“The Deed of the Dying”

Many ‘digital wallet” companies in Asia (ex. China) are finding it hard to demonstrate any meaningful value for the users. Wallet Players have experimented with various business models to monetize, but primary focus thus far has been on ‘customer acquisition and usage — through deals, offers, promotion, zero fees, etc.

If 2015–16 was “rapid scale-up time” for ‘wallet companies,’ then 2017–18, very soon, will be the year of M&A, strategic partnerships, and consolidation for these startups.

Mobile payments are primarily a DATA business, where business economics is ‘tight,’ and viable only at SCALE.

Sub-optimal scale leads to ‘slow death.’

Asia is huge, fragmented, and heterogeneous market very different from the west, with strong cultural nuances and varying levels of readiness to embrace digital payments.

Although cashless payments are growing across Asia, the growth is not universal. In some countries, cash remains the king because of fears of identity theft, lack of infrastructure and knowledge of the digital world.

Despite claims of simplicity, most users find the cash to be more convenient than any digital or mobile wallet.

It is no surprise that mobile wallets — in countries such as Singapore, India, Indonesia, Malaysia, Philippines — contribute less than 4% of the overall digital payments transactions. Wallets, as a payments instrument, are very far off to rate comparable with plastic cards for online and in-store payments.

Wallet companies are struggling with nascent local regulations, evolving consumer behavior, lack of infrastructure, weak business models, strong competition, and cash-as-a-habit.

The cumulative impact of all these factors is creating an existential crisis for wallet companies. Let’s deep dive into some of these threats: