If beggars in China are accepting electronic payments instead of cash, then something must be going on in the world of payments.
Indeed, electronic payments are rapidly catching on in emerging markets, particularly within Asia. In contrast, more developed areas of the world still rely on traditional means of payment like cash, credit cards, and cheques.
On top of the cashless shift, there's also the prospect of how blockchain can revolutionise how payments are executed and how records are stored.
But with all this change going on, where do the incumbents of the industry, like credit card providers stand? And what does it mean for investors? Here, we assess cashless trends and argue that there's still good prospects for incumbents.
China alone saw USD 15.5 trillion in mobile phone payments in 2017, close to double the amount in 2016, and on the way to surpassing total national credit card payment volumes in 2018, according to iResearch2.
China is leapfrogging from cash to mobile phone payments and rejecting the steps in between. That's because it doesn't have old legacy systems, but is experiencing rapid growth of e-commerce, innovations from platform providers, and smartphone penetration.
In contrast, growth in mobile phone payments and digital wallets is much lower in countries where credit cards have long had a large market share. On a global scale, only around 15% of people use mobile phone payments.
Mobile payments have been growing slower on a global level because there are a number of payment providers competing in a fragmented market that have high entry barriers, including technology and infrastructure.
With these conditions in mind, there is a distinct possibility that none of the mobile phone providers will win quickly and globally…
Which payment providers stand to benefit?
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