Move aside, startups. Banks are now muscling into mobile payments in Singapore

Photo credit: 123RF.

Mobile payments are surging in Southeast Asia. According to a study by McKinsey, digital banking users in the region have doubled between 2011 and 2014. In Singapore, Samsung, Apple, and even Alibaba have entered the mobile payments space.

Of late, more traditional establishments have been rolling out mobile payments. In countries like Indonesia and Thailand, which have a large unbanked population, telcos lead the way with apps like Mandiri E-cash and TOT Just Pay. In Singapore, banks are moving fast.

According to research firm Ovum, 61 percent of banks worldwide would increase their spending on payment technologies in 2016, up from 52 percent the year before. They may be late to the game compared to smaller players, but they should not be underestimated. Here’s why.

Large user base and safety

Photo credit: 123RF.

Customers associate well-established banks with credibility and security and are willing to trust banks with their personal information.

This helps facilitate the launch of new products and services, and provides them a large and ready user base. For new technologies like mobile wallets, having the trust of a large user base goes a long way in boosting adoption.

For example, Citi’s recently launched proprietary digital wallet, Citi Pay®, automatically adds users’ active Citi cards in the app. Citi Pay’s user base already exists – the credit card holders, so it has a low barrier to entry. An in-bank mobile wallet also alleviates concerns about security that third-party payment players may struggle with.

Photo credit: Citi.

“Our value propositions are already best in each category and through Citi Pay we bring added convenience to our credit card customers who can now simply use their mobile phones to tap and pay for their purchases,” said Sergio Zanatti, Citi Asia Pacific head of cards and loans.

Global reach

Photo credit: Unsplash.

Traditional banks also have a wide reach, benefitting global customers who travel often and shop online. This means that while new and innovative payment services like Indonesia-based iPayMu can only be used domestically, solutions like Citi Pay can be used in 29 countries following its full launch in 2017.

Generally, fintech players do not have this kind of reach and accessibility. As such, they may seek partnerships with different banks to be able to target a significantly large user base across multiple markets and locations.

Bank perks

Photo credit: Citi

Traditional banks have a firm monopoly over certain kinds of perks, including cash back offers and airline miles. Perks are a concept that banks’ customers are familiar with, regardless of age, demographic, or income level. They are especially helpful in helping banks differentiate credit cards, driving people to compare card benefits on sites like MoneySmart or iMoney.

It makes sense that these perks will also be extended to mobile payments. For example, early adopters of Citi Pay will be entitled to perks on top of their existing Citi card benefits, such as a 3 percent cash back, 2 miles per dollar, and up to 10X Rewards points.

Wide network of partners

Banks often work with F&B outlets to provide perks like cashbacks or discounts. Photo credit: Unsplash.

The ability of traditional banks to offer perks and incentives on a wide scale is partially driven by their extensive network of partners. Be it distributors, tech companies, or retailers, these partnerships have served to offer customers benefits that they value.

To advance the mobile payments agenda, banks are also working closely with many fintech startups, either through accelerator programs or acquisitions, to bring new and increasingly innovative solutions to customers.

As an example, Citi recently launched its Global API Developer Portal in November, which enables third-parties to incorporate Citi services like peer-to-peer payments, money transfers, and account authorization, into their own fintech products.

A leader in mobile payments?

Traditional banks have been portrayed as struggling in the new age of mobile payments. While they might have taken their time to join the ‘digital race’, these institutions should not be discounted.

Given their size, scale and nature of work, banks play a significant role in developing financial markets – the adoption of payment methods included.

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