Mobile-payment wallets have become a vital part of the Southeast Asian consumer landscape, allowing financial access for millions of previously excluded people. As online spending soared during the COVID-19 pandemic, wallets saw a surge in newly registered users. Uptake of this convenient technology now far outpaces that of credit cards in the region’s emerging markets, thereby revitalizing the payments ecosystem.
The very notion of digital wallets has changed. Wallets are no longer simply a value store: they are a medium for every type of payment—and more. What started out as a closed-loop payments platform is fast becoming a front-end engagement channel, enabled by a multitude of open and semi-open payment networks. Wallets have greeted the rise of BNPL (buy now, pay later), cryptocurrency, and cross-border payments by enabling transactions through these modes too. Beyond this, digital wallets are becoming access points for gaming, commerce, and loyalty, in some cases emerging as “super apps” or financial superstores—hubs of financial connectivity.
Despite the surge in use of these tools, no Southeast Asian provider has replicated the success of Chinese giants such as Ant. It remains to be seen whether the industry can overcome the challenges of monetization, profitability, and a crowded field of competitors. Is a sustainable playbook in sight?
To explore these issues, we tapped the collective wisdom of three leaders at the forefront of the field: Martha Sazon of Mynt, Anthony Thomas of MoMo, and Chris Yeo of Grab Financial Group. Their experience spans Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—a total population of close to 600 million people—and they share their existing and would-be customers’ enthusiasm for the wallet revolution (see sidebar, “My path to payments: Leaders’ personal journeys”).
These leaders undertook individual interviews with McKinsey, which have been edited and combined to create “conversations” on common and pertinent themes.
Southeast Asia: The ‘wallet first’ region
McKinsey: How do you account for the massive uptake of wallet technology in the region? And are you optimistic that this growth will persist after COVID-19 wanes?
Martha Sazon: In the Philippines, internet adoption was fast because of smartphone ownership. We circumvented the computer and went straight to mobile. A similar thing is happening with e-wallets: their role has evolved from being just for payments. People have become very creative and personalized in the way they use the app. We’ve seen merchants use it to receive payments from customers, pay bills, and get access to credit or loans, especially during COVID-19. It’s heartwarming to see how people are reacting to these innovations throughout the region. You could say we’re a digital life hack that is fast becoming a financial-wellness platform.
In Southeast Asia, more than six in ten people are unbanked, and only about 17 percent of transactions are cashless. So there are massive opportunities: we have to meet those needs, solve these problems.
Chris Yeo: We’re really excited about the future of wallets in Southeast Asia. It’s an underappreciated region—over 600 million young emerging consumers, massive smartphone penetration—yet there are basic problems with infrastructure and access to financial services. More than six in ten people are unbanked, and only about 17 percent of transactions are cashless. So there are massive opportunities: we have to meet those needs, solve these problems. This means really strong growth for wallets. It may be the only payment method that’s consistently gaining share across most or all markets in Southeast Asia, driven by tailwinds from e-commerce and COVID-19. Southeast Asia, in fact, is a wallet-first region, and we think this trend will continue.
Martha Sazon: Cash continues to be the preferred means of payment, but we’ve seen greatly accelerated adoption of wallets during the pandemic. In fact, if I may quote some data, the Central Bank of the Philippines just reported that 20 percent of retail transactions last year were done with online merchants, and P2P payments are key growth drivers.1 We deal with anything and everything that needs some form of financial connectivity. Filipinos are known to not jump on a trend right away; we want to be sure about where we put our money. But once you get to that tipping point, it’s like a big bandwagon. People have observed wallets being used by friends and family members who were early adopters. They’ve seen that it works.
Payments is deeply local. Wallets have been urban-centric, but there’s so much expansion in smaller cities beyond the traditional hubs, and that’s where future growth lies.
Anthony Thomas: These services inherently add convenience. The big barrier was education and awareness. And when there’s a trigger like COVID-19, which forces you to move onto this path, people realize that this is so much better. Education and awareness go hand in hand with trust. And once you’ve crossed that trust barrier, it sticks. I think we are beyond the need for incentives, because people have realized that this solves real problems. Payments is deeply local. Wallets have been urban-centric, but there’s so much expansion in smaller cities beyond the traditional hubs, and that’s where future growth lies, especially once we solve for cash-in.
Martha Sazon: As digital payments increase, we’ve experienced unprecedented growth on our own platform. When GCash started in 2020, we only had 20 million registered users. This grew to 55 million by the end of 2021, which is 70 percent of the adult population. There are 17 million daily active transactions, and we serve three million merchants and social sellers. So GCash is already embedded in users’ daily lives. This popularity is based, I think, on the trust we’ve earned—on our ability to simplify communication and demystify financial services for the masses.
Monetization: Finding routes to sustainability
McKinsey: Despite the popularity of wallets, monetization has proved a somewhat elusive goal. Often, payments are seen as a route to diversification into financial services, where the real monetization happens. What’s your playbook here?
Chris Yeo: What’s important is for each player to recognize their strengths and competitive advantages. Asia is really diverse, so everyone is starting in a different position. For us, we’re already large—part of a growing ecosystem with over 25 million monthly transacting users—so one thing we anchor on is our data advantage. How do you get efficient proprietary data at scale? With that, you can have more granular and proprietary risk and credit assessments, which lets you cross-sell your lending products safely. And fortunately, we have very high-quality, high-frequency transactional data.
Anthony Thomas: First, I am quite a proponent of the Ant model. There is significant room for growth and for monetization. As we move into smaller towns and more rural areas, it will be about how we connect the use cases—the vital network effect that all of us look for. However, the payment margins are razor-thin, so monetization has to happen in parallel through distribution of financial and other services. This obviously lags the larger payment services, but the monetization part is very much in progress.
Chris Yeo: We’ve spent a lot of time building up the infrastructure and foundations of the Grab ecosystem; now we’re looking to accelerate growth. We also want to deepen our financial services, to start cross-selling across payments and other products. And we continue to focus on being more efficient—increasing our cost advantage, operating efficiency, and marketing advantage.
Martha Sazon: We’ve seen tremendous growth in our financial-services space. Many traditional offerings from banks are not suited for the masses, but we’ve proven that digitization can make previously “for the wealthier” services—like credit, lending, insurance—relevant to all. We’ve democratized investment for our users, making it accessible even in a sachet economy like the Philippines.2 Global funds availability was such a surprise for people. They felt so empowered: “Oh, finally, I can invest in global funds for my future!” That concept of financial freedom and financial growth has really resonated. We currently have 7 percent market share of unit-linked funds and 77 percent of UITF [unit investment trust fund] accounts in the country.
Anthony Thomas: Value pools are clearly in lending, but I’m also bullish about our role in wealth management. Taking a leaf from the Ant playbook, we started with the equivalent of a money-market fund, which gives a reasonably high yield at very limited risk, as a foundational product. That has scaled very well. You can lower the entry to $1 or less. Then if you can get access to a bond fund, an equity index fund, some blue-chip global funds, there’s great opportunity to create access to wealth. Also with insurance, platforms like ours can often provide a better end-to-end experience than banks in terms of bringing the offering at the right time, to the right consumer, with a better risk profile than they’d get in the “real world.” So there’s value to be captured, especially considering we have so much engagement.
Is banking the future for wallet platforms?
McKinsey: Do you feel you’re in competition with traditional banks or need to become more bank-like yourselves?
Martha Sazon: I don’t believe becoming a bank is the only path forward for payment players. We already offer a full suite of financial services, but we’re focused rather on our platform approach, which allows us to collaborate actively with both traditional banks and neobanks. It’s a flexible, hybrid strategy. Not everything has to be initiated by us or owned by us end to end. I also believe in concentrating on what we’re great at, which is creating distinctive customer experiences by simplifying communication.
Anthony Thomas: We deeply care about our relationship with the banks in anything we do. Right now, for us, it’s a seamless process to pull money from a bank, and that’s fundamental to wallets. Banks can, of course, upgrade their apps and create payments platforms, but it’s a question of specialized focus. The DNA of the institution creates barriers to direct competition. It’s unlikely that a bank app will sell flowers, for example. Besides, banks and wallets are trying to work together for the most part. I don’t think there’s a good model that is completely stand-alone. Many wallet businesses are partnered with a licensed player in some form. I think a good hybrid is a ring-fenced independent entity: a digital front-end layer that runs on top of a parent bank’s license.
Building merchant relationships
McKinsey: Partnerships are key to this fragmented market. You never win alone in payments—especially in a subsector like wallets, which involves an extensive ecosystem of merchants and other players. How do you manage these relationships?
Martha Sazon: There’s so much to be done in the merchant space. Because it’s a huge opportunity and market base, we want to be there for the merchants, to have a role in their ecosystem, whether as a payment tool, as their pseudo bank access through our app, or even insurance. As we venture into the e-commerce space, we see merchants looking to partner with super apps to expand their digital presence.
Chris Yeo: We tend to adopt a merchant-centric lens. How do we uniquely serve merchant customers? How do we partner with them to be their preferred growth partner, supporting their business needs beyond payment acceptance? It’s really important to help new merchants get onboarded. We have cash-advance products, analytics, and other tools that we provide them beyond the ecosystem. We’re constantly thinking about increasing value to merchants, such as helping them improve the discoverability of their brand and exposing that to our consumers across 68 countries on the Grab app.
Martha Sazon: The philosophy we apply in developing the merchant base and empowering it is, first of all, that these merchants are consumers themselves. Most of the time, what they find useful for themselves and their families, they also want to adapt in their business; there’s a lot of intertwining of the two lives. Solutions can get complicated—simple for a micro business, but very complex as the enterprise grows—and can’t be provided by one company alone. We believe in partnerships, especially when tackling complex problems, like taking care of the merchants.
Anthony Thomas: We’ve been building merchant solutions beyond pure payment acceptance to include integrated logistics. For example, our app supports small food merchants with content to aid local discovery. The voucher marketplace and mini-apps allow merchants to leverage our traffic. And we’ve enabled large convenience-store chains to integrate their loyalty program with MoMo payments.
Space for new players in the wallet arena
McKinsey: Established players with large user bases and high engagement seem best positioned to win in this space. Is there room for new, smaller companies? Or do you see a giant regional payment specialist emerging?
Chris Yeo: Every month, you hear of new payments start-ups trying to add value within the value chain, trying to create a new layer, to aggregate different products, to reduce the friction. That’s what makes the payment space so interesting. We need to be open and keep saying, “How do we partner together so we help the ecosystem grow?”
Anthony Thomas: There’s always room for new players. But I don’t think this is the age of a new regional player, cutting across geographies. It’s tougher now to create a region-wide organization; each country’s dynamics are totally different. I think there will be some M&A activity and some consolidation. Then it depends on alignments—how businesses get acquired or partner and form networks. New players will probably solve in niches that make sense for them, but they’re unlikely to try to solve everything for everyone, because the leading wallets have somewhat captured positions.
Our vision of finance for all is a very big task, and no one company can tackle it alone. We choose to collaborate rather than compete.
Chris Yeo: We adopt an open-partnership philosophy, and the guiding principle is that it must be a win–win–win relationship. It helps the merchant; it helps our partner—a payment gateway, a third-party acquirer, an aggregator—and of course, it helps us. And this will continue as we constantly seek to work with more intermediaries. I think all of us can win.
Martha Sazon: Our vision of finance for all is a very big task, and no one company can tackle it alone. We choose to collaborate rather than compete, because we know it’s only by working together, partnering with different entities, that we can really tackle financial inclusion as a nation.
Cautiously monitoring the cryptocurrency space
McKinsey: We’ve seen that offering users the ability to trade cryptocurrencies can lead to higher user acquisition and engagement. What’s your view? Is this an area your company is looking to expand into?
Martha Sazon: We believe that whoever understands it first will have a higher chance of succeeding in crypto. It’s a big opportunity, and we’d like to participate. But we’re also very careful. When we do take part, it won’t be for the short term, and we’ll make sure that consumers get the most out of it and that it’s done in the safest way possible. I believe crypto is here to stay; we just have to find a way to safely participate in that space.
Chris Yeo: What payments conversation could we have without talking about crypto, right? It has attracted great global interest and massive institutional attention, even from conventional players. Personally, I am very interested in this space, but at Grab Financial Group, we’re going to approach crypto in a measured way. For example, we’d only consider working with crypto platforms and players that are recognized by regulators, with the right KYC [know your customer] processes in place. This area will continue to develop in terms of payments and important financial services, and we’ll continue to monitor it.
Anthony Thomas: Our thinking is evolving on crypto. For me, crypto as a means of enabling payments is not as relevant as crypto as an investment option, which is an idea people seem quite mesmerized by. It’s a long shot for MoMo at this point. It’s not something we ignore. We watch it closely, but we haven’t felt a compelling reason to dive into it. What problem does it solve? We are open to developing some blockchain-based capability, but cryptocurrency? We’re not as excited as a lot of other players.
Buy now, pay later: The new frontier
McKinsey: Many see “Buy now, pay later,” or BNPL, as a potential game changer for consumer finance. What’s your position on this?
Anthony Thomas: BNPL—or as I like to call it, end-use-based credit—is growing significantly everywhere. E-commerce players and banks are all waking up to it. So despite the hype, I think BNPL is here to stay. When it becomes a way to manage spend and cuts across multiple use cases, that could be powerful. We only launched our pay-later offering earlier this year, but demand is definitely there. Of course, the merchants love it. So I’m bullish. I don’t know how to put a percentage on it, but I wouldn’t be surprised if 20 to 30 percent of payment transactions come to be done on a deferred basis.
Martha Sazon: Lending is an area where we really want to double down, so BNPL is a good fit. We recently launched our BNPL platform for GCash. I think BNPL will accelerate financial inclusion, and consumption will be spurred. It’s great for many borrowing needs—airtime loads, electronics purchases, motorcycle financing. It provides an easy, flexible, accessible solution to the need for cash, especially for people at the base of the pyramid, who don’t normally have access to credit. Many Filipinos are forced to borrow from informal lenders—loan sharks—and there are so many barriers to borrowing from traditional banks, including a lack of credit scores. When cash is running low, BNPL will be a game changer.
Anthony Thomas: The advantage for wallets is that you already have the merchants and the consumers in a payment flow, so layering in BNPL is easier than for a stand-alone player. It’s a path to monetization, and the other important value it has for MoMo is the credit data. That opens up our platform possibilities on credit. There’s a nice positive reinforcing loop.
Chris Yeo: BNPL is a convenient way to increase spending power and a great tool for consumers to leapfrog credit cards. Nine in ten customers in Southeast Asia don’t have a credit card. Ultimately, what’s critical here is risk management. It’s important to ensure the industry grows so it benefits everyone in a responsible manner, balancing innovation with protection. All these pieces must come together to unlock this really interesting BNPL space, which we think will grow more and more. For our consumers, it’s more about ensuring sufficient control than extending an unnecessarily large credit line. This is what financial inclusion is all about: in the past, you didn’t have access to useful financial products, and now you can buy something special for your loved one. This is what makes for a great consumer product.
Infrastructure for frictionless payments
McKinsey: What are your views on open- versus closed-loop rails? Regarding nationalizing infrastructure and making payments in real time, how does this affect your economic and business model?
Anthony Thomas: With open-loop interoperability, it’s not left to a few players to create the infrastructure; a lot more can participate. That drives a greater degree of competition, and naturally people will look to differentiate on user experience. That leads to more convenience, more widespread adoption, more use cases. Then network effects start kicking in, and it becomes a way of life. We’ve seen that in our context.
Chris Yeo: Typically, only governments can mandate and push for interoperability or national payments rails. That makes sense because there is a national financial-inclusion agenda. In Malaysia, for example, we’ve seen how this helped to redistribute funds during COVID-19. Government regulators are key players and enablers. We interact with them across Southeast Asia, and they’ve been supportive of innovation in payments, very proactive. In turn, we’re super supportive of improvements in national infrastructure. Infrastructure is critical to drive more adoption of cashless wallets and digital payments, because ultimately, payments are about moving money between individuals and entities in a seamless manner. The more frictionless it is, the more it benefits everyone in the value chain and the ecosystem in general.
Anthony Thomas: There is so much to learn from India here. The first layer of infrastructure is having the ability to onboard customers through KYC, because even with smartphone penetration, if the regulatory regime requires complex processes, then that’s friction. India moved quickly on personal-identity documents and made it easy to onboard customers.
Then there has to be a way for money to flow into this world. India, again, worked hard to ensure a proliferation of bank accounts. Another factor in India is the introduction of UPI real-time payments. But in countries like Vietnam, there’s also a need to have physical networks, like retailers and convenience stores. Payroll allowances, disbursements, and inward remittances make a difference in some markets as well. The Philippines and Vietnam are probably three to five years behind India. Having said that, with the pandemic and the almost-forced movement to digital payments, I feel the gap between the countries is narrowing rapidly.
Finance for all: Are wallets a force for good?
McKinsey: Wallets can be viewed as a driver of holistic impact, inclusion, and diversity. Do you see your work as bringing social benefits to the region? How do we sustain that?
Martha Sazon: It’s about empowering the unbanked, so that’s exciting. I immediately feel the impact of what we do, whether in the economy or in how we make individual people’s lives better, no matter how small the innovations or services that are made available.
It’s about empowering the unbanked. I immediately feel the impact of what we do, whether in the economy or in how we make individual people’s lives better.
Anthony Thomas: It does solve the problem of access. That’s where wallets are particularly attractive, because they create access for all through the smartphone. That has led my career decisions, and that’s what motivates me the most to this day—bringing financial services to all. Technology gives us that opportunity.
Chris Yeo: Digital payments play a key role in the democratization of financial services, especially in a mobile-first region such as Southeast Asia. By actively partnering with governments, regulators, and other like-minded partners, we’ve been able to accelerate payments acceptance across the region and will continue with this approach to make seamless, flexible, and rewarding payments options accessible for all.
Anthony Thomas: Before COVID-19, we would have just talked about wallets theoretically and scratched our heads as to why more people don’t use them. In a social settings six years ago, when I started on this journey, I had to explain what I was doing. Now I can be quiet and hear other people talking about it, and that’s wonderful.
Martha Sazon: We’ve put a lot of effort into gaining the trust of our users by providing them with the best experience and best products, seeing as we are entrusted with their hard-earned money. We continue to protect this trust every day by keeping our platform safe and constantly communicating with our users. It’s very important to keep communication lines open. In the process, we demystify what finance is, what financial management is, what payments are, what financial services are—that it’s not just for the “smart ones,” it’s for everyone.
