companies will be encouraged to create mobile wallets that are easy for customers to use and can be used for payments and budgeting.

What the future holds

The future looks promising for digital wallets and their customers. As the industry formalizes its regulations with support from regulating bodies, merchants increase adoption and customers increase usage the industry is positioned to continue growing.

With relatively low barriers to entry, an increasing number of Fintechs and non-traditional institutions are launching mobile wallets. This is great for customers as more competition means more options, more innovation, and lower costs.

Banks will no doubt feel the threat this poses to their business, so being able to pivot and adapt to the trend will be a make or break for many traditional finance brands.