Asia’s Drive for Financial Inclusion Means Opportunity for PFs

It’s hard to read the global news about payments without continually seeing something new happening in Asia. Companies like Paytm and Grab are expanding rapidly, enabling payments in innovative ways for small and micromerchants across the region.

These companies appear to recognize the opportunity for growth that bringing more people into the financial system offers them. And factors present in many places across Asia are creating an environment that is ready for that sort of opportunity.

Citing data from organizations such as the World Bank, a Let’s Talk Payments article last year argued that Asia is ripe for efforts to include more people in the formal financial system in technology-enabled ways. A significant unbanked population alongside a high rate of mobile phone penetration creates a unique environment where the right solutions could thrive.

Todd Ablowitz, CEO of Double Diamond Group, also contends that the conditions in Asia are favorable.

“There are a lot of markets in Asia that have limited penetration of electronic payments, alongside huge economic growth,” he told

Governments in the region realize this as well, and some are developing policies and strategic plans to grow digital payments within their borders.

India has made ongoing headlines with its efforts to drive digital payments. Not all of its moves have been as dramatic as demonetization; some have been as ordinary as tweaking transaction economics to incentivize adoption.

But India isn’t the only government on board with increasing the use of electronic payments. Other governments such as Japan and Singapore have announced goals to make their economies less reliant on cash.

Officials have given a number of reasons for their support, including collecting taxes and accommodating tourists. But outside organizations have also provided data suggesting that better financial inclusion lifts economies.

A report last year from the Better Than Cash Alliance examined the impact of digital payments growth in China. It credited digital payments platform Alipay for providing small businesses access to $107.3 billion USD in capital.

And Visa argued that digital payments provide an economic boost to cities in a report published last fall. It cited more efficiency, lower transaction handling costs and increased retail sales as some of the reasons.

But barriers stand in the way, proponents argue – barriers that have been difficult for legacy payments systems to overcome.

As Mastercard noted in its report on financial inclusion last fall, the effort is hampered by the cost of accepting digital payments and the difficulties of distributing electronic payments capabilities to small and micromerchants. Historically, banks have been the dominant players in enabling electronic payments acceptance, and it is difficult and expensive for them to board micromerchants.

That is why payment facilitators may very well serve as a necessary link that brings the formal financial system to the masses – in Asia as well as elsewhere.

Indeed, Mastercard pointed this out in its report, describing PFs as “an extremely cost-effective and expedient approach to enrolling, underwriting, and managing smaller merchants.”

Ablowitz agrees. “The PF model is the way around the world that new merchants are being brought into the ecosystem,” he said.

Intentionally or not, financial inclusion is at the heart of what payment facilitators do. Their unique use of technology to board and serve clients efficiently is well suited to serving underserved populations in innovative ways. And Asia is one region where that ability is in real demand.