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The Use of Crypto-Currencies Is On The Rise In Asia

World Affairs

Open Eyes Opinion {source: SGgov EDB}

Singapore

Cardless Transactions On The Rise In Asia
By Tan Shuyi

Photo Credit:Antana via Flickr

Businesses in Southeast Asia may increasingly find themselves having to accept new forms of payment as more consumers in the region shift towards making transactions that are both cashless and cardless.

Paper and plastic are gradually giving way to silicon, with the advent of new mobile payment services that allow customers to pay for goods and services at the point of sale using digital wallets on their smartphones.

Recent competitors entering the marketplace include e-commerce giant Alibaba’s Alipay Mobile Wallet app, which was released in January 2013, and Apple’s digital wallet Apple Pay, which was launched in October last year. Samsung followed by launching its Apple Pay rival, Samsung Pay, in early March this year. There are also various digital wallet smartphone apps that store cryptocurrencies such as Bitcoin.

Some of these payment providers now process up to millions of transactions a day, a sign of how popular cashless and cardless transactions have become over the past few years among consumers.

The Alipay Wallet mobile app, for example, has 190 million active users who use it to shop, pay utility bills, book hospital appointments, pay for taxi rides and even buy financial investment products, says Zhang Dayong, head of Alipay in Southeast Asia.

The app relies on the Alipay platform, which Alibaba set up in 2004 as an escrow payment service that lets customers verify that they are happy with their purchase before releasing their payment to the merchant. The Alipay payment platform now handles more than 80 million transactions daily and more than 300 million people have signed up for the service, Zhang notes, adding: “We can expect to see rapid growth in cashless transactions across Asia … online transactions will take place more predominantly on mobile”.

Apple Pay works differently – instead of being an escrow service, Apple Pay stores credit card information and depends on a technology called near-field communication (NFC). To make a payment using Apple Pay, users hold their iPhone or Apple Watch near a contactless NFC chip reader, which scans the credit card data held on the device.

Although some market watchers have raised concerns that Apple Pay could spell trouble for major credit card companies such as Visa and MasterCard, others point out that for the time being, Apple Pay transactions are ultimately still handled by credit card companies, which still get their cut of the proceeds.

Cryptocurrencies

Besides apps that hold electronic versions of cash or credit, another emerging payment technology in the region is cryptocurrency, of which the most well-known variant is Bitcoin. A cryptocurrency is a digital currency that uses cryptographic encryption techniques to control the generation of new units and secure transactions. A few early-adopter companies in Southeast Asia have begun to accept payments for goods and services in Bitcoin, which was created in 2009 and is not backed by any central bank.

No official statistics on Bitcoin adoption are available for the region, but prominent merchants in countries such as the Philippines have embraced Bitcoin payments – two large daily deals websites there announced last year that they would accept Bitcoin, according to the Tech in Asia news site, and the country had 26 Bitcoin-accepting merchants listed in an online directory at coinmap.org. Singapore also appears to have a fairly high number of Bitcoin-accepting merchants relative to other Southeast Asian countries, with 39 businesses listed on coinmap.org compared with seven in Malaysia, for instance.

Vaughan Woods, regional vice president for South Asia at cloud computing services provider Akamai Technologies, says that the use of cryptocurrencies for payments in Asia is “still very much in its infancy” but has great potential.

There is strong demand for remittance services in Southeast Asia, he noted, and Bitcoin’s low transaction costs relative to traditional banks’ fees could help it gain market share in this area.

However, security issues are likely to be merchants’ biggest bugbear, regardless of whether payments are made in regular currencies or cryptocurrencies.

Despite its security measures such as requiring biometric identification, Apple Pay was hit earlier this year by a wave of fraudulent transactions that used stolen credit card data from security breaches at retailers, the Wall Street Journal reported in March.

More security problems could crop up when dealing with cryptocurrency transactions, since the pseudonymous nature of the technology may make it a ripe target for fraudsters.

For example, although Bitcoin transactions are not completely anonymous, it is possible to send and receive Bitcoin without revealing any personally identifying information at the outset, which makes transactions in the cryptocurrency harder to trace.

“Security, performance and high availability are critical to the success of cryptocurrency” as a form of payment, Woods says, adding that the wide disparity in Internet speeds and security infrastructure across Southeast Asia could prove another hindrance to more widespread adoption of cryptocurrency transactions in the region.

The dominant form that currency transactions will take in future hinges on which competing payment technology can gain the most users the quickest. And that, in turn, will likely depend on how fast each service provider can fix security flaws.

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