Banks and card providers have been devoting a lot of attention recently to Asian markets, and it’s not hard to see why. With more than 1.3 billion potential customers in China alone, and a similar number in India, the opportunities for banks are immense.
At the moment, some parts of this region are still heavily cash dependent, with research from McKinsey and Capgemini suggesting just two per cent of transactions in emerging nations of Asia-Pacific were cashless last year – though this rises to 35 per cent in developed countries.
But could this be set to change sooner rather than later? Recent figures have highlighted how efforts are being made to boost banking infrastructure in this part of the world and deliver the right technologies to consumers to help them embrace digital.
India set for a digital boom
One market that’s particularly poised for growth is India. According to new research by Google and Boston Consulting Group, the value of digital transactions in the world’s second-biggest nation is expected to reach $500 billion by 2020 – ten times the level seen today.
It highlighted several reasons for this, such as the growing penetration of smartphones in the country. By 2020, some 520 million people – more than a third of the population – will own such a device. Greater access to the internet and acceptance of digital options by merchants will also have a key role to play.
By 2020, digital payments will account for 15 per cent of the country’s GDP, it was forecast, with more than half of the nation’s internet users making such a payment – and more than ten million merchants accepting them.
Cutting down on the unbanked
The key driver behind this is efforts by both government and industry to boost financial inclusion in India. The government has made the move away from cash a key pillar of its finance strategy, relaxing regulations for such services and joining the UN-based Better than Cash Alliance.
Card providers have also been promoting the use of new solutions. In June, for example, Visa announced it has surpassed the milestone of distributing one million contactless-enabled cards in the country, with this technology now making up five per cent of cards in circulation, and 100,000 merchants accepting them.
All these factors have combined to help ensure that 53 per cent of Indian consumers now have a bank account, up from just 35 per cent in 2011.
Mobile bridging the gap
While many people in India still do not have bank accounts, they do have mobile phones, so companies such as Visa are looking to use this as a way to boost financial inclusion.
Business Insider noted Visa hopes its efforts in contactless will be a launching point for smartphones, wearables, and sticker payments, all of which could help it boost financial inclusion by targeting individuals who own mobile phones, but are still unbanked.
Alpesh Shah, senior partner & managing director, BCG, India, also observed: “The smartphone explosion will usher in a new era in digital payments in India over the next few years that will see non-cash transactions exceed cash ones by 2023.”