We’re regularly seeing new Paytech innovations that are changing how payments are made. At their core, each looks to simplify the payments process and make it more secure for merchants and consumers overall. We took a look at one specific technology and learned why it could soon go from challenger to mainstream.
eWallets, a software solution that leverages mobile carriers to make payments are a rising alternative to mobile wallets, single-use virtual credit cards, payment apps, and other solutions. Some experts believe as adoption continues, they have the potential to offer a strong challenge to these more established payment methods. Boku, a growing payments software provider is seeking to expand its footprint in eWallets. Its solutions are designed to reduce fraud and enhance security for online purchases. Boku’s CEO, Jon Prideaux, a technology industry veteran with stints at IBM and Visa spoke to The Fintech Times to make his case for why consumers and merchants should consider eWallets as a viable alternative.
What are eWallets and why should consumers and merchants be excited about them?
eWallets, or digital wallets, or simply mobile wallets are digital accounts that hold digital cash. Unlike mobile wallets that are popular in established markets that enable credit card payments from mobile devices, like Apple Pay and Google Pay, eWallets store the value of digital cash. This is incredibly exciting for both consumers and merchants as eWallets have dramatically lowered the barriers for consumers to make online purchases by giving them a digital payment method. These payment types are extremely popular in Asia, as well as in emerging markets in Latin America, the Middle East and Africa, where 1.8 billion new consumers have joined the middle class over the past ten years. eWallets now provide merchants with access to these consumers, who mostly do not have credit cards, but do have eWallets.
eWallets have been described as “a critical tool for growing online sales,” because of their inherent benefits to merchants. Can you share your thoughts on why?
The simplest way in which eWallets are a growth tool for merchants is that they grow the addressable market considerably as merchants gain access to billions of consumers that they haven’t had before. eWallets are most popular in Asia and growing rapidly in Latin America, the two fastest-growing eCommerce regions in the world. Additionally, eWallets, especially the “super apps” like AliPay, Grab & GoJek provide merchants with integrated storefronts and marketing capabilities that other payment methods never could.
On the consumer/user side what protections do eWallets offer against fraud, bad actors, and scams? Similarly, what protection do merchants have against consumer fraud and chargebacks?
eWallets are much safer than credit cards for online payments because consumers use them almost exclusively on their mobile devices through apps. eWallet apps are able to leverage the technologies of the device, like biometrics and two-factor authentication in order to make transactions far more secure.
It seems like eWallet adoption is highest in Asia, what’s it going to take for them to catch on in Europe and the US?
eWallets are far more popular in Asia as they have taken off in countries with low credit card penetration. Credit cards have long been stigmatised in parts of Asia due to concerns of over indebtedness and the infamous interest rates associated with the payment type. Consumers simply opted to use cash and cash equivalent payment methods instead. These conditions made eWallets a perfect solution as they combine the convenience and utility of a digital payment method without the downsides of credit. Consumers and merchants have simply skipped credit cards and moved on to more advanced payment methods.
On the other hand, Europe and the US have the inertia of credit cards. Cards are widely distributed, and merchants have the ability to accept them. Instead of the revolution that we’ve seen in Asia and elsewhere, we’re seeing that credit cards are being digitised and put onto mobile devices using the existing card infrastructure.
There are some signs of life in the US, with both Venmo and Square Cash being highly popular. It remains to be seen if these apps will make the transition from P2P payments into merchant payments, but the fact that both Venmo and Square Cash offer debit cards, for now they are following suit.
Can you describe three recent innovations in Boku’s product?
Fixed/Guaranteed Settlement Timing: Boku aggregates payment methods across multiple payment types, countries of origin, and currencies, and thus settlement timing will vary. Boku has built a new settlement process that allows all funds to settle on a fixed timetable regardless of the settlement schedule of each individual payment issuer.
Device-Specific User Authentication Flows: While users who shop on their mobile phone will expect to be taken into their mobile wallet app to authorise purchases in real-time, we now allow merchants to flag instances when the user is NOT on their mobile phone, possibly on their tablet, laptop, console, or PC. In those instances, Boku will invoke user flows that take that particular environment into account and display a QR code for instance so that a user can readily authorise the payment in their mobile app even when they are not actually executing the purchase on their mobile phone.
Real Time Payments for recurring subscriptions: Because real time payments like India’s UPI are strictly governed by rules that typically prohibit automatic direct debits, subscription services may have difficulty supporting recurring charges. Boku recently implemented safeguards for UPI 2.0 that would allow automatic recurring charges by collecting a user opt-in (e.g. bank mandate) authorising direct debits up to a certain value and subject to a reminder notification that must be sent at least 24 hours ahead of the billing event. Boku’s platform takes care of all of the requirements while enabling the subscription service to automatically execute the charge as it normally does.
Boku has announced a string of recent high-profile deals with major companies around the world. What makes Boku standout when compared with your competitors?
Boku’s customers include six of the seven most valuable companies in the world, with Saudi Aramco being the outlier since they don’t sell directly to consumers. Our customers have chosen Boku because of our long track record of delivering complex, disparate mobile payment types in a consistent manner. We have integrated over 300 mobile payment types to date, including eWallets, and we have engineered them to a single, global specification so that our merchants can connect once and have universal acceptance. Moreover, we have engineered our specifications to support the business models of modern, digital merchants, enabling recurring subscriptions as well as one-tap purchases.
Looking ahead, how do you expect the market for eWallets to change in the next 2-3 years?
Our 2021 Mobile Payments Report, which will be released on July 7th uncovers a number of trends, but there are a few that are particularly relevant to watch. Southeast Asia is projected to be the fastest growing region for eWallets over the next five years, and Asia more broadly will start to reach full market adoption by 2025.
What will be truly transformative is going to be the mass adoption of eWallets in other parts of the world, particularly Latin America, Africa and the Middle East. In 2020, Latin America surpassed Asia to become the fastest growing eCommerce region in the world. Brazil and Mexico, which make up roughly half of the Latin American population, both have rapidly growing eWallets due to their previous cash-centricity and desire to adopt digital payment types.
Big investments in eWallets in Africa and the Middle East are poised to drive consumer adoption and growth, along with merchant acceptance. Nigeria now has a thriving eWallet market, and a rapidly growing eCommerce market. At the same time, STC Pay, from Saudi Arabia seems poised to become a regional eWallet for the Middle East, with plans to expand into multiple markets.
What’s important to understand is that eWallet hypergrowth is coming at the expense of cash, not credit card transactions. We are seeing a global paradigm shift from paper and coins that have been used for thousands of years to digital payment types that bring consumers into eCommerce for the first time.
What should consumers, and merchants expect from Boku, essentially, how will you maintain your industry leadership and competitive advantage?
One thing that comes out clearly from consumer research we conducted for our mobile payments report is that merchant adoption remains one of the few impediments for eWallets. In our minds, Boku has a very clear job to perform over the next few years, building out a global, mobile payments network that includes the most popular mobile payment types.
Enabling our merchants to reach billions of consumers means that we continuously integrate the most popular and fastest growing eWallets into the payments network, while ensuring that we maintain the high standards they expect.
For consumers, merchant adoption is the biggest issue, and thus for Boku it is critical that not only we bring our existing merchant customers along, but also that we can ensure our payments network is scalable and easy to onboard so that merchants everywhere can accept eWallet payments.
Consumers have made it clear, eWallets are here to stay, and now the world’s most popular payment type. When Boku connects merchants and scales the network, it delivers value to the entire ecosystem, delivering considerable value to merchants and consumers alike.
With digital adoption accelerating at a rapid pace during the pandemic, the need for new security and new fraud prevention technologies are top of mind for all stakeholders in a payment -consumers, merchants, networks, and financial institutions. eWallets, which combine the convenience and utility of a digital payment method with the enhanced, native protection of mobile devices, like biometrics and two-factor authentication, are becoming a trusted solution and may have the potential to be the payment solution that drives commerce in a post-cash, digital world.