A report produced by PwC Global titled, “Emerging Markets: Driving The Payments Transformation” details how consumers’ needs are driving the revolution in payments within emerging markets. 

According to the study, 85% of the global population live in countries known as emerging markets.  Representing one-third of the world’s population, China and India’s 2.5 billion people can make a significant difference when it comes to experiencing even a slight market development. 

The report revealed that almost two billion adults around the world are “unbanked”. Emerging markets also have some of the “lowest rates of financial penetration”. 

Less Financial Inclusion Means More Innovations

Historically, traditional banks were the primary way to access any type of financial services. But this is simply not practical when it comes to reaching those who live in more rural communities. The dilemma to be resolved is how to provide affordable and accessible financial services to this demographic. 

To meet this urgent need for financial inclusion, new technologies and innovation are working together to make it more inexpensively viable to reach both the “underbanked” and “unbanked” populations. 

The solution has progressed from traditional branch banking to e-banking, and more recently, mobile money. This has made it possible for small areas to acquire some level of financial power.

In Vietnam and Thailand, one-fifth of adults keep their savings within a financial institution. Yet, two-thirds of the population in Kenya either receive or make their payments by using their mobile phones. 

Both retailers and customers have learned to adopt alternative banking channels such as interactive voice response (IVR), ATMs, and mobile and online banking, due to their lower costs. 

Key Drivers To the Rise In eCommerce

The integration between e-commerce and mobile technology have drastically changed the payments marketplace. eCommerce is seeing steady growth worldwide. 

As innovators continuously develop online purchase tools and customers are gaining more confidence with online purchases, the emerging markets are spearheading the rise in eCommerce spending. 

One of the main determining factors of eCommerce growth is simply the massive proliferation of smartphones, tablets, and internet/mobile access. It is a cash-free, card-free “financial transaction medium”. This in itself is advancing financial inclusion. 

“Mobile phone penetration”, which is now beyond 100%, can be seen in countries like Brazil. South Africa, India, and China are at 90%, 84.6%, and 76%, respectively. 

Both online retailers and payment service providers are busy developing “new payment concepts” that are compatible with the mobile infrastructure. This will ensure customers will have a more convenient means to make electronic payments. 

Kenya is currently leading the way in mobile payment technology. They primarily send transactions via the M-Pesa network. This amounts to 25% of Kenya’s GDP. 

It was found that 16 countries led the way in having a mobile money account versus a bank account. These countries include Cameroon, Burundi, the Democratic Republic of Congo, Gabon, Guinea, Kenya, Lesotho, Madagascar, Paraguay, Rwanda, the Republic of the Congo, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. 

Mobile Wallets Have Introduced Financial Inclusion

India, China, and Nigeria are markets that have benefited greatly from the explosive growth of mobile penetration. Consumers in these markets essentially went from no prior banking history to making payments via their mobile phone. 

With the vast majority of the world’s population living in these emerging markets, one thing is for sure, these countries will be the driving force for both the adoption and innovation of mobile payment technology.