Digital mobile payments are gaining momentum, but are they yet declaring a war on cash?
Leading the charge is arguably China’s billion-user multifunctional messaging and payment app, WeChat Pay, a digital wallet feature that allows users to conduct peer-to-peer transactions, book flights and hotels, apply for loans, and top-up mobile phones.
Locally, the Mall of the Emirates rolled out WeChat Pay for Chinese shoppers earlier this year. The app also offers instant VAT refunds to Chinese tourists at Dubai airports via the We Tax Refund on the WeChat Mini Program.
At Forbes Middle East’s Finruption In Focus event in September, some of the biggest leaders in the industry gathered to discuss the forthcoming possibility of introducing WeChat and Alipay-like mobile payment platforms or applications into the UAE market.
“For that solution to work here, it again comes down to the same basics,” said Pankaj Asthaana, Vice President of Digital Payments & Labs, MENA at Mastercard. “What are the financial services and other services being offered through the platform? What’s the real need that the market is feeling? Are you ending up creating a delta that current solutions are not providing? So that’s layer number one.”
“Layer number two is, are they allowed to hold funds like they are in China and what are the governing frameworks around that?”
Banks and financial institutions, including technology companies such as Mastercard, are already welcoming fintechs, although 70% of retail spends continue to be cash in markets like the UAE.
“What we are facing right now is that there is a gap in the kind of experiences the consumers would need for them to migrate,” added Asthaana. “There is an opportunity. Players who can solve the problem of giving better services are most welcome.”
When WeChat was first introduced in China, it was marketed with a low-interest regime. “So suddenly in China there was a setting whereby keeping money in a wallet, I was getting better returns plus great value and services,” explained Asthaana. “So, I don’t know how easily replicable that is in every market but I think it’s a good starting point that in the UAE there’s nothing that stops us from having such a player in the market.”
“Normally it’s about adoption,” said Alberto Diez, Chief Innovation Officer at RAKBANK. Much like WeChat, it comes to a point where it becomes the chat and everybody eventually becomes hooked to it. “Different people leverage it for different things and it becomes an ecosystem that is almost like open-source software.”
When a value is being added to it, Diez said that it will become impossible to compete with. “Will we get there or not it needs a bit of policy and regulations and a little bit of people coming together to come into that type of leverage model,” he concluded.