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TableofContents
Preface...................................................................................................................................................1
ExecutiveSummary................................................................................................................................3
1.Introduction.......................................................................................................................................6
2.APECE-paymentIndex.......................................................................................................................9
KeyFindingsbyPillar........................................................................................................................16
Pillar1:RegulatoryandPolicyEnvironment................................................................................16
Pillar2:Infrastructure..................................................................................................................18
Pillar3:Demand...........................................................................................................................20
Pillar4:Innovation.......................................................................................................................22
Conclusion........................................................................................................................................23
3.CaseStudies:In-DepthLookatSelectedEconomies........................................................................25
Australia...........................................................................................................................................25
HongKong........................................................................................................................................27
Indonesia..........................................................................................................................................29
ThePhilippines.................................................................................................................................32
4.ConclusionandRecommendations:LookingAhead........................................................................35
Appendix1.EconometricMethodologyandResults...........................................................................37
Appendix2.APECE-paymentIndex–Methodology............................................................................39
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Preface
TheAPECFintechE-paymentReadinessIndex:EcosystemAssessmentandStatusReportisajointstudybytheAustralianAPECStudyCentreatRMITUniversityandTRPC,aspecialisttechnologyresearchconsultancy,basedoutofSingapore,withofficesinHongKong,BeijingandSydney.PayPalgenerouslysupportedthedevelopmentofthereportforboththe2015reportandthe2016report.
Thestudyassessesthelevelofreadinessandfuturepotentialofthe21APECeconomiestoengagein,adoptandreapthebroadrangeofeconomicandsocietalbenefitsthate-paymentshold,andtowhichtheroleofFintechisofcriticalimportance.Thereportwasundertakenwithaviewtotestingtheassumptionthatthereisastrongandgrowinglinkbetweene-paymentpenetrationandeconomicgrowth.Andthat,anysuchlinkwasworthidentifyingandbeginningtomeasure,alongwithacanvassingofthebarrierstoe-paymentadoptionacrossthevariousAPECeconomies.
APECeconomiesconstituteanimportantregionaleconomicbloc,representingover40%ofworldtradeand50%ofglobalGDP.Asthestudyattests,theseeconomiesareundergoingaprofoundtransitiontowardscashlesssocieties,drivenbythespreadofmobiledevices,increasingaccesstotheInternet,andtheemergenceofdigitalpayments.Thestudyprovidesatimelysnapshotofe-paymentadoption,andservesasanearlyguideonacceleratingdigitizationofpaymentsinlinewithAPEC’sfoundingobjectivesoftradefacilitation,regionalintegrationandeconomicprosperityforall.Morecrucially,thereportalsohelpspolicymakersassesstowhatextenttheireconomiesaree-paymentsready,andidentifieswhatareasareinneedofimprovement.
Whilee-paymentshavelongbeendiscussedwithinafewspecificforaoftheAPECsystem,theirwide-rangingbenefitsareonlybeginningtobeappreciatedoutsidethetechnologysector.Notsurprisinglytherefore,across-sectoralapproachwithinAPECtosystematicallymeasuretheeconomicimpactofthetransitiontowardse-paymentshasbeenlacking.Atthetimeofwriting,however,theAPECBusinessAdvisoryCouncil(ABAC)AsiaPacificFinancialForum(APFF)hasinitiatedtheprocessofcreatingane-paymentssub-group.Thestudycan,therefore,serveasareferencepointtotracktheregion’sprogressandinvitecollaborationfromvariousmembersintheefforttoimproveone-paymentsreadinessandimpactmeasurement.
Toestimatethemacro-economicimpactofopenaccesstoe-paymentsonAPECeconomies,thereportbeginswithaproof-of-concepteconometricmodellingusingsampledatafromsixAPECeconomies.TheheartofthereportistheAPECE-paymentReadinessIndex,comprising44indicatorsacrossfourpillarsmakingupthee-paymentecosystemthatmeasuretheattractivenessoftheirphysicalandregulatoryenvironments,currentandpotentialdemand,andtheircapacitytoinnovate.Thislatestreportisimprovedbyfine-tuningtheindicatorsusedinordertobetterrepresentexistingandpotentialdemandofe-payments,aswellasincorporatingtheuseofthelatestavailabledata.
Asthefindingsfromtheindexshow,smartphonesande-commercearesettodrivee-paymentadoptioninthefutureandinthiscontext,theroleofgovernmentsindevelopingeconomiesiscriticalife-paymentsaretoforgeahead.Governmentsneedtoensuretheirregulatoryandbusinessenvironmentsareconduciveforinnovationandseamlesstransactionalflowswiththeregion.Thereportalsoarguesthatgovernmentsneedtoshowleadership,especiallyinemergingeconomies,bypromotingashifttodigitalwithinpublicfinances,andtoworkwithstakeholdersfromtheprivatesectorandtheinternationaldevelopmentcommunity.
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Thisreportillustrateskeyconsiderationsandpotentialpathwaysforexpandinge-paymentadoptionacrossAPECeconomies.TheauthorshopethattheAPECE-paymentReadinessIndex2016willcontributetothedevelopmentofseamlesselectronicpayments,expandingtheoverallmarket,andincreasingthesharedprosperityofallAPECeconomies.
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ExecutiveSummary
E-paymentsholdabroadrangeofpromisesforindividuals,communitiesandeconomiesatlarge.Adaptationtodigitaltransactionsisalreadyhavingatransformativeimpactonsocietiesthroughaloweringoftransactioncosts,particularlyforSMEs,andtherebyaddingtoproductivity,economicgrowthandsocialbenefits.Constrainingtransactionflows,throughrestrictionsonaccesstoe-payments–whetherintentionalornot–canbeshowntodampeneconomicgrowth,socialequityandequality,andinnovation.However,thisstudyfindsthatAsiaPacificEconomicCooperation(APEC1)economies’levelofadvancementandexperienceinthedevelopmentofane-paymentecosystemvarieswidely.Realisingthefullpotentialofe-paymentswillrequiremoreflexibleregulatoryandbusinessclimatesalongwithcoordinatedandsustainedeffortsfromgovernments,theprivatesectorandtheinternationaldevelopmentcommunitytofosteradoption.
Thisstudysetouttoillustratethelinkagesbetweene-paymentpenetrationandeconomicgrowth,canvassingwherebarriersexistsforeachAPECeconomy.Toestimatethemacro-economicimpactofopenaccesstoelectronicpaymentsonAPECeconomies,aproof-of-conceptexercisewasconductedattheoutsetofthestudy.UsingsampledatafromsixAPECeconomies,thestudyfoundthata1%changeinonlineretailsalesisassociatedwithatleasta0.175%growthinGrossDomesticProduct(GDP)percapitaamongthesesixAPECeconomies.Thisisasubstantivefindingandcallsforafollowupandmoresubstantiveandempiricallybasedsurveyofe-paymentsaccessandopportunitiesacrossAPECeconomies.
Next,anAPECE-paymentIndex,comprisingfourpillarsand44indicators,wasconstructedtogaugethereadinessandcapacityofeachofthe21APECeconomiestoengageine-payment(includingbothe-paymentandm-paymentservices),andtofurtherdeveloptheiroveralle-paymentecosystem.BuildingfromthisIndexthestudyalsousesaseriesofcasestudiesofselectedeconomies–Australia,Indonesia,HongKongChina,andthePhilippines–toillustratekeycontributingfactorstotheprospectsfore-paymentadoptionanddevelopment.
KeytrendsandinsightsthatemergedfromtheIndexandcasestudiesareasfollows:
• Whileeconomiescangenerallybeseentorankinaccordancewiththeirincomebracket(GDPpercapita),thelevelofeconomicgrowthisnotthesoledeterminantofe-paymentreadinessoradoptioninagiveneconomy.Indeed,somemiddle-incomeeconomies,suchasMalaysia,andChina,withafavourablebusinessclimateandsolidinfrastructure,arepunchingabovetheirweight,whilesomehigh-incomeeconomies,suchastheRepublicofKoreaandJapan,fallbelowwheretheywouldotherwisebeexpected,duetoarestrictiveregulatoryenvironmentandalackofcertainconsumerdemand.Thissuggeststhat,byfocusingone-payments,aneconomycanboosteconomicgrowthandeffectively‘leapfrog’initsdevelopmenttrajectory.
• Furtherdevelopingthisissue,theE-paymentIndexshowsthatAPECeconomiesarelargelydividedintothreeclustersaccordingtoreadinessandcapacityfore-paymentusageandadoption.Theclusterscanbesummarisedasfollows:
1The21APECeconomiesare:Australia,BruneiDarussalam,Canada,Chile,China,HongKongChina,Indonesia,Japan,RepublicofKorea,Malaysia,Mexico,NewZealand,PapuaNewGuinea,Peru,Philippines,Russia,Singapore,ChineseTaipei,Thailand,UnitedStatesofAmericaandVietnam.
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• Cluster1:Economieswithadvancede-paymentecosystems(“Advanced”)–UnitedStatesofAmerica,Singapore,Canada,Australia,NewZealand,RepublicofKorea,HongKongChina,andJapan
• Cluster2:Economieswithtransitioninge-paymentecosystems(“Transitioning”)–ChineseTaipei,Malaysia,BruneiDarussalam,China,RussianFederation,andChile
• Cluster3:Economieswithnascente-paymentecosystems(“Nascent”)–Thailand,Peru,Mexico,Indonesia,Philippines,Vietnam,andPapuaNewGuinea
• Notably,nosingleAPECeconomytrumpsinallpillarsoftheIndex.Ofthefourpillarsthat
comprisetheIndex,SingaporecomesfirstinRegulatory&Policy,KoreatopsthelistinInfrastructure,NewZealandscoreshighestinDemand,whiletheUnitedStatesexcelsinInnovativeProducts&Services.Thismeansthateveryeconomyhasaspectsitcanimproveinordertoreapthebenefitsthate-paymentscanbring.Evenmoresignificantly,nosingleeconomytrumpsinmorethanonepillar.Thisalsoimpliesthatwhilesequencingofstructuralshiftsthattakesplacemaybeimportant,thereisnosinglepathwayoraroadmapforthoseinthelowerclusterstoclimbuptheranking.Everyeconomywillhaveauniquecombinationoffocusareastostrategicallyandsuccessfullyshifttoe-payments.
• Theresultsalsoshowthatwhileaccesstoformalfinancialsystems,suchasbankingincludingcreditanddebitcardusage,isimportanttoday,futuregrowthwillcomedisproportionatelyfromemergingeconomiesusingaffordablesmartphonesandothermobiledevices.EconomiessuchasIndonesiaandthePhilippines,whilestillcashdependent,areshowingnotonlyaremarkablyhighpropensitytogoonline,engageinsocialmediaandshopviasmartphones,butalargeproportionareenteringtheformalfinancialmarketbecauseofthesedevices,andpotentiallybypassingtraditionalplatformssuchascreditcards.Rapidlyexpandinge-commercesectorsintheseeconomieswilloftenleadandfurtherdrivethedevelopmentandusageofe-paymentsincomingyears.
• Nomatterthestageofdevelopmentofthee-paymentecosystem,facilitatinganattractivemarket(includingbusiness)climate,andinvestmentsintoinnovativee-moneysolutionsisimportant.Somedevelopingeconomies,suchasIndonesiaandthePhilippines,areforgingaheadininnovationssuchasFinTechandcryptocurrenciestocapitaliseontheirgrowingmiddleclass’propensitytospendandtransactviamobiledevices.
• Government,asahugeproviderandconsumerofpayments,hasanimportantroletoplayinacceleratingthedigitaltransition,especiallyineconomiesacrossthelowerclusters.Governmenteffortsandinitiativestotransitiontoelectronicpaymentscreatesdemandandnewopportunities,includingnewneedsforpaymentinfrastructureandachangeinconsumers’cashdependence.Asgovernmentsceasetoaccumulate,andproduce,cashandincreasinglymovetoelectronicallydisbursingcitizenfunds–tobankbranches,ATMs,orothercash-outpoints–recipientswillbeincentivizedtoparticipate.
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IntermsofspecificareasoftheAPECE-paymentIndex,thefindingsareasfollows:
RegulatoryandPolicyEnvironment:Manyeconomiesneedtofocusonfosteringafavourableregulatoryandpolicyenvironmenttoenhancetheconfidenceofbusinessesandconsumers.Therefore,government’svisionandeffortstomakeuseofe-paymentstoimprovetransparency,efficiencyandaccountabilityinitsownfinancescankick-startavirtuouscycleofadoption.
Infrastructure:Thegapordividebetweenhigh-income,upper-middle-incomeandlower-middle-incomeeconomiesismostobviousintheinfrastructurepillarandbridgingthedigitaldividewillbeessentialtofullyleveragingtheopportunitiesine-payments.Thisincludesincreasingsmartphonepenetrationandbroadbandaccessandaffordability.Focusingonavailabilityandaffordabilityofbasicfinancialservicesiskeyindrivinge-payments.
Demand:Demandfore-paymenttodateismoreprominentinadvancedeconomieswherethemajorityofthepopulationarelikelytohavebankaccounts–butthattrendislikelytochangesoon.Rapiduptakeofmobilephones,socialmediaande-commerceindevelopingeconomieswillfacilitatemarketgrowthfore-paymentandm-payment.
Innovation:Innovationsespeciallyinmobileandvirtualcurrenciesinovercominginfrastructurechallengesarecontributingtohigheruptakeofe-paymentandm-paymentservices,andareactingasgatewaysintothefinancialsystemforunbanked–orunder-banked–consumersegments.Governmentsneedtoembracecryptocurrency,whilealsoprovidingmuchneededconsumerprotectionandmitigatingillicitactivities,tobeabletobenefitfromthepotentialtoplugconsumerstoglobalpaymentssystems.Asthenumberofnon-bankplayersinthee-paymentsystemincreases,particularlyindevelopingm-paymentsolutions,thereisaneedforcollaborationamongbanksandnon-banksinordertoaccelerateinnovation.Thereisalsoaneedforregulatorycoordinationintheregiontosupportthisendorsement.
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1.Introduction
Electronicpayments,ore-payments,havebeenmakingever-increasinginroadsintotransactionssincethe1950sbeginningwiththeadventofgeneral-purposepaymentcards.Technologydevelopments,particularlytheincreasingpervasivenessoftheInternetandmobilephones,havepavedthewayforthecurrentproliferationofe-paymentmethods.E-paymentsnowrangefromstandardbanktransfersandcardpayments,toInternet-basedconsumptionandtransactions,tomobilewallets,andontovirtualcurrencyexchangessuchascryptocurrenciesanddistributedledgertechnologies.Commonusecasesofdigitalpaymentshavestretchedbeyondtraditionalretailandpeer-to-peer(P2P)paymentsandnowincludegovernment-to-people(G2P)payments,cross-borderremittances,transportation,andin-apppurchasesonsmartphones.
Withsuchvarietye-paymentsholdabroadrangeofpromisesforindividuals,communities,andespeciallyfordevelopingeconomiesandsmallandmedium-sizedenterprises(SMEs)thathavetypicallybeenleftbehindbythebrick-and-mortarmodeloffinancialservices.Mobilemoney,forexample,canextendfinancialaccesstotheunbanked,enablingthemtotransferfundsconvenientlyandsafely,whileonlineandmobilepaymentsenableSMEstoexpandmarketreachandengageincrossbordertradebyofferingfast,secureandpredictableflowsoffunds.Forgovernments,digitizedpaymentsenablefarmoreeffectivedisbursementsoffundssuchaspensions,salariesandsocialwelfarepayments,increasingreachandtransparency,reducingcorruption,andensuringaccountability.
Despiteitspotential,thepaceofe-paymentsadoptionisstillconstrainedinmanypartsoftheworld.Outofthetwobillionpeoplewithoutaccesstoformalfinancialservices,1.12billionarefromAsiaPacific,wherecashstillremainsthepreferredmediumofpayment.2Moreover,differingregulatoryframeworksacrosstheregionalongwithdifferentdefinitionsofwhatconstitutespayments–orwhatisapaymentsbusiness–constraincross-bordere-payments.
Thispaperispremisedaroundasimplehypothesis:thatbyincreasingopenaccesstopayments(i.e.removingconstraintsonpaymentsaccess)therewillbeacorrespondinggrowthineconomicdevelopment(GDP).
Thepurposeofthisstudythereforeistolookintothetrendsanddifferences,toexaminethestatusofe-paymentpenetrationacrosstheAPECeconomies,andthelevelofadvancementofeacheconomy’se-paymentecosystemforsupportingfuturedevelopmentandadoption.Insodoing,thestudyprovidesaroadmapofpotentialpathwaysandkeyconsiderationsforexpandinge-paymentadoptionacrossAPECeconomies,andthusbeingabletorealisethesocioeconomicbenefitsthatadoptioncanbring.
Thestudyisdividedintotwodistinctcomponents:
1. TheAPECE-paymentIndex,gaugingthereadinessandcapacityofeachofthe21economiesthatcompriseAPECtoengageine-payment,tousebothe-paymentandm-paymentservices,andtofurtherdeveloptheiroveralle-paymentecosystem.The2016APECE-paymentIndexhasfine-tuned19indicatorsoutofthe44usedwithnewerstatisticsormorerelevantindicatorsthathavebecomeavailablesincethepublicationofthe2015APECE-paymentIndex.
2AsiaPacificherereferstoEastAsia,SouthAsiaandthePacificaccordingtotheGSMAclassification.Formoreinformation,seeGSMA(2016)2015TheStateoftheIndustryReport:MobileMoney.
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2. Casestudiesofselectedeconomies–includingbothadvancedandemergingeconomies–to
illustratekeycontributingfactors,andtheprospectsofe-paymentadoptionanddevelopment.
ConceptualFramework
Inordertoestimatee-paymentreadinessthisstudydevelopedanIndexaggregatingandthenrankingavarietyoffactorscontributingtoahealthye-paymentecosystem.TheAPECE-paymentIndexisbasedonfour‘pillars’ofthisecosystem:i)theRegulatoryandPolicyEnvironment,ii)Infrastructure,iii)DemandandUse,andiv)InnovativeProductsandServices(orthesupply-sideofthee-paymentecosystem)(seeFigure1).Usingthesefourpillars,theIndexexaminesthereadinessofAPECeconomiestoadoptandutilisee-payments,aswellastheirfuturedevelopmentpotential(seeAppendix2forthemethodologyusedindevelopingtheIndex).
Figure1.Conceptualframeworkofthee-paymentecosystem
Source:TRPC
Thefirstpillarfocusesontheregulatoryandpolicyenvironmentforboththeinformationandcommunicationtechnology(ICT)andbusinesssectors.Businessfriendlyregulationsandpoliciesneedtobeinplacetobeabletoprovideaffordableandsecuree-paymentservices.Forserviceproviders,regulationsandpoliciescanfosterorhindermarketentry,andthus,affectthedevelopmentanduptakeofe-paymentsolutions.ThispillarthereforereflectsonthepresenceofICT-relatedregulationsandpolicies(e.g.,electroniccommerce,digitalsignatures,consumerprotection),andtheextenttowhichgovernmentisusingtechnologytoenhancecompetitiveness.Astherearenoregionalleveldatasetsthatcomprehensivelyexamineandcompareregulationsandpoliciesspecifictoe-payments,theindexusesmorebroadmeasuressuchasthetimeandcostsrequiredtostartabusiness,theefficiencyofthelegalframeworkinsettlingdisputesandchallengingregulations,andtherangeoffinancialproductsandservicesavailabletobusinesses.
Thesecondpillarfocusesone-paymentinfrastructure.Investmentsinbuildingareliableandsecurephysicalnetworktodelivere-paymentsnationwide,particularlytoruralareas,isessentialtotheexpansionofe-paymentservices.ThispillarlooksatthelevelofpenetrationoftheInternet,wireless
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broadband,mobilephonesandsmartphones,aswellasthenumberofATMsandcommercialbankbranchesineacheconomy.Italsoexaminesnationalcapabilitiesincybersecurity.
Thethirdpillarfocusesontheleveloflatentandactualdemandfore-paymentsfrombusinessesandconsumers,astheiracceptanceandusageofe-paymentservicesarekeytoathrivinge-paymentecosystem.Thepillargaugestheeconomies’useofthevariouschannelsfore-payment,includingcreditanddebitcards,onlineandmobileoptions,andthroughsocialmediasites.
Thefourthpillarfocusesonthesupply-sideofe-paymentandtheeconomies'readinesstodevelopinnovativee-paymentsolutionsandbusinessmodelsbylookingatthelevelofcompetitiveness,venturecapitalavailability,andpresenceofinternationalplayersinbothe-commerceandonlinepaymentssuchasAlibaba,Alipay,Amazon,Bitcoin,eBay,PayPal,TaobaoandTenpay.Intheupdated2016report,thispillarreceivedthemostchanges,with4outofthe9indicatorspreviouslyusedfromtheWorldEconomicForum’sGlobalCompetitivenessReportreplacedwithmorerigorousandrelevantonesfromtheGlobalInnovationIndexpublishedin2015(SeeAppendix2fordetails).
Thecentralpremiseofthisstudyisthatanincreaseinaccesstoandusageofe-paymentswilllead,fairlydirectly,toanincreaseineconomicgrowth.Acorollarypositionisthatthegreaterfinancialdepthcreatedbyatransitiontoe-paymentshasapositiveimpactonsocioeconomicdevelopment.Thereisalreadyampleevidenceestablishingaconcretecorrelationbetweene-paymentsandeconomicgrowthtosupportthisargument.Moody’sAnalytics,forexample,conductedastudylookingatelectroniccardusagein70countries.ThestudyfoundthatelectroniccardusageaddedUSD296billiontorealGDPfrom2011to2015,equivalenttoa0.1cumulativeincreaseinglobalGDPduringthesampletimeperiod.Higherelectroniccardsusagealsoaccountedforanaverageincreaseof2.6millionjobsperyearacrossthecountriessampledduringthesameperiod.3Similarly,ImperialCollegeLondonestimatesthatmoving25%ofpaper-basedtransactionstodigitalinretailpayments,G2P,e-commerce,cross-borderremittancesandSMEs,governments,businessesandconsumerscouldunlockbetweenUSD350to400inannualsavings.4
Takingthisastepfurther,Deloitteusedaneconometricmodellingtoquantifytheeffectsofanincreaseinonlineretailasaproxytoe-paymentsoneconomicgrowthacrossEuropeandfoundthatthetotalcontributionofonlineretailenabledbyonlinepayments,between2009and2012,tobeatleast1%ofGDPpercapita.5Asitisbeyondthescopeofthisstudytobuildaseparateeconometricmodeltoquantifytheeconomicimpactofonlinepaymentsacrossall21APECeconomies,aproof-of-conceptexercisewascarriedoutusingDeloitte’sregressionmodeltotestthecorrelation.
UsingsampledatafromsixAPECeconomiesoverfouryears,from2011to2014(includingamixofadvancedandemergingeconomies:seeAppendix1),amulti-regressionanalysiswascarriedouttoestimatetheelasticitybetweenonlineretailsaleandeconomicgrowth.Theresultssuggestthata1%changeinonlineretailsalesenabledbye-paymentsisassociatedwith0.175%changeinGDPpercapitaamongtheseeconomies,a57%increasecomparedtothepreviousstudywherea1%changeinonlineretailaccountedfora0.1%changeinGDPpercapitaover2011-2013.
3Moody’sAnalytics(2016)TheImpactofElectronicPaymentsonEconomicGrowth,https://usa.visa.com/dam/VCOM/download/visa-everywhere/global-impact/impact-of-electronic-payments-on-economic-growth.pdf4ImperialCollegeLondon(2016)ReleasingtheFlowofDigitalMoney:HittingtheTippingPointofAdoption,https://www.citibank.com/icg/sa/digital_symposium/digital_money_2016/pdf/releasing_the_flow_of_digital_money.pdf5TheeconomicgrowthliteraturethatDeloitteandthisstudydrewthemethodologicalapproachfromincludesBarro(1992),Mankiw,RomerandWeil(1992)andCaselli,EsquivelandLefort(1998).
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WhencombinedwiththeconclusionsemergingfromtheE-paymentIndex,webelievethatthisresultmeritsfurtherstudyutilizingpaneldataacrossallAPECeconomiesandoverasustainedperiodoftimetobetterunderstandtheeconomicimpactofe-paymentadoption.
2.APECE-paymentIndex
ThissectiondetailsthedevelopmentoftheAPECE-paymentIndexandsummarisesthekeytrendsandinsightsthatemergefromananalysisoftheIndex.
Table1.TheAPECE-paymentIndex:OverallRanksAPECishighlydiversifiedintermsofreadinessandadvancementofe-paymentecosystems.
Whileintuitive,itisworthrecognizingupfrontthatAPECeconomies’readinesstoadoptandutilisee-paymentsvarieswidely.Overall,theUnitedStatesretaineditsfirstpositionwithintheAPECE-paymentIndexwithascoreof66.9(outofapossible100–seebelowfordetails),whileattheotherendofthetablePapuaNewGuineacameinlastwithascoreof23.9.
Between2015and2016,11ofthe21APECeconomieshadashiftinrankings.Perumarkedthebiggestgainbymovingupthreeplacesto16th.Canadamoveduptwopositionsto3rd,whiletheRepublicofKorea,China,theRussianFederation,andMexicoallmoveduponeplaceto6th,12th,13th,and17threspectively.Chile,IndonesiaandthePhilippinesfelltwoplacesto14th,18th,and19threspectively,whileNewZealandalsofell1placedownto5th.
APEC’soveralle-paymentecosystemisimproving,thankstothetransitioningeconomies
Comparedto2015,theaveragee-paymentreadinessscoreofthe21APECeconomieshasimprovedfrom41.6to44.6.Themedianscoreisalsoupto43.4,from37.2inthepreviousyear.Thissignalsanoverallimprovementinthee-paymentecosystemoftheregionwiththebottomtiergroupmovingupatafasterratethantherestoftheclusters.
Thereadinessandcapacityofaneconomytoengageine-paymentisstronglyinfluencedbyitsstageofdevelopment.
Rank Economy ScoresChangesinRanking
1 UnitedStatesofAmerica 66.9 -
2 Singapore 62.9 -
3 Canada 62.4 (+2)
4 Australia 60.6 -
5 NewZealand 60.4 (-2)
6 Korea,Rep. 59.9 (+1)
7 HongKong,China 59.3 (-1)
8 Japan 55.5 -
9 ChineseTaipei 52.9 -
10 Malaysia 45.5 -
11 BruneiDarussalam 42.4 -
12 China 37.5 (+1)
13 RussianFederation 37.4 (+1)
14 Chile 36.2 (-2)
15 Thailand 33.2 -
16 Peru 29.5 (+3)
17 Mexico 29.1 (+1)
18 Indonesia 28.4 (-2)
19 Philippines 26.0 (-2)
20 Vietnam 25.6 -
21 PapuaNewGuinea 23.9 -
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Thelevelofeconomicdevelopmentofaneconomyis,ofcourse,onekeyfactordrivingsuchawiderange.Indeed,astrongcorrelationemergeswhentheeconomies’e-paymentindexrankingsareoverlaidagainstGDPpercapita,(Figure2);thehighertheincome,thebettertheeconomytendstodointherankingoftheAPECE-paymentIndex.6Exceptionsdoexistinthiscase;BruneiDarussalam,forinstance,appearstolaginrankingcomparetoitspeersofthesimilarincomerangewhileMalaysiaandChinashowhigherrankingrelativetotheirincomepeers.
Figure2.RelationshipbetweenAPECE-paymentIndexrankingsandincomelevel
Source:WorldDevelopmentIndicators(2014);forChineseTaipei,NominalGDPpercapita,2014obtainedfromNationalStatistics,RepublicofChina(ChineseTaipei)
OncetheAPECe-PaymentIndexscoresareoverlaidagainstincomelevels,thefollowingthreeclustersemerge:advanced,transitioning,and,emerging(Figure3):
• Cluster1:Economieswithadvancede-paymentecosystems(>55points)–UnitedStatesofAmerica,Singapore,Canada,Australia,NewZealand,RepublicofKorea,HongKongChina,andJapan
• Cluster2:Economieswithtransitioninge-paymentecosystems(between35–55points)–ChineseTaipei,Malaysia,BruneiDarussalam,China,RussianFederation,andChile
• Cluster3:Economieswithnascentandemerginge-paymentecosystems(<35points)–Thailand,Peru,Mexico,Indonesia,Philippines,Vietnam,andPapuaNewGuinea
6TheR-squaredvalueofthelogarithmictrendlineis0.7662,whichshowsagoodfitofthedataandthusastrongcorrelationbetweentheAPECe-paymentreadinessrankingsandlevelofeconomicgrowth.
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Figure3.RelationshipbetweenAPECE-paymentIndexscoresandIncomelevel
Source:WorldDevelopmentIndicators(2014);forChineseTaipei,NominalGDPpercapita,2014obtainedfromNationalStatistics,RepublicofChina(ChineseTaipei)
WhencomparedwiththeWorldBank’sincomeclassification,Clusters1and2arecomprisedmainlyofhigh-incomeeconomies,withtheexceptionofMalaysia,andChina(upper-middleincomeeconomies).ThisdemonstratesthatMalaysia,andChinahaveachievedhighe-paymentreadinessrelativetotheirlevelofeconomicdevelopment.AfurthernotablecomparatorhereisbetweenMalaysiaandMexico,twoeconomieswithroughlysimilarlevelsofGDPpercapitaandyetstarklydifferentlevelsofe-paymentsreadiness.Cluster3comprisesmostlyupper-middleandlower-middleincomeeconomies,againdemonstratingthestrongpositiverelationshipbetweenthelevelofe-paymentreadinessandthelevelofeconomicdevelopment.
Table2.ClustersoftheAPECE-paymentIndexClusters APECE-paymentIndex WorldBankIncome
ClassificationCluster1(>55pts)
1. UnitedStatesofAmerica
2. Singapore3. Canada4. Australia
5. NewZealand6. RepublicofKorea7. HongKong8. Japan
Allhigh-incomeeconomiesexceptMalaysiaandChina
Cluster2(35-55pts)
9. ChineseTaipei10. Malaysia11. BruneiDarussalam
12. China13. RussianFederation14. Chile
Cluster3(<35pts)
15. Thailand16. Peru17. Mexico18. Indonesia
19. Philippines20. Vietnam21. PapuaNewGuinea
Allupper-middleandlower-middleincomeeconomies
High-incomeeconomiesaremorelikelytohaveathrivingecosystemfore-payments.
BasedonthestronglinkagebetweenGDPpercapitaande-paymentreadiness,high-incomeeconomiesarelikelytohavemadesignificantprogressinthefourpillarsthatmakeupthee-paymentecosystem.EconomiesinCluster1,forinstance,havemoreadvancedbankingandpaymentsystems,withwell-establishedregulationsandinfrastructurefore-paymentsinplace.A
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largerpercentageofitspopulationhasbankaccounts,andisfamiliarwithcreditcardsanddebitcards,andonlineshopping.
Cluster1:Economies
Overall,theUnitedStatesrankshighestbasedonitsstrengthsininnovation(1st),infrastructure(2nd)anddemand(4th).Fromtherankingbypillar(Table3),theUnitedStatestakestheleadintheinnovationpillar.US-foundedcompaniessuchasAmazon,Google,andPayPalaswellasmajorcreditcardcompanieslikeAmericanExpress,MasterCardandVisaareinternationally-recognisedinnovatorsine-payment.TheintensityofcompetitionandtheavailabilityofventurecapitalintheUSareleadingtothedevelopmentofinnovativee-paymentproductsandservices.Forexample,USFinTechcompaniessawa72%risefundingin2015year-on-year,whichtotalledUSD$7.9billion,whichismorethanhalfoftheglobalshare.WhileFinTechactivitiesmayhavetaperedsincethen,fundingrecoveredbyUSFinTechcompaniescontinuetodwarfotherregions(USD$4.5billionforAsiaandUSD$1.5billionforEurope).7Thiscapacitytoinnovateislinkedwithanadvanceddigitalinfrastructureaswellasonlineandsocialtechnologies,whichareinturnsparkingdemandfornewservicesandfunctionalitiesthatincreasetheconvenienceandreliabilityofmakingpayments.
Singapore’srunner-upstatusintheIndexisfuelledbyitstoprankingintheregulatoryandpolicypillar.TheGovernmentofSingaporetakesatop-downapproachindevelopingitsdigitaleconomywithaclear-eyedstrategytobuildaSmartNationandfocusonbusinessstart-ups.Theimportanceoftheanaloguecomponentsofthedigitalpaymentsecosystem,namelyafavourablepolicyandregulatoryenvironmentcannotbestressedenoughandisshownbytheIndexresultstobefundamentalinattractinginvestment,drivinginnovation,andstimulatingthenecessaryemergenceofdemandfore-paymentproductsandservices.
Canada,rankingthirdoverall,moveduptworanksfrom2015,scoreshigh–perhapssurprisinglyforsome–inthedemandpillar(tied2ndwithAustralia)wherethetopthreeeconomiesscorewithin0.1pointfromeachother.Supportingthisresult,aGfKstudycorroboratesCanadian’sstrongpreferencefornon-cashpayments,reportingthatonly1in4transactionsinCanadausedcashin2015.8Thesamestudyalsofoundthatmobilepaymentsweregainingtraction,with63%ofCanadianconsumersreportedmakingatleastonemobiletransactionpermonthinthesameyear,up3%from2014.9Canada’spolicyandregulatoryenvironment(5th)andinfrastructure(4th)fore-paymentsalsoscoredrelativelystrong.ItisworthnotingthatCanadahasasignificantlyhigherpercentageofcreditcardownershipandusage,at77%and73%respectively,thanotherAPECeconomies.(JapanisnextamongAPECeconomieswith66%creditcardownershipand52%creditcarduse–asizeabledifference.ThegapisevengreaterwhencomparedwitheconomiesinClusters2and3.InMalaysia,only20%ofthepopulationownsacreditcard,andinIndonesiaonly2%.)
AccordingtoWorldPay,creditcardsconstitutethegreatestproportionofnon-cashtransactionsconductedgloballyintermsofonlinetransactionpurchasevalue(55%),followedbye-walletaccounts(22%)in2014.10Creditcardande-walletadoptionratesaresignificantlyhigherinhigh-incomeeconomies,whichreinforcesthepointthatpopulationsinhigh-incomeeconomiesaremoreabletoperforme-paymenttransactions.However,asthevarietyofe-paymentoptionsgrowand
7KPMGandCBInsight(2016)PulseofFintech2015Review,https://home.kpmg.com/content/dam/kpmg/pdf/2016/06/pulse-of-fintech-2015-review.pdf8GfK(2016)FutureBuystudy,http://www.gfk.com/en-us/insights/press-release/canadians-preference-for-non-cash-payment-methods-continues-to-grow-gfk-study/9Ibid10WorldPay2015citedinUnitedNationsConferenceonTradeandDevelopment(2016)B2CE-CommerceIndex2016,http://unctad.org/en/PublicationsLibrary/tn_unctad_ict4d07_en.pdf
13
accesstoe-paymentincreasesitispreciselythiscategoryofcredit/debitcardsandbankaccountsweseegivingway,asthetransactionsbasecontinuestotransform.Well-positionedeconomiesinClusters2and3willbeabletomaketheleapbybestenablingtheirpopulationstoadopte-paymentsoutsidetheuseofcredit/debitcardsandbankaccounts.
AustraliaandNewZealandrankfourthandfifth,respectively,scoringrelativelywellinthreeofthefourpillars.InAustralia,thehighInternetandsmartphonepenetration,andhighusageofe-paymentmethodsallowittoscorerelativelywellininfrastructure(3rd)anddemand(tied2ndwithCanada),withfiguressimilartoNewZealand.Forinstance,82%ofAustraliansusedebitcards(comparedwith92%ofNewZealanders),and68%ofAustraliansusetheInternettopaybillsorbuythings(comparedwith72%ofNewZealanders).IntheG20E-tradeReadinessIndex,Australiatoppedtherankings,andoneofthereasonswasduetotheeconomy’shighuseofe-paymentmethods.Anotherreasonwasrelatedtoitsrelativelywell-developeddigitalinfrastructure–althoughthisisoneareawhichtherehasbeendomesticconsternationinrecentyearswithalackofconsensusinpoliticalwill.11
ForNewZealand,itsoverallrankingwentdownby2spotsalthoughitdidmanagetoascendtothetopspotinthedemandpillar,albeitwithaslightlyhigherscorethanAustraliaandCanada,tiedat2ndspot.Italsoscoredrelativelyhighinregulatoryandpolicy(4th),infrastructure(6th)andinnovation(8th).NewZealandhasthemostfavourableregulatoryenvironmentforstartingupabusiness,andtheuseofe-paymentsisalreadyquitehighwithover90%ofitspopulationusingdebitcards,andover70%ofitspopulationusingtheInternettopaybillsormakepurchases.12Forbothoftheseindicators,NewZealandrankshighestamongallAPECeconomies.
NoeconomydominatestheIndexbytoppingmorethanonepillarinthee-paymentecosystem.
FromTable3andfromtheprecedingobservationsonCluster1economies,itcanbeseenthatnoneoftheeconomiestopmorethanoneofthepillarsinthee-paymentecosystem.Moreover,onlyCanadarankedinthetopfiveinallfourpillars,meaningthatmajorityoftheeconomieshavethepotentialtoimproveinoneormoreaspectsoftheire-paymentecosystem.
Forinstance,theUnitedStatesleadsinthedevelopmentofinnovativeproductsandservicesbutranks6thintheprovisionofaregulatoryandpolicyenvironmentfore-payments.Singaporeisthefrontrunnerinofferingafavourableregulatoryandpolicyenvironmentfore-paymentsbutranksonly6thindemandandusage.Oneinterestingindicatorinthisregard:only28%ofSingaporeansusetheInternettopaybillsorbuythings.13Canadaleadsinthedemandpillarbutits5thrankinregulatoryandpolicyenvironmentpullsdownitsoverallranking.TheRepublicofKorea,oneoftheworld’smostdigitallyconnectedsocieties,notsurprisinglyscoreshighestforinfrastructure,butranksonly11thintheregulatoryandpolicyenvironmentpillar.Oneofthereasonsforthisisthat,whilethelawsrelatingtoICTsarewelldevelopedinKorea,lawsrelatingtothebankingandfinancialservicessectorshavenotadjustedquicklytoinnovationsappearinginICT,leavingnewinnovativeareassuchasFinTech,ratherlesscompetitivethanmightotherwisebeexpected.Thereisthusroomforimprovementintheefficiencyofthelegalframeworksforfinancialservices,inparticularwhereitoverlapswithICT.Thisneedforcross-sectoralunderstanding,awarenessandresponsivenessine-paymentsisathemethatcomesthroughtimeandagaininlookingattherankingsacrosstheAPECE-paymentsIndex.
11TheEconomistIntelligenceUnit(2014)TheG20e-TradeReadinessIndex,https://www.eiuperspectives.economist.com/sites/default/files/Laurel%20West%20-%20eBay%20-%20The%20Global%20e-trade%20Readiness%20Index%20Final%20V2_0.pdf12WorldBank(2014)GlobalFindex,http://datatopics.worldbank.org/financialinclusion/13Ibid
14
Table3.TheAPECE-paymentIndexrankingsandscores,bypillar P1.Regulatory
&PolicyEnvironment
P2.Infrastructure
P3.Demand P4.InnovativeProducts&services
Rank Score Rank Score Rank Score Rank Score
1 UnitedStatesofAmerica 6 67.0 2 72.5 4 54.1 1 77.5
2 Singapore 1 96.4 7 59.7 5 48.4 5 55.9
3 Canada 5 68.3 4 66.8 2 56.1 2 59.3
4 Australia 8 62.2 3 70.5 2 56.1 7 51.0
5 NewZealand 4 77.1 6 60.2 1 56.2 8 50.0
6 Korea,Rep. 11 48.8 1 78.9 5 49.3 3 58.3
7 HongKong,China 2 83.8 9 57.7 9 45.8 4 57.4
8 Japan 7 64.7 5 63.2 10 42.7 6 54.0
9 ChineseTaipei 9 58.4 8 58.6 8 46.6 9 48.3
10 Malaysia 3 80.6 11 40.8 11 34.2 13 34.4
11 BruneiDarussalam 12 47.4 12 39.0 7 46.6 12 36.3
12 China 15 42.7 16 37.7 13 28.6 10 45.4
13 RussianFederation 20 24.6 10 50.5 12 32.0 11 38.6
14 Chile 10 52.3 14 38.4 14 28.5 17 28.6
15 Thailand 16 35.6 15 37.9 15 28.2 15 31.2
16 Peru 21 24.1 13 39.3 17 23.1 16 29.8
17 Mexico 19 28.3 17 29.3 16 27.1 14 32.8
18 Indonesia 14 42.8 18 28.9 21 18.9 19 27.7
19 Philippines 17 32.0 19 28.7 18 21.1 20 23.4
20 Vietnam 18 31.1 20 25.4 19 20.4 18 28.0
21 PapuaNewGuinea 13 47.1 21 15.5 20 20.4 21 18.6
Othernotablestrengthsandweaknessesareworthcallingout.TheseincludetheremarkablyrapidpaceofdevelopmentintheChinesemarket,internationallyknownforwidelyadoptede-paymentsolutionssuchasAlipay,TaobaoandTenpay,butstillneedingtoovercomeregulatoryandinfrastructurechallengesinordertofullyleveragetheopportunities.InJapan,itspaymentsinfrastructureismature(ranks5th),whileitsdemandfore-paymentissurprisinglylow(ranked10th).AmongAPECeconomies,theJapanesespendtheleastamountoftimeontheInternetandonsocialmedia,andonly8%ofitspopulationusemobilebanking,despitetheubiquityofmobileusageelsewhereinotheraspectsofJapaneselife.Thelackofprevalentinternationale-paymentsolutionsinJapan,andthelackofsuccessofJapanesee-paymentssolutionsinforeignmarketscouldexplainJapan’slowuptakeofmobilebanking.
Astheresultsshow,thereisnosinglepathwaytopromotinganddevelopinge-payment.Thismeansthatforpolicymakerse-paymentisanareathatneedstobedevelopedholisticallybyconsideringthewaysinwhicheachofthepillarsinthee-paymentecosystemaffecteachother
15
withinthecontextofeachindividualeconomy.Andthismeansthatpolicymakersneedtohaveabroadappreciationofhowthesefactorsworkiftheyaretocreateaneffectiveframework.
Moreover,whilegrowthandinnovationine-paymentcancomefromallincomelevelsandfromallmannerofsocialgroups,thetypesofinnovationfindingtractioninaneconomydifferasdifferentneedsareaddressedanddifferentsocialgroupsserviced.
Cluster1economiesgenerallyhavealongerhistoryofthedevelopmentanduseofe-paymentservices.Theseeconomieshavealargepercentageoftheirpopulationalreadyusingcreditanddebitcards,andarefamiliarwithATMsand,increasingly,withonlinebanking.Heree-paymentinnovationsaimtoincreaseconvenience,flexibilityandsecurityforconsumers;whileforbusinessestheyenhancesalesandreducepaymentprocessingcosts.
ForeconomiesinClusters2and3,theemphasisisoftenonincreasingaccesstobasicfinancialservices,ontheonehand,andempoweringtheSMEe-commerceopportunity,ontheother.Intheseeconomiespeoplearelesslikelytohavebankaccountsandtheownershipofcreditcardsislower,butthosewithsmartphonesareincreasinglyusingthemtomakepaymentsofonesortoranother.ForSMEsthiscanmeanaccesstofundsforsettingupandexpandingtheirbusinesses;itcanmeanaccesstonewmarkets,whetheronthesupplysideordemandside,andunlockingthepotentialfore-commerce;anditcanmeanbeingabletoexecuteonpayrollorfinancewithouthavingtophysicallyvisitabankandcarrylargesumsofcash.Greateraccesstoe-paymentsdrawsmoreenterprisesintotheformalsector,raisingtaxrevenuesandmakingworkerseligibleforbetterprotectionandbenefits.14Forconsumers,accesstopaymentcanmeanaccesstoservicessuchashealthandeducation,andenhancedproductivitybyreducingthetimeittakestopayforservicesandproducts.
APECisrapidlybecoming‘mobilefirst’andsignificantgrowthwillbedrivenfromeconomieswithhighsmartphoneadoptionandwheretheproportionsofservicesofferedthroughsmartphonesareincreasing.Theseeconomiesarenotnecessarilyhigh-incomeeconomies.Forinstance,theeconomywiththehighestpercentageofsmartphoneuserswhohavemadepurchasesviatheirphoneisChina(69%),withsome930millionpeople–orthreetimesthetotalpopulationoftheUnitedStates–alreadyhavingdoneso.ThisisfollowedbyVietnam(60%),Indonesia(57%),RepublicofKorea(56%)andThailand(51%).However,inCanadaitis27%,NewZealand33%andAustralia41%.15Figure4showstheweakcorrelationbetweenGDPpercapitaandthepercentageofsmartphoneuserswhohavepurchasedviaphone.Thisisanarearequiringsignificantfurtherresearch.
Asmorepeoplebecomeconnected,particularlyinthelower-middleandupper-middleincomeeconomiesofCluster3,throughtherapiduptakeofmobilephonesandsocialmedia,themarketfore-paymentandm-paymentwillgrowexponentially.Furthermore,thevarietyofinnovativeproductsandservicesislikelytoincreasetomeetdemand,includingalternativee-paymentsystemsfortheunbankedconsumersegments.
SuchconclusionsaresupportedbyemergingstudiessuchastheUnitedNationsConferenceonTradeandDevelopment’slatestInformationEconomyReport,16whichfindsthatmostretaile-commercepaymentsarestillmadeviacreditcard,butby2017alternatepaymentswillmakeupthemajorityofalle-commercepayments,withe-walletsalonesettorepresentmorethan40%ofthe
14StandardChartered,FinancialInclusion:Reachingtheunbanked,4September2014.15OurMobilePlanet,Google(2014)http://think.withgoogle.com/mobileplanet/en/downloads16UnitedNationsConferenceonTradeandDevelopment(2015)InformationEconomyReport2015:UnlockingthePotentialofE-commerceforDevelopingCountries,http://unctad.org/en/PublicationsLibrary/ier2015_en.pdf
16
total.AccordingtotheWorldPaymentsReport2015,17mobilepaymentsarerapidlyincreasingwithnon-banksslowlyincreasingtheirshareoftransactions.InChina,mobilepaymentsmakeup28%ofthenon-cashtransactionsbyvolumes,whichreached4.5billionin2014,upby170%fromthepreviousyear.Thereportalsopointsoutthathiddendigitalpayments,includingmobilemoney,cryptocurrenciesandmobileapppurchases,areestimatedtomakeupatleast10%ofnon-casemarketgloballybutarenotbeingreported.Therearesignsthatgovernmentsareactivelyplayingacatchuptobringnewandinnovativedigitalfinancialservicesunderanoverarchingregulatoryumbrella(SeeCaseStudies:Australia).
Figure4.Relationshipbetweenincomelevelandthepercentageofsmartphoneuserswhohavepurchasedviaphone
Sources:WorldDevelopmentIndicators(2014);forChineseTaipei,NominalGDPpercapita,2014obtainedfromNationalStatistics,RepublicofChina(ChineseTaipei);ConsumerBarometer,Google(2015)
KeyFindingsbyPillar
Pillar1:RegulatoryandPolicyEnvironment
AmajorityofAPECeconomiesneedtofocusoncreating,orimproving,afavourableregulatoryandpolicyenvironmentforICTinfrastructuredevelopment,cybersecurity,businessinnovationanddemandfore-paymentsasillustratedbytheE-paymentsIndex.WiththeexceptionofMalaysiaandChina,alllower-middleandupper-middleincomeeconomiesneedtofocusonthisaspectoftheirecosystemtobeabletoattractinvestmentandfurtherparticipation.Thisisofcourseoneareawherethegovernmentcanhaveanoutsizedinfluenceandwherelowerincomeeconomiescanmakesubstantialheadway.Itisalsoanareaofsignificantcontentionandconfusionwithmanyaspectsofe-paymentsnowcuttingacrossmultipleregulatoryjurisdictions.Thus,evensomehigh-incomeeconomiessuchasAustraliaandtheRepublicofKorea,sufferfromcomparativelylowscoresinthispillar(ranking8thand11th,respectively).
BruneiDarussalam,anotherhigh-incomeeconomy,needstosignificantlysimplifyandshortentheprocessforbusinessstart-upsinparticular.AccordingtoaWorldBankstudyoneconomies'easeofdoingbusiness,BruneiDarussalamisrankedlowestamongAPECeconomies,requiring15procedures,101daysand10%ofincomepercapitatostartabusiness.18
17CapgeminiandRBS,WorldPaymentsReport2015.https://www.fr.capgemini-consulting.com/resource-file-access/resource/pdf/world_payments_report_2015_vfinal.pdf18WorldBank(2014)DoingBusiness2015:GoingBeyondEfficiency,https://openknowledge.worldbank.org/bitstream/handle/10986/20483/DB15-Full-Report.pdf?sequence=1
USSG
CA
AU
NZ
KR
HK
JP
TW
MY
BN
CNRUCL
THPEMX IDPH VNPG
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
20 25 30 35 40 45 50 55 60 65 70
GDPpe
rCap
ita,CurrentUSD
PercentageofSmartphoneUserswhoPurchasedviaPhone
17
InLatinAmerica,Chileismostadvancedine-payment(ranking14th),whilePeruandMexicorank16thand17th,respectively.Chilehoweverscorescomparativelyhigherintheregulatorypillar(10th)whileMexicoandPeruranklow(19thand21st).Overall,itisrelativelyeasytostartabusinessinthesethreeeconomies—withascoreforthisindicatorofover85outof100,buttheyallneedtoimprovetheefficiencyoftheirlegalframeworksforsettlingdisputesandchallenginggovernmentactionsandregulations.InMexicoandPeru,ICTcontinuestolielowonthegovernment’sagenda,whichisreflectedinthelowdevelopmentofthee-paymentecosystem,evenase-paymentbecomesincreasinglyICT-driven.
Table4.RegulatoryandPolicyEnvironmentTheresultsresonatewiththeG20E-tradeReadinessIndexwhichnotedthat“regulatorsinmanycountriesarestillstrugglingwiththequestionofhowtoregulatethepaymentsindustry.”19Thecreationofnewandinnovativepaymentsystemsonlyaccentuatestheneedforreviewingexistingpaymentsregulations,andreviewingthemonabroadercross-sectoralbasis.
Canada,forexample,hasbecomeoneofthefirstcountriestopassanationallawregulatingvirtualcurrenciessuchasbitcoinandXRP.20InAustralia,theAustralianPaymentsCouncilwasestablishedtobettercoordinatethecountry'spaymentsystemswithaviewtofosteringinnovation,ratherthanmerelyregulatingconservatively.Thisisperhapsthecentralchallengeforalleconomies:successfullyencouraginge-paymentoperatorsrequirescross-sectoralgovernmentcoordination,suchasawhole-of-government
approachoracoordinatinggovernmentagency.ForAPEC,e-paymentsregulatoryalignmentwillacceleratee-paymentsadoptionandusage,andthisinturnwilldrivecross-bordertransactionsandthusregionaleconomicgrowth.
19TheEconomistIntelligenceUnit(2014)TheG20e-TradeReadinessIndex,https://www.eiuperspectives.economist.com/sites/default/files/Laurel%20West%20-%20eBay%20-%20The%20Global%20e-trade%20Readiness%20Index%20Final%20V2_0.pdf20CapgeminiandRBS,WorldPaymentsReport2014,https://www.capgemini.com/thought-leadership/world-payments-report-2014-from-capgemini-and-rbs
Ranking Economy Scores RankingChanges
1 Singapore 96.4 -
2 HongKong,China 83.8 -
3 Malaysia 80.6 -
4 NewZealand 77.1 -
5 Canada 68.3 -
6 UnitedStatesofAmerica 67.0 -
7 Japan 64.7 -
8 Australia 62.2 (+1)
9 ChineseTaipei 58.4 (-1)
10 Chile 52.3 -
11 Korea 48.8 (+2)
12 BruneiDarussalam 47.4 -
13 Indonesia 47.1 (+2)
14 PapuaNewGuinea 42.8 -
15 China 42.7 (-3)
16 Thailand 35.6 -
17 Philippines 32.0 -
18 Vietnam 31.1 -
19 Mexico 28.3 -
20 RussianFederation 24.6 -
21 Peru 24.1 -
18
Pillar2:Infrastructure
Thegapordividebetweenhigh-income,upper-middle-incomeandlower-middle-incomeeconomiesismostobviousintheinfrastructurepillar.
Table5.InfrastructureForexample,thenumberofsecureserversusingencryptiontechnologyinInternettransactionsrangesfromsixperonemillionpeopleinIndonesiato2,178peronemillionpeopleintheRepublicofKorea.Internetpenetrationratesrangefrom9.4%inPapuaNewGuineato90.6%inJapan.Wirelessbroadbandsubscriptionratesrangefrom5.8%inPapuaNewGuineato156.1%inSingapore.Smartphonepenetration,however,showsarelativelysmallervariance,from21.9%inPapuaNewGuineato79.1%inAustralia.
AccordingtotheWorldEconomicForum,“ICTsareneitherasubiquitousnorspreadingasfastasmanybelieve.Some90%ofthepopulationinlow-incomecountries,andover60%globally,arenotonlineyet.”Itgoesontosuggestthat“asdevelopingcountriesleapfrogto4Gtechnology,thusenablingowners
ofsmartphonestoaccesstheInternet,Internetdiffusionmayaccelerateincomingyears.Pricesof4Gsmartphonesremainhigh,but—thankstoinnovationandcompetition—pricesareexpectedtokeepfalling.Alreadyone-sixthofsmartphonessoldin2013costlessthanUS$100.”21
AmongallAPECeconomies,onlyPapuaNewGuineahasachievedlessthan80%mobilepenetration,while15of21APECeconomieshavemobilepenetrationratesover100%,including144%inThailand,147%inVietnam,and128%inIndonesia.Asmorepeoplegetconnected,particularlyinCluster3economies,themarketformobilepaymentswillonlygrow,andgrowstrongly.Bridgingthedigitaldivideisthereforeessentialforfullyleveragingtheopportunitiesine-andm-payment.Thisincludesincreasingsmartphonepenetration,andbroadbandaccessandaffordability.Butthisrequiressignificantup-frontaswellascontinuousinvestmentsintelecommunicationandnetworkinfrastructure.Ensuringalevelplayingfieldandimprovingmarketconditionstoencouragebroad-
21WorldEconomicForum(2015)GlobalInformationTechnologyReport2015,http://www3.weforum.org/docs/WEF_Global_IT_Report_2015.pdf
Ranking Economy Scores RankingChanges
1 Korea 78.9 -
2 UnitedStatesofAmerica 72.5 -
3 Australia 70.5 -
4 Canada 66.8 -
5 Japan 63.2 (+1)
6 NewZealand 60.2 (-1)
7 Singapore 59.7 -
8 ChineseTaipei 58.2 (+1)
9 HongKong 57.7 (-1)
10 RussianFederation 50.5 -
11 Malaysia 40.8 (+2)
12 BruneiDarussalam 39.4 (-1)
13 Peru 39.3 (+3)
14 Chile 38.4 (-2)
15 Thailand 37.9 -
16 China 37.7 (-2)
17 Mexico 29.3 (+1)
18 Indonesia 28.9 (+1)
19 Philippines 28.7 (-2)
20 Vietnam 25.4 -
21 PapuaNewGuinea 15.5 -
19
basedparticipationandcompetitionrequiresregulatorycoordinationacrossregionaleconomiesandwouldhelpattractthenecessaryinvestment.
Innovationsinovercominginfrastructurechallengesarecontributingtohigheruptakeofe-paymentandm-paymentservices,andareactingasgatewaysintothebankingsystemfortheunbanked,orunderbanked,consumersegments.
Forexample,thehighcostoftraditionalbrick-and-mortarbankbrancheshashistoricallyconcentratedfinancialaccesspointsinurbanareaswherehigherpopulationdensitymakesthemprofitable.However,innovationssuchasmobilefinancialservicesandagentbanking,andthemodernisationofpostofficesprovidetheopportunitiesforruralandlow-incomeindividualstoaccessfinancialservices,includinge-payments.
TheWorldPaymentsReport201522notesthattheRussianFederation'snon-cashtransactionsgrewby37.7%during2012-2013,drivenbyanimprovedpaymentinfrastructure.Thenumberofpoint-of-saleterminals,forexample,grew23%annuallysince2011,leadingtoincreasedcardacceptance.TheRussianFederationranks10thininfrastructure–significantlyhigherthanitsrankinginotherpillars.
22CapgeminiandRBS,WorldPaymentsReport2014,https://www.capgemini.com/thought-leadership/world-payments-report-2014-from-capgemini-and-rbs
20
Pillar3:Demand
Comparedtothe2015index,NewZealandmovedup2positionstothetoprankfollowedbyAustraliaandCanada,tiedat2nd.However,thescorevarianceofthetop3islessthan0.1point,indicatingsimilarityinmaturityandpenetrationlevelofe-paymentsinthesethreecountries.
Asdiscussedabove,populationsinCluster3economiesarelesslikelytohavebankaccountsandtheownershipofcreditcardsislow,butthosewithsmartphoneshavereadilyusedthemtomakepayments.
Table6.Demand69%ofsmartphoneusersinChinaand60%inVietnamhavepurchasedviaphone,markingthehighestamongtheAPECeconomies.Whiletheownershipofsmartphonesinthetransitioningeconomiesisstillrelativelylow,ithasgrownrapidlyinrecentyears.Nevertheless,mobilepaymentsarepoisedforrapidexpansionacrossemergingeconomies.AccordingtoWeAreSocial.com,23almost46%oftheworld'spopulationhadaccesstotheInternetasofJanuary2016—amajorityofthemincreasinglydoingsofromamobiledevice.Atleastone-thirdofallwebpagesarenowservedtomobilephones.InPapuaNewGuinea,89%ofallwebpagesareservedtomobilephones.InFigure4,acomparisonontheuseof
differente-paymentmethodsinCanadaandChinaprovidesanillustrationofwhythisincreasingmobileaccessandchangingusagepatternsispoisedtohavesuchadramaticandtransformationalimpact.
E-paymentsarepoisedforexpansionacrossemergingeconomiesfuelledbyincreasinglytech-savvyandsocialpopulations.EconomieswithpopulationsthatspendanaverageofoverfivehoursadayontheInternetincludeIndonesia,Malaysia,Mexico,Philippines,ThailandandVietnam.Asearlyas2012,socialmediaplatformsservedasentrypointsfore-commerceinmanyemergingpart
23WeAreSocial.com(2016)Digital,SocialandMobileWorldwidein2016,Digitalin2016,WeAreSocial.com,http://wearesocial.com/sg/special-reports/digital-2016
Ranking Economy Scores RankingChanges
1 NewZealand 56.2 (+1)
2 Australia 56.1 (+1)
2 Canada 56.1 (-1)
4 UnitedStatesofAmerica 54.1 -
5 Korea 49.3 -
6 Singapore 48.4 -
7 BruneiDarussalam 46.6 -
8 ChineseTaipei 46.6 -
9 HongKong,China 45.8 -
10 Japan 42.7 -
11 Malaysia 34.2 -
12 RussianFederation 32.0 -
13 China 28.6 -
14 Chile 28.5 -
15 Thailand 28.2 (+1)
16 Mexico 27.1 (-1)
17 Peru 23.1 -
18 Philippines 21.1 (+2)
19 PapuaNewGuinea 20.4 (-1)
20 Vietnam 20.4 -
21 Indonesia 18.9 -
21
ofAPECsuchasIndonesiawithmorethan50%ofonlinebuyersmakingonlinepurchasesonFacebook.24Since201,socialnetworkshavebecomeimportantplayersintoday’smarketingindustry,actingasmiddlemenbetweenusersandbusinesses,andareaggressivelymovingintotheretailspace.Inotherwords,socialmediausagewillsoonspillovertosocialcommerceactivities,indicatinganimminentdemandform-paymentande-paymentservices.
Anotherunderexploredacceleratorfore-paymentsisbulkpaymentsfrombigspendersintheeconomysuchasgovernments,whichcaninitiateavirtuouscycleofe-paymentadoption.Currently,6%ofMexicansreceivegovernmenttransfersthroughamobilephoneand3%receivewagesthroughmobile—thehighestamongallAPECeconomies.
Consumerfamiliarity,willingness,andactualusagearenecessaryconditionsformobilepaymentstotakeoff.
AccordingtoMasterCard'sMobilePaymentsReadinessIndex,25consumersaretypicallydrawntomobilepaymentseitherforaccesstoe-payments(mainlyintheemergingeconomies)ortheconvenienceofmobilephonepayments(inthehigh-incomeeconomies).
TheMasterCardstudyalsoreportsthat“consumerreadinessisacriticalsuccessfactor.Themostadvancedinfrastructuresintheworld,withresponsivelegalsystems,matureeconomies,andsophisticatedtechnologynetworks,maybefertileground,butuntilconsumersembracemobilepayments,thatgroundwillremainfallow.Consumerfamiliarity,willingness,andactualusagearenecessaryconditionsformobilepaymentstotakeoff.”26
E-commercedrivese-paymentandviceversa.
TheMasterCardreportclaimsthat“moreconsumersareusingmobilepaymentsform-commercethanforperson-to-personorpoint-of-saletransactionsinthevastmajorityofthemarkets,”and“significantconsumerexperiencewithe-commerceispartofthereasonwhym-commerceistheleadingmobilepaymenttypeinmostofthemarketssurveyed.”27Atthesametime,theUnitedNationsConferenceonTradeandDevelopmentclaimsthattheemergenceofsecureandreliablee-paymentinstrumentsisanessentialelementforexpandinge-commerce.28Thus,e-/m-commerceande-/m-paymentreinforcesdemandforeachotherspurringgrowthinbothindustries.
Figure5.Comparisonontheuseofdifferente-paymentmethodsinCanadaandChina
Sources:WorldBankGlobalFindexDatabase,WeAreSocial.com,andConsumerBarometer.
24eMarketer(2012)SocialnetworksprovideecommerceentrypointinIndonesia,http://www.emarketer.com/Article/Social-Networks-Provide-Ecommerce-Entry-Point-Indonesia/100956025MasterCard(2012)TheMobilePaymentsReadinessIndex:AGlobalMarketAssessment,https://mobilereadiness.mastercard.com/globalreport.pdf26Ibid27Ibid28UnitedNationsConferenceonTradeandDevelopment(2015)InformationEconomyReport2015:UnlockingthePotentialofE-commerceforDevelopingCountries,http://unctad.org/en/PublicationsLibrary/ier2015_en.pdf
66%
77%
93%
24%
27%
19%
16%
49%
26%
69%
%usedtheInternettopaybillsorbuythings
%populationwithcreditcards
%populationwithdebitcards
mobilebanking
%ofsmartphoneuserswhohavepurchasedviaphone
CanadaChina
22
Pillar4:Innovation
Comparedtothe2015index,theinnovationpillarhashadthemostchangesinrankinginpartduetotheintroductionofnewindicatorsfromtheGlobalInnovationIndex.DevelopmentsincryptocurrencyandtheincreasingnumberofinvestmentsintoFinTechstart-upsalsoledtofurthershiftsinthepillar.
USAretaineditstopposition,andisaheadofsecond-placedCanadabyalargemargin(over18points)inscore,aidedbyitsstrongleadinFinTechactivities.Canadamadearemarkableascenttothesecondbyjumpingup7positions,thankstotheprevalenceofventurecapitaldealsinthecountry–thehighestintheAPECeconomyaheadofUSA.Generally,high-incomeeconomiesappearmuchbetterplacedtodevelopinnovativeproductsandservicesthantheirlowerincomepeers,withthemajorityofthetop10belongingtothehigh-incomebracket.
Table7.InnovationTheexceptionisChina,ranked10th,andhometoAlipay,TaobaoandTenpay.Chinahasalreadyemergedasthelargestglobalmarketforbusiness-to-consumere-commerce—measuredbothbyonlinebuyersandbyrevenue.29eMarketerestimatesthatChina,infact,accountsforover40%oftheglobalretaile-commercesaleswithmobileaccountingformorethanhalfofsales.30
Othereconomiestowatchoutforwithupcominginnovativee-paymentsolutionsincludeMexicoandPeru.Mexico,andPeru,up5and4spotsrespectively,canattributetheirimprovementstohavinghigherproportionsofgraduatesintechnologyandtheeaseofgettingcreditintheircountries.Thesetranslatetoanincreasingfavourablebusinessenvironmentfortech-entrepreneurstodevelop
innovativeproductsinthee-paymentsindustry.
29EcommerceEurope(2015)AsiaPacificB2CE-commerceLightReport,http://www.ecommerce-europe.eu/news/2015/asia-pacific-remains-the-largest-b2c-e-commerce-market30eMarketer(2016)EcommercedrivesretailsalesgrowthinChina,http://www.emarketer.com/Article/Ecommerce-Drives-Retail-Sales-Growth-China/1013028
Ranking Economy Scores RankingChanges
1 UnitedStatesofAmerica 77.5 -
2 Canada 59.3 (+7)
3 Korea 58.3 (+4)
4 HongKong,China 57.4 (-1)
5 Singapore 55.9 (-1)
6 Japan 54.0 (-4)
7 Australia 51.0 (-1)
8 NewZealand 50.0 -
9 ChineseTaipei 48.3 (-4)
10 China 45.4 -
11 RussianFederation 38.6 (+2)
12 BruneiDarussalam 36.3 (+5)
13 Malaysia 34.4 (-2)
14 Mexico 32.8 (+5)
15 Thailand 31.2 -
16 Peru 29.8 (+4)
17 Chile 28.6 (-3)
18 Vietnam 28.0 (+1)
19 Indonesia 27.7 (-7)
20 Philippines 23.4 (-4)
21 PapuaNewGuinea 18.6 -
23
Thepropensitytoadoptdisruptivedigitalpaymenttechnologiesappearstobewidespread,regardlessofincomelevel.Themosthigh-profilevirtualcurrency,Bitcoin,whilepredominantlyusedinNorthAmerica,isgainingtractioninotherpartsoftheworld,forexampleBitnoderecorded182bitcoinnodesintheRussianFederationand118inChina,whichareatcomparablelevelsasJapan(202)andSingapore(200).312016alsowitnessedashiftindiscussiononcryptocurrencywithPWCclaimingthat“itisnolongeroneofwhethercryptocurrencywillsurvivebutratherhowitwillsurvive”.32Whiletheexpandinguseofcryptocurrencyhasthepotentialtoconnectfinanciallyexcludedconsumerstoglobalpaymentssystemsaffordablyandinstantaneously,itsexpansionisfraughtwithchallengessuchaslowuseracceptance,aswellassecurityissues.33
Regulatorysystemsareburgeoning,withmyriadapproachesbeingtakenbyvariousgovernments;ononehand,Australia,Canada,Japan,SingaporeandtheUSAareleadingthewayoflegitimisingcryptocurrencybypromotingconsumerprotectionandissuingguidelinesontaxationwhileontheotherhandtheRussianFederation,China,MexicoandVietnamhavetakenmorerestrictivestances.34Cryptocurrencywillnotreachitstruemarketpotentialunlessregulationsevolvetoembracecryptocurrency,albeitcautiously.
Thereisaneedforcollaborationamongbanksandnon-banksinordertoaccelerateinnovation.Thisincludesmobilemoneyandagentbankingventures,forinstanceencouragingnon-bankplayers—suchasretailers,e-commerceplatforms,andtelecommunicationfirms—tojointhesystemoffinancialservicesdeliveryandaccessprovidersinaninteroperableandopenmanner.Financialregulatorycollaborationinandacrosseconomieswillalsobeessential.
ConclusionThekeytrendsandinsightsthatemergefromthisIndexincludethefollowing:
• Globally,therateofe-paymentadoptioncontinuestorise,andtherangeofe-paymentchannelsisbroadeningsignificantly.
• APECeconomies’levelofadvancementandexperienceinthedevelopmentofane-paymentecosystemvarieswidely.Thegrowthofandinnovationine-paymentcancomefromallincomelevelsbutthetypesofinnovationwillbedifferentastheneedsthattheseinnovationsaretryingtomeetaredifferent.
• Thereadinessandcapacityofaneconomytoengageine-paymentisstronglyinfluencedbyitsstageofdevelopment.High-incomeeconomiesaremorelikelytohaveathrivingecosystemfore-payment.
• Yet,APECisbecomingmobilefirstandmajorgrowthwillcomefromeconomieswheresmartphoneadoptionisgrowingandtheproportionofservicesofferedthroughsmartphonesareincreasing.Theseeconomiesarenotnecessarilyhigh-incomeones.
• NoneoftheeconomiesexceptCanadarankedinthetopfiveofallthepillarsinthee-paymentecosystem.Thus,economiesinallstagesofdevelopmenthaveanopportunitytoimproveononeormoreaspectsofthee-paymentecosystem.
31Bitnode(2016)GlobalBitcoinNodesDistribution,https://bitnodes.21.co/,figuresasofApril2016.32PWC(2015)Moneyisnoobject:Understandingtheevolvingcryptocurrencymarkethttps://www.pwc.com/us/en/financial-services/publications/assets/pwc-cryptocurrency-evolution.pdf33AsrecentlyasinJune2016,DAO,acrowdsourcinginvestingorganization,becameavictimofUSD79millionheistofether,arivalcryptocurrencytoBitcoin.Formore,seehttp://qz.com/710126/a-massive-79-million-heist-just-happened-and-its-threatening-the-future-of-blockchains/34WhartonResearchScholarJournal(2015)AnAnalysisofCryptocurrencyIndustry,http://repository.upenn.edu/cgi/viewcontent.cgi?article=1133&context=wharton_research_scholars
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• Thereisnosinglepathwaytopromotinganddevelopinge-payments.E-paymentneedstobedevelopedholisticallybyconsideringthewaysinwhicheachofthepillarsinthee-paymentecosystemaffectorreinforcetheotherinthecontextofeachindividualeconomy.
RegulatoryandPolicyEnvironment
• Manyeconomiesneedtoimprovetheireaseofdoingbusinessandfocusonfosteringafavourableregulatoryandpolicyenvironmenttoenhancetheconfidenceofbusinessesandconsumers.
• Government’svisionandeffortstomakeuseoftechnologytoimprovetransparency,efficiencyandaccountabilityinitsownfinancesthroughe-paymentscankick-startavirtuouscycleofadoption.Thisshouldbeachievedthroughpublic-privatepartnershipsinvolvingthefinance,retail,andtelecommunicationssectorsinparticular.
Infrastructure
• Thegapordividebetweenhigh-income,upper-middle-incomeandlower-middle-incomeeconomiesismostobviousintheinfrastructurepillar.
• Bridgingthedigitaldividewillbeessentialtofullyleveragingtheopportunitiesine-payments.Thisincludesincreasingsmartphonepenetration,broadbandaccess,andaffordability.Focusingonavailabilityandaffordabilityofbasicfinancialservicesiskeyindrivinge-payments.
• Atthesametime,innovationsinovercominginfrastructurechallengesarecontributingtohigheruptakeofe-paymentandm-paymentservices,andareactingasgatewaysintothebankingsystemforunbankedconsumersegments.
Demand
• Populationsinupper-middleandlower-middleincomeeconomiesarelesslikelytohavebankaccountsandtheownershipofcreditcardsislow,butthosewithsmartphoneshavereadilyusedittomakepayments.
• Asmorepeoplegetconnectedintheseeconomies,particularlythroughtherapiduptakeofmobilephonesandsocialmedia,themarketfore-paymentandm-paymentislikelytogrowexponentially.
• E-commerceande-paymentarecloselyinterlinked;e-commercecandrivee-paymentgrowthande-paymentwillfacilitatee-commercegrowth.
Innovation
• Generally,high-incomeeconomieshavebetterhumanresourcesandmorefinancialresourcestodevelopinnovativeproductsandservices.
• Butdevelopingeconomiesarecomingupwithinnovativee-paymentsolutionsaswelltomeettheirdevelopmentneeds.Chinahasbeenoneofthekeyinnovatorsine-paymentwithsolutionslikeAlipay,TaobaoandTenpay.
• Othereconomiestowatchoutfortocomeupwithinnovativee-paymentsolutionsareMexicoandPeru.
• Cryptocurrencywillnotreachitstruemarketpotentialunlessregulationsevolvetoembracecryptocurrency,albeitcautiously.
• Asthenumberofnon-bankplayersinthee-paymentsystemincreases,particularlyindevelopingm-paymentsolutions,thereisaneedforcollaborationamongbanksandnon-banksinordertoaccelerateinnovation.ThiswillneedtobeaccompaniedbyregulatorycooperationinandbetweenAPECeconomies.
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3.CaseStudies:In-DepthLookatSelectedEconomies
TheAPECE-paymentIndexprovidesahigh-levelviewoftheentireAPECeconomyandasystematicanalysisofvariouselementsofthee-paymentecosystem.AsthevastnumberofindicatorsthatwereaggregatedintheIndexshows,however,e-paymentreadinessandadoptiondependonamultitudeoffactors.Eacheconomyalsohasadifferentbaselineandadifferentsetofchallengestosurmount.TocomplementthefindingsfromtheIndex,thissectionprovidesasetofcasestudieswhichassessesamixofadvancedandnascente-paymentecosystems,namelyAustralia,HongKongChina,IndonesiaandthePhilippines.
Australia
Australiamaintaineditspositionin4thplaceinthe2016APECE-paymentReadinessIndex,andremainscloselybehindleaderstheUnitedStates,Singapore,andnowCanadawhichleapfroggedtothirdplace.Withintherespectivepillars,Australiahasshownimprovementintheregulatoryandpolicyenvironmentpillar,whichisreflectedbyitsslightlyhigherscoreandimprovedrankfrom9thto8th.Howeverintheinnovationpillar,Australiahasfallenonepositionto7thplace.Australiacontinuestoremainalucrativeformarketfortheadoptionofe-paymentsandotherinnovativeFinTechservices.
AustraliahasahighGDPpercapitaofoverUSD60,000andisthesixth-largestcountryintheworldintermsofsize,andtheleastdenselypopulated.ThismeansthatAustraliahasaconsiderableamountoflandmasstoprovidecoveragefor,intermsofmobilenetworks,Internetaccess,ATMsandbankbranches.Thegovernmentcontinuestodowellintheseareas,andthelatestiterationoftheNationalBroadbandNetwork(NBN)employsamulti-technologymodelincludingfibre-optic,fixedwirelessandsatelliteinfrastructuretoimproveInternetaccess.AlthoughtheNBNcontinuestorunintoitsfairshareofproblemsandcriticisms,itcontinuestobethegovernment’slong-termnationalinfrastructureprogramtoimproveInternetconnectivitywithfasterandmorereliablebroadbandconnections.35Australiansarefastadoptersoftechnology,andtheincreasedavailabilityandaffordabilityofsmartphonesmeansmanymobilephoneusersareupgrading,orhavealreadyupgradedtotheuseofsmartphones.WiththepromiseofimprovedInternetbroadbandconnectivityoftheNBN,Australianswillfindthemselveswellequippedtonavigatetheopportunitiesofitsdevelopingdigitaleconomy.
Withitsstrongregulatoryenvironmentandemerginginfrastructureprogress,theAustraliangovernmenthasturneditsattentiontosupporttheFinTechindustrytobecomeinternationallycompetitive,andtoattractandretainlocaltalentsinAustralia.Thiswillhelpenabletheuseandspreadofe-paymentsasmoreelectronicservicesbecomeavailableandmoremerchantsreadilyaccepte-payments.
RecentE-paymentDevelopments
TheAustraliangovernmentcontinuestoexpressitscommitmenttosupporttheemerginglocalFinTechindustryandaspiresforAustraliatobecometheFinTechhubofAsia.Tothisextent,theAustraliagovernmenttreasuryannouncedasetofFinTechreformsinMarch2016,outliningitssupporttotheindustry.36
35Tucker,H.(2016)TheNBNisreportedlyfacinghugeproblems,BusinessInsiderAustralia,http://www.businessinsider.com.au/the-nbn-is-reportedly-facing-huge-problems-2016-236Morrison,S.(2016)SupportingAustralia’sFinTechfuture,http://sjm.ministers.treasury.gov.au/media-release/032-2016/
26
TheseincludethecreationofanewFinTechadvisorygroupwhichischairedbyFinTechhub,StoneandChalkchairmanCraigDunn,andincludesrepresentationfrombanks,venturecapitalists,paymentproviders,andotherFinTechstart-ups.37Othernewmeasuresincludeprovidingbetteraccesstoconcessionaltaxtreatmentforventurecapitalinvestmentsinstart-upFinTechfirms,commissioningtheProductivityCommissiontooutlineoptionstoincreasedataavailabilityandaccesstofacilitatenewproductsandbetterconsumeroutcomes,addressingthe‘doubleGST’treatmentofdigitalcurrencies,creatingaregulatorysandboxtotestideaswithminimalregulations,andmanyothers.38
Thegovernmentisalsolookingatamendingthepriorityareasofexistingfinancialregulationtoensuretheyaretechnologyneutral,andthusfutureproofingregulationsonFinTechinnovations.WiththeAttorney-General’sDepartmentalsolookingatmakingobligationsundertheexistinganti-moneylaundering/counterterrorismfinancing(AML/CTF)regimetechneutral,thiswillsignificantlyeasetherestrictionsfore-paymentandFinTechservicesonofferingnewserviceswhichusebiometricidentificationandidentityverification.39
TheNewPaymentsPlatform(NPP)isasystemcreatedbytheAustralianPaymentsClearingAssociationtoallowlow-valuetransactionsamongdifferentfinancialinstitutionstobemadeinrealtimeand24/7.Initiallydesignedin2012,andsetforcompletioninthesecondhalfof2017,theNPPremainsontrackforitsscheduledcompletiondate.BillpaymentsproviderBpayhaswonthetendertoofferapaymentserviceontheNPP,knownasthe"InitialConvenienceService",allowingconsumerstoinstantaneouslytransferfundstoandfromtheirbankaccountsthroughtheirmobilephone,tablet,ortheInternet.40Theservicewillallowusersbettervisibilityoftheirbudgets,astheirtransactionsandaccountsareupdatedinstantly.AstheNPPbeginstonearcompletion,theReserveBankofAustralia(RBA)shouldcontinuetoworkwithfinancialinstitutionsandotherstakeholderstoeducateandbuildawarenessonthebenefitsandservicesavailableontheNPP.
LookingAhead
AustralianisalreadyamongthetopfivecountriesintheE-paymentReadinessIndex,andlookssettofurtheradvanceitspositionandimproveitsrankingsinthenear-future.StrongsupportfromthegovernmentonFinTechwillhelpenablethelocalindustrytoflourish,increasingexposuretoe-paymentsforawiderrangeofservices.ThemobilepaymentsmarketisalsobecomingincreasinglycompetitiveasinternationalplatformsincludingApplePay,GoogleWallet,andincomingSamsungPayandAndroidPaycompeteagainstlocalbankpaymentappsinAustralia.
Australiaisinagoodpositiontobecomeagloballeaderine-payments,andthevariouspolicyandregulatoryagencies,includingTreasury,theRBA,ASIC,AustralianPrudentialRegulationAuthority(APRA),andAustralianTransactionReportsandAnalysisCentre(AUSTRAC),havebeenactivelyengagingwiththeFinTechindustrytoremoveunnecessaryregulatoryburdenandredtape,inlinewiththegovernment’sderegulatoryagenda.WhilethiswillhelpFinTechinnovationstotake-off,thepolicyandregulatoryagencieswillstillcontinuetoprovidesomeformofregulatoryoversightovertoensureinvestorandconsumertrustandconfidenceintheseemergingbusinessmodels.
37TheTreasury(2016)WorkingwithAustralia’sFinTechindustry,http://fintech.treasury.gov.au/working-with-australias-fintech-industry/38TheTreasury(2016)Australia’sFinTechpriorities,http://fintech.treasury.gov.au/australias-fintech-priorities/39TheTreasury(2016)AustralianRegulatorsengagementwiththeFinTechindustry,http://fintech.treasury.gov.au/australian-regulators-engagement-with-the-fintech-industry/40Drummond,S.(2015)BPayfirsttoofferinstantpaymentsonbanks'NewPaymentsPlatform,http://www.smh.com.au/business/banking-and-finance/bpay-first-to-offer-instant-payments-on-banks-new-payments-platform-20151029-gkmjkw.html
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HongKong,China
HongKongfellonespotto7thplaceintheIndex,althoughscoresremainclose,withlessthan4pointsseparatingsecondtoseventhplace.HongKongnowtrailscloselybehindKorea,butcontinuestodemonstratehighscoresfortheregulatoryandpolicyenvironmentpillar(2ndbehindSingapore)andtheinnovationpillar(4thbehindtheUnitedStates,Canada,andKorea).However,HongKongcontinuestobeplaguedbyproblemsinInfrastructureandDemandwithaveragescoresinthosetwopillars.
HongKongisaprominenttradehubandfinancialcentreandissynonymouswithalight-touchregulatedeconomywhichhasattractedmanymultinationalcorporationstosetuptheirregionalofficesandheadquartersthere.Howeverwhileitmaybenon-interventionistinmanyareas,oneareawhereHongKongstillregulatestightlyisthee-paymentsspace.PaymentprovidersofmobileandelectronicpaymentservicesarerequiredtoobtainabankinglicensefromtheHongKongMonetaryAuthority(HKMA).41TheHKMAannouncedanewregulatoryregimeforStoredValueFacilities(SVF)andRetailPaymentSystems(RPS)inNovember2015,withtheHKMAsettoissuenewlicensesinNovember2016.TheHKMAannouncedthemajortoolsitwouldemploytoregulatelicenses,including(a)on-siteexaminations;(b)off-sitereviews;(c)independentassessments;(d)reviewofauditors’reports;and(e)meetingswiththemanagementofthelicensee.42Whilewellintendedtoprotectconsumerdeposits,andmoneylaundering,theregulationsmayinadvertentlyfrightenoffe-paymentsprovidersfromoperatinginHongKong.Todate,ApplePayisalreadyavailableinChina,anddespiteannouncingplanstolaunchinHongKong,Applehaveyettoannounceatimetableforthemobilepaymentservicelaunch.TheHKMArevealedinApril2016,thatofthesome20applicationsithadalreadyreceived,onlyathirdthathadappliedwereseekingtooperateInternetormobilepaymentservices.43
Withthegovernmentannouncinginits2016-17BudgetspeechinFebruarythatitwantstotakeadvantage,andsupportFinTech,theHKMAneedstoconsiderlesseningtheregulatoryburdenfore-paymentproviderstooperateinHongKong.44
RecentE-paymentDevelopments
NineHongKongbankslaunchedane-chequesysteminDecember2015,whichallowsuserstousetheirphonesandInternet-enableddevicestosettlebills,transfermoney,andevengiveoutelectronicredpacketsduringtheLunarNewYear.Thee-chequesystemworkssimilartothatofpapercheque,butaddstheconvenienceofbeingabletobegeneratedelectronicallythroughmobilephones.E-chequeshavetheaddedadvantageovertraditionalelectronicpayment/transferservicesinthattheywouldnotrequirepartiestoregisterwiththepaymentplatform,anddonotrequirethepayeetoprovidehis/heraccountinformationtothepayer.Aspartofitsawarenesscampaigns,theHKMAandtheHongKongAssociationofBanks(HKAB)jointlylaunchedapublicitycampaignincludingaseriesofeducationalmaterialssuchasadvertisementsontelevisionandradio,postersandelectronicbrochures.45
41HongKongMonetaryAuthority(2015)ExplanatoryNoteonLicensingforStoredValueFacilities,http://www.hkma.gov.hk/media/eng/doc/key-functions/finanical-infrastructure/infrastructure/retail-payment-initiatives/Explanatory_note_on_licensing_for_SVF.pdf42HongKongMonetaryAuthority(2015)RegulationofStoredValueFacilities(SVF),http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/regulatory-regime-for-svf-and-rps/regulation-of-svf.shtml43RTHK(2016)HKMAsaysitwon'tsetcapfore-paymentservices,http://news.rthk.hk/rthk/en/component/k2/1252673-20160405.htm44HongKongGovernment(2016)BudgetSpeech,Fintech,http://www.budget.gov.hk/2016/eng/budget11.html45HongKongGovernment(2015)LaunchofElectronicCheque(e-Cheque)publicitycampaign,http://www.info.gov.hk/gia/general/201511/23/P201511230374.htm
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TheSteeringGrouponFinTechreleaseditsrecommendationstothegovernmenttopromoteFinTechinFebruary2016.ThereporthighlightsthepotentialforHongKongtobecomeapremierFinTechHub,andthatappropriatesupportandmeasuresfromthegovernmentcanhelptodevelopthefledglingsector.ThekeyrecommendationsproposedbytheSteeringGroupinclude:(i)formulatingavisiontounderlineHongKong'scommitmentindevelopingFinTechandpositioningasalaunchpadforcompaniesinthesector;(ii)providingassistancetoFinTechstart-ups;(iii)establishinginandattractingtoHongKongmoreFinTech-themedprogramsandinnovationlaboratories;(iv)encouragingtheapplicationandsettingofstandardsforcutting-edgeFinTechtechnologies;(v)facilitatingcommunicationbetweenfinancialregulatorsandtheFinTechcommunity;(vi)improvingdisseminationofinformationonfundingsourcesandimmigrationpolicy;and(vii)encouragingyoungtalentstoentertheFinTechsector.46
TheHKMAcreatedtheFinTechFacilitationOffice(FFO)inMarch2016tofacilitatethedevelopmentoftheFinTechecosysteminHongKong,andpromoteHongKongasaFinTechhubinAsia,whichwillputitindirectcompetitionagainstSingaporeandAustraliawhosharesimilaraspirations.47TheFFOdescribesitselfamongotherthings,as:(i)aplatformforexchangingideasofinnovativeFinTechinitiativesamongkeystakeholdersandconductingoutreachingactivities;(ii)aninterfacebetweenmarketparticipantsandregulatorswithintheHKMAtohelpimprovetheindustry’sunderstandingaboutthepartsoftheregulatorylandscapewhicharerelevanttothem;and(iii)aninitiatorofindustryresearchinpotentialapplicationandrisksofFinTechsolutions.ThisfollowsasimilarmovebytheSecuritiesandFuturesCommission(SFC),whichalsosetupinMarch2016acontactpointfortheFinTechindustrytoliaiseonregulatoryissues.48
LookingAhead
HongKongremainsontherighttrackfore-paymentsandotherinnovativeFinTechservicestoflourish.TheHongKonggovernmenthasannounceditssupportofthesector,andisalreadytakingstepstoaidthedevelopmentandencouragegreateradoptionofe-payments.However,HongKongstillremainsafewstepsbehinditsclosestregionalcompetitorsSingaporeandAustralia.Tocatch-upswiftly,theHongKonggovernmentshouldlookatrelaxingitsrequirementsfore-payments,forexampleimplementingtransactionlimitsone-payments,ratherthanrequiringbankinglicenses.WhenprovidingfinancialassistancetoFinTechventures,thegovernmentshouldensurethatinformationonhowtoreceiveandapplyforfundingiseasilyavailable,andaccessible.
TheHongKonggovernmentneedstoensureithasaclear,articulatedvisionwiththerelevantsupportingmechanismsonenablinge-paymentsandFinTechlessitgetleftbehind.
46HongKongGovernment(2016)SteeringGrouponFintechreleasesreport,http://www.info.gov.hk/gia/general/201602/26/P201602260497.htm47HongKongMonetaryAuthority(2016)FintechFacilitationOffice(FFO),http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/fintech-facilitation-office-ffo.shtml48SecuritiesandFuturesCommission(2016)SFCFintechContactPoint,http://www.sfc.hk/web/EN/sfc-fintech-contact-point/
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Indonesia
IndonesiahasbeengainingincreasingattentionasAsia’snextfocalmarketfore-commerceande-payments.Itsgrowingeconomy,emergingmiddleclass,youthfuldemographic,increasingspendingpowerandrapidlygrowingInternetuser-baseareallreasonstobeoptimisticaboutthefutureprospectsofIndonesia’sdigitaleconomy.49
TheimmediatepriorityforIndonesiaappearstobeonimprovingtheICTinfrastructuretoprovidesecureandreliableInternetconnectivity.Whilemobilepenetrationhasreachednearubiquitouslevels,broadbandconnectivityisstilllimited,andnationalcybersecuritycapabilitiesremainquestionable.
Indonesiaalsoneedsastrategyforunlockingthenascentdemandfore-payments,asthisisIndonesia’sweakestpillar(21st).ThelowrankingcanbeexplainedbyIndonesia’sheavycash-dependency.Only36%ofthepopulationwasbankedasof2014,withcreditcardpenetrationataroundonly5%,oneofthelowestamongAPECeconomies.50While1outof4Indonesiansownadebitcard,only1outof10wouldactuallyuseit.51However,Indonesiaisalsotheworld’sfourthlargestcountrybypopulationwithaveryyoungdemographicgroupandthereforethepotentialforgrowthamongstIndonesianconsumersandbusinessesremainspotent,ande-commerceande-payments,particularlywhendeliveredviamobileconnectivityofferwaysaroundmanyoftheexistingmarketconstraints.
IntheregulatoryandpolicypillarIndonesiafaresrelativelybetter(14th),butfellsignificantlyintheprovisioningofe-paymentproductsandservices(19th).Thereis,however,stillalotofroomforIndonesiatoimprovetheeaseofdoingbusiness,theeffectivenessofitslegalsystemandtheinvestmentclimate.BureaucratichurdlesofmarketentryandinvestmentclearlyneedtobeaddressedforIndonesiatofullybenefitfromtheefficienciesandsocialgainspossiblefromdigitalpayments.
RecentE-paymentDevelopments
Morefavourableregulatorychangehasbeguntakingplaceinrecentyearsasthegovernmentrecognisedthepotentialofe-paymentsinfosteringfinancialinclusion.Acaseinpointisbranchlessbanking,whichusesagentsandmobilephonestoprovidebasicsavingsandtransactionservices,thathasrisentoprominenceinIndonesia’snationalagenda.In2013,BankofIndonesia(BI)releasedguidelinesforallowingselectedbanksandmobilenetworkoperatorstopilotagent-modelandmobilewalletinitiativestotesttheviabilityofthebusinessmodel.52Ayearlater,theFinancialServicesAuthority(OJK)formallyopenedthedoorforbankstohireagentstoimprovefinancialinclusionandexpandbasicfinancialservicestoremoteandruralpartsoftheeconomy,53eventually
49TechinAsia(2015)BarrierstoIndonesiane-commerce:Separatingfactfromfriction,https://www.techinasia.com/friction-points-and-barriers-indonesia-ecommerce/50Only1.6%of15yearsorolderIndonesianshavecreditcards,lowerthanVietnam(1.9%)accordingtotheWorldBank’s2016Findexfigure.ThefigureforPapuaNewGuineawasnotavailable.Seehttp://datatopics.worldbank.org/financialinclusion/51WorldBank(2016)GlobalFindexDatabase,http://datatopics.worldbank.org/financialinclusion/52CGAP(2013)LatestonBranchlessBankingfromIndonesia,http://www.cgap.org/blog/latest-branchless-banking-indonesia53TheJakartaPost(2014)OJKTargetsDeeperFinancialMarketwithNewRules,http://www.thejakartapost.com/news/2014/11/21/ojk-targets-deeper-financial-market-with-new-rules.html
30
launchinganationwidecampaign,LakuPandai,inMarch2015.54Theinitialfourbanksparticipatinginthiscampaignhadhired30,000agentsasofSeptember2015.55AsofOctober2015,therewereatotalof6banks56thatparticipatedinthecampaign.OJKexpandedtheprogrammebyintroducingIslamicbanking,orSyariahBanking,inDecember2015,57includingtwootherIslamicbanksintheprocess.58AsofJanuary2016,therewasIDR41.3billionworthinsavingfundsand1.09millionnewcustomersnationwide.59OnceOJKapprovesallpendinglicensingrequestsfrom9otherbanks,thenumberofagentsisexpectedtogrowto300,000,60whichwilldrasticallyimprovingtheaccessibilityofmobile-basedfinancialservices.61WhileOJKhasachievedreasonablesuccessinthepastyearwiththeprogramme,ithopestoexpandittoincludeprivatelendersandruralbanksinthenearfuture.62
SimilardevelopmentsonthehorizonshouldfurtherhelpIndonesiamoveuptheranksinthecomingyears,suchastheMinistryofCommunicationandInformationTechnology’saspirationstoimprovebroadbandconnectivity63andtoestablishanationalcontroltowerforcybersecurity.TheMinistry’sforthcominge-commerceroadmapwillalsoprovideregulatoryclarityandboostthealready-growinge-commercemarket,andinturn,e-paymentsaswell.64
TheprivatesectorisalsoweighinginonIndonesia’se-paymentsopportunities.InMay2013thethreeleadingmobilenetworkoperatorslaunchedaground-breakinginitiativetomaketheirmobilewalletservicesinteroperable.65ThisallowedTelkomsel’sT-cash,Indosat’sDompektu,andXLTunaiuserstosendmoneyelectronicallyacrossanyoftheirnetworks.Furthermore,TelkomsellaunchedanNFCmobilepaymentservicethatseamlesslyconnectswithT-Cash.66Separately,inJune2016,
54ParticipatingbanksincludeBankMandiri,BankRakyatIndonesia,BankCentralAsiaandBankTabunganPensiunanNasional.55OJK(2015)SiaranPers:OJKPerluasProgramLakuPandaikePerbankanSyariah,http://www.ojk.go.id/id/kanal/syariah/berita-dan-kegiatan/siaran-pers/Pages/OJK-Perluas-Program-Laku-Pandai-ke-Perbankan-Syariah.aspx#sthash.kk14FULa.lDdEiTVi.dpuf56BankTabungNegaraandBankNegaraIndonesiajoinedinMayandSeptember2015,respectively.RefertoTheJakartaPost(2016)OJKInvitesMorePlayerstoJoinBranchlessBankingProgram,http://www.thejakartapost.com/news/2016/01/05/ojk-invites-more-players-join-branchless-banking-program.html57OJK(2015)SiaranPers:OJKPerluasProgramLakuPandaikePerbankanSyariah,http://www.ojk.go.id/id/kanal/syariah/berita-dan-kegiatan/siaran-pers/Pages/OJK-Perluas-Program-Laku-Pandai-ke-Perbankan-Syariah.aspx#sthash.kk14FULa.lDdEiTVi.dpuf58TheJakartaPost(2016)OJKInvitesMorePlayerstoJoinBranchlessBankingProgram,http://www.thejakartapost.com/news/2016/01/05/ojk-invites-more-players-join-branchless-banking-program.html59Ibid60Ibid61TheJakartaPost(2015)FourMajorBanksLaunchBranchlessBankingProgram,http://www.thejakartapost.com/news/2015/03/27/four-major-banks-launch-branchless-banking-program.html#sthash.mgLqXTEm.dpuf62TheJakartaPost(2016)OJKInvitesMorePlayerstoJoinBranchlessBankingProgram,http://www.thejakartapost.com/news/2016/01/05/ojk-invites-more-players-join-branchless-banking-program.html63GSMA(2016)IndonesianGovernmentEncouragesOperatortoSharetheirNetworksforFasterMBBDeployment,http://www.gsma.com/mobilefordevelopment/programme/connected-society/indonesian-government-encourages-operator-to-share-their-networks-for-faster-mbb-deployment64TheJakartaPost(2014)GovernmenttoLaunchE-commerceLawFrameworkThisYear,http://www.thejakartapost.com/news/2015/03/07/govt-launch-e-commerce-law-framework-year.html65GSMA(2013)ImplementingMobileMoneyInteroperabilityinIndonesia,http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/10/Implementing-mobile-money-interoperability-in-Indonesia.pdf66NFCWorld(2015)TelkomselLaunchesNFCMobilePaymentsandLoyaltyServiceinIndonesia,http://www.nfcworld.com/2015/10/16/338743/telkomsel-launches-nfc-mobile-payments-and-loyalty-service-in-indonesia/
31
Lotte,theKoreanmultinationalcompany,expressedinterestinofferingcreditcardservicesinIndonesia.67
LookingAhead
Whilebanksandtelcoscurrentlydominatethee-paymentmarket,e-commerceandalternatepaymentsolutionsproviderswillplayacriticalroleinspurringdemandinthefuture.E-commerceplatformssuchasLazadaandTokopediahavecircumventedthelimitationsoncurrente-paymentinfrastructurebyofferingcash-on-deliveryandbanktransfersoptions.AsmoreandmoreIndonesiansbecomeaccustomedtotheconvenienceofonlinecommerce,thedemandfordigitally-enabledpaymentswillcontinuetorise,particularlyamongyoungandtech-savvyIndonesians.
Anotherhurdleisinconsistentregulationsandthesiloedapproachofdifferentgovernmentagencies.BI,forexample,hasonesetofgoverningrulesfore-moneywhile,OJKhasanotherforLakuPandai,withthelatterlinkedtosavingsaccounts.68Theprogrammeisthusheavilyreliantuponbankswithlimitedsupportfromtelcos,limitingtheprogramme’spotentialreach.69
Finally,consumermistrustofe-paymentsystemsneedstobeaddressed.Progresshasbeenmade70butthereisstillalongwaytogoinimprovingthereliabilityofpaymentgateways,forexample.71
67TheJakartaPost(2016)LotteAimstoTakeSliceofIndonesia’sCreditCardIndustry,http://www.thejakartapost.com/news/2016/06/06/lotte-aims-take-slice-indonesia-s-credit-card-industry.html68TheWallStreetJournal(2015)MobileBankingStrugglesinIndonesia69Ibid70TechinAsia(2014)DokuTransactsIDR520million,https://www.techinasia.com/doku-2014-520-million-transaction/71AccordingtoVeritrans,atypicalpaymentgatewayinIndonesiahadreliabilityof96%(4outof100transactionswillreturnerror)whenthecompanywasfirstestablished.Thecompanysubsequentlyimprovedtherateto98%butisstillbelowinternationalaverage,whichisabove99.9%.
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ThePhilippines
Witharelativelylonghistoryinmobilepaymentservicesandagrowinge-commercemarket,thePhilippinesisprimedtobeahotbedfore-payments.Atthemacrolevel,thePhilippinesstillhassomewaytogoinimprovingitsruleoflawandthebusinessenvironment,bothofwhichdraggedtheeconomy’sscoresdownintheregulatoryandpolicyenvironmentpillar.AccordingtotheassessmentoftheUnitedStatesAgencyforInternationalDevelopment(USAID)andtheAmericanBarAssociation,Philippinecourtsareburdenedwithlengthybacklogs,makingtimelydeliveryofjusticedifficultandultimatelyunderminingthecredibilityofthejudicialsystem.72Despitegovernmenteffortsatimprovingthebusinessclimate,theeconomyislosinggroundtoitspeerswhenitcomestofacilitatingmarketentryofnewbusinesses(belowMalaysia,ThailandandVietnam).
WhilethePhilippinesfareswellinmobilepenetration,thereisstillsignificantroomforimprovingICTinfrastructuresecurityandaccesstoformalfinancialsystems.ItsscoreintheGlobalCybersecurityIndexlagsbehindregionalandincomepeergroups,andformalfinancialservicesremainoutofreachforthemajorityofFilipinos.SupportingthelatterassessmentareindicatorsontheownershipanduseofcreditcardsinthePhilippines,amongstthelowestinAPECat2%.73
ThesilverliningistheactiveuseoftheInternetandsocialmediabythecountry’syoungandgrowingpopulation.WhilethemajorityofFilipinoshaveyettousetheInternetormobileforday-to-daypaymentsactivities(only2.5%ofthepopulationareusingtheirmobiletomakeatransactionaccordingtothelatestFindexresults),thecurrentlevelsofsocialmediauseshowsignificantlatentdemandtobetapped.
Thegrowthtrajectoryofe-commercealsoshowsthatFilipinosareincreasinglybecomingcomfortablewithonlineshopping.Thee-commercemarketisprojectedtogrowatacompoundannualgrowthrate(CAGR)of101.5%during2013-2018,74ledbyregionale-commercejuggernautssuchasZaloraandLazada,andlocalretailheavyweightssuchastheSMgroup.TheoverseasFilipinoworkercommunity,whoseremittanceamountedto8.5%oftheeconomy’sGDPin2014,75isanotherfactorthatislikelytocontributetotheincreasingdemandfore-paymentproductsandservices.
ThePhilippinesisrelativelywellpositionedwhenitcomestothesupplysideofthee-paymentservicesandproducts.Hometotwooftheearliestmobilepaymentsservicesintheworld—GCashandSmartMoney,launchedintheearly2000s—thePhilippinesenjoysaplethoraofoptionswhenitcomestomobilepayments.Leadingforcesincludethetelcoduopoly(PLDTandGlobe),andalternativepaymentsservicesbyinternationalplayerssuchasPayPalandlocalfirmDragonpay.ThekeypriorityforthePhilippinesistodriveadoptionwidelythroughouttheeconomysothatthepervasivenessofthee-paymentreachescriticalmass.Buildingconsumertrustiskeyindrivingadoptionbutthatrequiressustainedeffortsfromservicesproviders,supportedbyanenablinglegalandregulatoryenvironment.
72TheAmericanBarAssociations,TheRuleofLawProgramsinthePhilippines,http://www.americanbar.org/advocacy/rule_of_law/where_we_work/asia/philippines/programs.html73WorldBank(2016)GlobalFindexDatabase,http://datatopics.worldbank.org/financialinclusion/74KenResearch(2014)ThePhilippinesE-CommerceMarketOutlookto2018,http://www.kenresearch.com/it-enabled-services/e-commerce-industry/philippines-ecommerce-market-research-report/590-105.html75ManilaTimes(2015)OFWRemittanceHitRecordHigh,http://www.manilatimes.net/ofw-remittances-hit-new-high/163522/
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RecentE-paymentDevelopments
Inrecentyears,thePhilippinesgovernmenthaspaidparticularattentiontothepotentialofe-paymentsinreducingcorruptionandincreasingefficiencyoffinancialflowsinthepublicsector.76Asaresult,thegovernmenthasinitiatedanumberofinitiativesthatshowadeliberateandstrategicshifttowarde-paymentsystems.
In2011,thegovernmentstartedanumberofe-governmentinitiativestocreateanintegratedfinancialmanagementinformationsystemforamoretransparentandeffectivewayofmonitoringpublicfunds.Oneoftheinitiativesisthedevelopmentofane-procurementsystem(PhilGEPS)toallowe-bids,e-paymentsande-transactionsintheuseofpublicfunds.PhilGEPSeventuallywentlivein2013inpartnershipwiththeLandBankofthePhilippines,allowinggovernmentagenciestopayforprocureditemsthroughanonlineportal.TheDepartmentofScienceandTechnologyfurthersupportedtheshiftwiththelaunchofapaymentplatformforallgovernmentagencies,PhPay,in2013,whichintegratedexistingmarketservicesproviderssuchasDragonpay,PVBCard,AsiaPayandRuralNet.TheNationalTelecommunicationsCouncilandtheSocialSecuritySystemfollowedsuitbyimplementingandacceptingreal-timeonlinepayments.In2016,theBureauofCentralRevenuepartneredwithGlobetore-launchthemobilepaymentservicefortaxfilingandpayments.77
TheCentralBank,BangkoSentralngPhilipinas(BSP)hasalsoplayedanimportantroleinenablingthegrowthofmobilemoneyservices.Inpartduetoitsfinancialinclusionmandate,BSPhastakena‘testandlearn’attitudeinsteadofanex-anteapproachtomobilemoneyregulations,enablinginnovationsfrommarketplayers.Thisincludesapprovingnon-bankagentstoperformcashin/outservicesin2005,effectivelyturningpawnshops,airtimesellersandmoneychangersintheruralareasintoe-paymentnetworkextensions.78Ithopestoseemoreconsumersadopttheusageofe-paymentsandtargetsitsshareinthepaymentindustrytoreach20%by2020.79Withthedevelopmentofvirtualcurrencysystems,policymakersareconsideringtighteningregulationsforbitcoinstocurbmoneylaunderingandtostrengthenitscybersecurity.80
Thelatestdevelopmentinthegovernment-to-consumerspacestemsfromtheKasambahayLaw,whichaimstoimprovesocialsecuritybenefitsofoverseasdomesticworkers.ThelawpromptedGlobeandSmarttorolloutnewmobilewalletofferings.SmartCommunications,asubsidiaryofPLDT,forexample,rolledoutBayardLoad,ane-moneyplatformtofacilitateemployersofoverseasFilipinoworkerstosubscribetoandpayforgovernmentsocialbenefits,includingtheSocialSecuritySystem,PhilippineHealthInsuranceCorp(PhilHealth),andtheHomeDevelopmentMutualFund.81WithsuchdevelopmentsthePhilippineshasbecomeoneofthemostinterestingmarketsfore-paymentinitiativesandcanbeexpectedtoriseuptherankingsinthecomingyears.
76WorldBank(2015)InfrastructureChallengesinthePhilippines,http://www.worldbank.org/transport/transportresults/regions/eap/infra-chall-philippines.pdf77ManilaBulletin(2016)BIR,GCashRelaunchFirstE-taxFilingandPaymentSysteminPH,http://www.mb.com.ph/bir-gcash-relaunch-first-e-tax-filing-and-payment-system-in-ph/#HQ3y2tqqKXx4wIp7.9978GSMA(2012)MobileMoneyinthePhilippines–TheMarket,theModelsandRegulation.79TheManilaTimes(2016)E-commerceSeenasMajorGrowthDriverby2020,http://www.manilatimes.net/bsp-sees-e-payments-growing-by-20-in-2020/233809/80Reuters(2016)UPDATE2-Philippinecentralbankbolsterscybersecurity,mayregulatebitcoinoperators,http://www.reuters.com/article/cyber-heist-philippines-idUSL4N18W05K81AlsoknownasPag-IBIGFund.CGAP(2013)http://www.cgap.org/blog/innovation-person-government-payments-philippines
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LookingAhead
WhilethePhilippineshasbeenslowlymovingtowardsa‘cash-lite’societyforsometime,afewimpedimentsinmarketconditionsneedtoimprovefortheeconomytomakeittothenextstageofbroad-basede-paymentadoption.SimilartoIndonesia,customers’lackoftrustandpreferenceinusingcashforpaymentsarebarrierstotheexpansionofonlineshopping.82Furthermore,thearchipelagicgeographyofthecountrymakeslogisticsoperationsdifficult.83Thelong-standingduopolyofPLDTandGlobehasreducedtheincentivesforthecompaniestoworktogetherandthusmakethee-paymentpiebigger.AlthoughGCashandSmartMoneyhasannouncedsuccessfultrialsinmobileinteroperability,84thefactthatbothpaymentsystemsarestillnotinteroperableadecadeaftertheirinceptionisacaseinpoint.Anecdotalevidenceshowsthatexistinge-paymentplayersarenotinvestingenoughtoimprovetheconsumerexperienceine-payments.85NewentrantssuchasCoins.Ph,acryptocurrency-basedP2Ppaymentplatform,isbankingonthisgaptobeabletopenetrateandgrowinthemarket.
Thegovernmenthastakenstepstomapoutthefutureofe-commercewiththePhilippinesE-CommerceRoadmap(PECR)2016-2020.TheDepartmentofTradeandIndustryexpectse-commercetotakeup25%ofthecountry’sGDPby2020.86ThismasterplanwillhelpthePhilippinesslowlyinchtowardsa‘cash-lite’society.
82TheFreeman(2015)BarrierstoE-commerceGrowthOnlineShoppersPreferPayingCashhttp://www.philstar.com/freeman/cebu-business/2015/10/18/1512451/barrier-to-e-commerce-growth-online-shoppers-prefer-paying-cash83ibid84Inquirer(2016)PayMaya,GCashAnnouncesSuccessfulTrialsofMobileMoneyInteroperability,http://business.inquirer.net/207626/paymaya-gcash-announce-successful-trials-of-mobile-money-interoperability85TelephoneinterviewwithRonRose,FounderofCoins.Ph.Dated15June2015.86TheManilaTimes(2016)E-commerceseenasmajorgrowthdriverby2020,http://www.manilatimes.net/e-commerce-seen-as-major-growth-driver-by-2020/262182/
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4.ConclusionandRecommendations:LookingAhead
E-paymentenableseconomiestorunbetterandboostsgrowththroughdifferentwayssuchasreducingtransactioncosts,expandingformalfinancialservicestothe‘uneconomic’,inducingproductivitygainsforgovernmentandbusinesses,andopeningmarketsandincreasingaccessforSMEs.
Thisstudydocumentsthelinkagesbetweene-paymentpenetrationandeconomicgrowthandcanvasseswhereeachAPECeconomystandsintheusageandlevelofdevelopmentine-payments.TheAPECE-paymentIndexprovidesatoolwithwhichtounderstandwherethebarriersareandwhichareasneedtobeimprovedinordertobenefitfromtheopportunitiespresentedbye-payments.
Notingthewide-rangingsocio-economicimpactse-paymentsadoptioncanhaveonAPECeconomies,thefollowingaresomeofthelessonsthatcanbetakenforwardbytheAPECBusinessAdvisoryCouncil.
• Understandingthatthelevelofeconomicgrowthisnotthesoledeterminantofe-paymentreadinessoradoption.WhilesupportiveinfrastructuresuchasICTandpaymentnetworksareheavilyinfluencedbyincomelevel,otherssuchasregulatoryregimes,demand,andeventhecapacitytoinnovate,showweakcorrelationtoincomelevels.
• Conversely,fosteringdigitalpayments,ortransactionscanenableaneconomyto‘leapfrog’initseconomicdevelopmenttrajectory.Thisinvolvesasystemicfocusandawholeofgovernmentpolicy-drivenapproachtoestablishanenvironmentthatpromotese-paymentadoptionandinnovation.
• Whileeacheconomycanhaveadifferentpathwaytowardsmaximizinge-payments,afewbuildingblocksneedtobeinplaceforatransformationalshifttowardse-cash-litesociety.
o Nomatterthestageofdevelopmentofthee-paymentecosystem,facilitatinganattractivemarket(includingbusiness)climate,andinvestmentsintoinnovativee-moneysolutionsisimportanttosustaindevelopmentofane-paymentecosystem.
o Buildingconsumertrustiscrucialtoachievingthedesirednetworkeffectsofe-payments.
• Understandingthatfuturegrowthwillcomedisproportionatelyfromemergingeconomies
fuelledbyaffordablesmartphonesandinteroperablenetworkaccess.Theplayingfieldforinnovationsisbeinglevelledforbothdevelopedanddevelopingcountries.
• Governmentadoptionofe-paymentscreatesnewopportunities,newneedsforpaymentinfrastructureandachangeinconsumercashdependence.
• Fosteringe-paymentsisamulti-facetedendeavourthatcutsacrossdifferentsectorsandgovernmentagencies.Therefore,bridgingvariousissues–servicesandtechnology,financialandInternetaccess,forexample,inpolicymakingandcreatingenablingconditionsforindustrycollaborationsespeciallyamongfinancialinstitutions,telcos,andalternativepaymentserviceprovidersareimportantforbalanceddevelopmentofe-payments.
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• Theregionincludesamixofdevelopedandemergingmarketsoperatingwithdifferentagendasandmultipleregulationsthatgoverne-payments.ForSMEstofullybenefitfromthemarketaccessandgrowthopportunitiese-paymentsoffer,andtoenablesocietiestofullybenefitfrome-payments,APECeconomiesneedtocreateaconsistentandcoordinatedapproachtoe-payments,includingharmonisationofproceduresande-paymentpolicyalignment.
Inaddition,thereareareasoffutureworksthatcanbeconsidered:
• ForalongitudinalviewofAPEC:CompiletheAPECE-paymentIndexonanannualbasissothateconomiescanbuildatrend-lineofinformationtotrackprogress
• Empiricallysubstantiatethelinkagesbetweentheuseofe-paymentsandeconomicgrowth:Conductathorougheconometricmodellingoftheeconomiccontributionofe-paymentsacrossall21APECeconomiesoveranextendedperiodoftime
• Tounderstandmarketdynamics:Conductcountry-levelresearchthatinvolvesamatrixofstakeholdersandexistingregulationsthatgoverne-payments.Thiswillhelpidentifywheretheinconsistenciesandgapsarethatthrottleadoptionandinnovation.
• Toprovideinsightsonhowbesttorolloutane-paymentregulatoryframework:Researchpotentialoperationalrisksstemmingfromdiversity,concentrationandcomplexityofvariouspaymentsplayersandnetworks.
Digitisationofpaymentsisnotaquestionof‘if’,but‘when’.Cash-dependenteconomiesfacenotonlyfrictionsinbusinessestransactionsbutinpublicservicedelivery,cross-bordertradeandinclusivefinancialgrowth.Whiletherearemanybarrierstoadoption,thebenefitsofe-paymentsfaroutweightherisksofnon-adoption.Wideruseofe-paymentsandpoliciesthatsupporttheiradoptionisaprioritynoAPECeconomycanaffordtoignore.
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Appendix1.EconometricMethodologyandResults
DataThedatasetusedinthisproof-of-concepteconometricanalysisincludesvariableslistedbelowforfiveeconomies,namelyAustralia,China,Indonesia,Japan,RepublicofKorea,andtheUnitedSates,observedacrossfouryears,spanningfrom2011to2014.
MethodologySincethepurposeoftheeconometricmodellingwastoprovethattheDeloittemodellingusedfortheEuropeisapplicabletotheAPECeconomies,theresearcherssimplifiedtheDeloittemodellingintothefollowingequation.
ln(𝐺𝐷𝑃𝑝𝑒𝑟𝑐𝑎𝑝-./) =(α + βln 𝐺𝐷𝑃𝑝𝑒𝑟𝑐𝑎𝑝-./) + 𝛾 ln 𝑂𝑛𝑙𝑖𝑛𝑒𝑅𝑒𝑡𝑎𝑖𝑙𝑆𝑎𝑙𝑒𝑠-,/ + 𝑥-,/𝛿 + 𝜃- +𝜀-,/where𝑥-,/includes𝐼𝑛𝑣𝑡-,/,𝐺𝑜𝑣𝐸𝑥𝑝-,/, 𝐿𝑎𝑏𝑃𝑎𝑟𝑡-,/𝑎𝑛𝑑𝑇𝑟𝑎𝑑𝑒-,/,
whereinthevariablesusedaredefinedasbelow:
TableA-1.VariablesVariableName VariableDescriptionLnGDPpercap LogofGDPpercapitainconstant2005USD
GovExp GengovernmentfinalconsumptionexpenditureasashareofGDP
LnOnRetailSales LogofOnlineRetailSales
Invt GrosscapitalformationasashareofGDP
LabPart Labourforceparticipationrate
Trade TradeasashareofGDP
Theeconometricresultsareasfollows:
TableA-2.ANOVAa
Model SumofSquares df MeanSquare F Sig.
1 RegressionResidualTotal
38.4532.74741.200
52429
7.691.114
67.194 .000b
a.DependentVariable;LnGDPpercapb.Predictors:(Constant),GovExp,Trade,Invt,LaborPart,LnOnlineRetailFirst,thefitnessofthemodeltothedatawastested(seeTableS-2).AnF-testinregressioncomparesthefitsofdifferentlinearrelationshipsandcanassessmultiplecoefficientssimultaneously.TheF-testofoverallsignificancedetermineswhetherthismodelisstatisticallysignificant.TheregressionanalysisshowsthattheF-testoutcomeishighlysignificant(<.001),sothemodeldoesfitthedata.
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TableA-3.RsquareModel R RSquare AdjustedR
SquareStd.ErroroftheEstimate
1 .966a .933 .919 .33831a. Predictors:(Constant),GovExp,Trade,Invt,LaborPart,LnOnlineRetail
Inregression,theR-squaredcoefficientofdeterminationisastatisticalmeasureofhowwelltheregressionlineapproximatestherealdatapoints.DespitethemodificationinthemodellingfromtheDeloittestudy,Rsquareshowsthepercentageofthedependentvariablevariationthatisexplainedbythemodel.Inourcase,93.3%ofthevarianceinGDPpercapitacanbeexplainedbyalltheindependentvariables(seeTableA-3).
TableA-4.CoefficientsaModel Unstandardised
CoefficientsStandardisedCoefficients
t
Sig.B Std.Error Beta
1(Constant)LnonlineretailInvtLaborPartTradeGovExp
7.078.175-.055.003-.001.205
1.651.043.010.020.004.029
.360-.413.015-.022.534
4.2884.123-5.373-.172-.3096.997
.000
.000
.000
.865
.760
.000a.DependentVariable;LnGDPpercapOnlineretailsalesshowasignificantcoefficientandhasalowp-value(<.05),whichsuggeststhatchangesinitsvaluearerelatedtochangesinGDPpercapita.Theresultssuggestthata1%changeinonlineretailsalesisassociatedwith0.175%changeinGDPpercapita.
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Appendix2.APECE-paymentIndex–Methodology
TheE-paymentEcosystem
TheAPECE-paymentIndexgaugesthereadinessandcapacityofthe21economiesthatcompriseAPEC87toengageine-payment,thelevelofuseofe-paymentandm-paymentservices,aswellastheirdevelopmentpotentialbasedoneacheconomy’se-paymentecosystem.
Using44business,technology,financialaccessandpayments-specificvariables,theIndexscoresandranksthe21economiestoidentifywhoaresuccessfulinadoptingandutilisingelectronicformsofpaymenttoday,andalsothosethatofferfuturepotentialintermsofcapacitytoinnovate.
Fourpillarsmakeupthee-paymentecosystem,andtheweightinggiventoeachpillarintheIndexisasfollows:
1. RegulationandPolicy(businessclimateandopennesstotechnology)–20%2. Infrastructure(levelofenablingtechnologyandfinancialconnectivity)–30%3. Demand(e-paymentusagelevelandlatentdemand)–30%4. InnovativeProductsandServices(thesupply-sidelandscapeandcapacitytoinnovate)–
20%
Pillar1looksattheextenttowhichregulationsandpoliciesarehinderingorfosteringthedevelopmentandgrowthofbusinessesrelatedtoe-payment,aswellase-paymentadoptionbybusinessesandindividuals.Itthereforefocusesontheregulatoryandpolicyenvironmentforboththetechnologyandbusinesssectors.ItreflectsonthepresenceofICT-relatedregulationsandpolicies(e.g.,electroniccommerce,digitalsignatures,consumerprotection),andtheextenttowhichgovernmentisusingtechnologytoenhancecompetitiveness.Italsoexaminesthetimeandcostsrequiredtostartabusiness,theefficiencyofthelegalframeworkinsettlingdisputesandchallengingregulations,andtherangeoffinancialproductsandservicesavailabletobusinesses.
Pillar2includesindicatorsontheconnectivityandfinancialinfrastructurerequiredtoprovidereliableandsecuree-paymentservices.ItcapturesthelevelofpenetrationoftheInternet,wirelessbroadband,mobilephonesandsmartphones,aswellasthecoverageofpaymentoptionsthroughATMsandcommercialbankbranchesineacheconomy.Italsoexaminesnationalcapabilitiesincybersecurity.Capabilitiestoaddresssecurityrisksarevitaltoenableboththedemandfore-payment,aswellaspromotee-paymentinnovation.
Pillar3providesapictureofbothlatentandactualdemandfore-paymentservicesfrombusinessesandconsumers.Itcontainsindicatorsonthreeaspects:theuseofcashlesstransactions,theuseofmobilepayments,andtheusageleveloftheInternetatlarge.IndicatorsforthelatterincludetheuseoftheInternettobuythingsandpaybills,andase-paymentoptionsarebeingintroducedthroughsocialmedia,thetimespentonsocialmediaisalsomeasured.
Pillar4focusesonthesupply-sideofe-payment,includingthepresenceofinternationale-commerceande-paymentplayerssuchasAlibaba,Alipay,Amazon,Bitcoin,eBay,PayPal,TaobaoandTenpay,andeacheconomy'scapacitytodevelopinnovativee-paymentsolutions.Thepresenceofinternationalplayersbothpromotesandisindicativeofopenaccessanddemand,whichleadsto
87The21APECeconomiesare:Australia,BruneiDarussalam,Canada,Chile,China,HongKong,Indonesia,Japan,RepublicofKorea,Malaysia,Mexico,NewZealand,PapuaNewGuinea,Peru,Philippines,Russia,Singapore,ChineseTaipei,Thailand,UnitedStatesofAmericaandVietnam.
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diversebusinessmodelsandcompetition.Thispillarisrepresentedbyindicatorsassessingtheavailabilityofcredit,capacityofhumanresourcesforinnovationthroughthenumberofgraduatesinengineeringandscience,numberofventurecapitaldeals,ICTpatentsapplication,theextentofdigitisationofnewbusinesses,andtheextentandqualityofelectronictransactionalservicesbeingofferedtocitizensaspartofe-governmentinitiatives.
AteamofresearcherscollecteddatafortheIndexinFebruarytoApril2016.TheprocessofdevelopingtheIndexincludedestablishingrelevantsub-indexesorpillars,selectingrelevantindicatorsforeachpillar,normalisingthedata,addressingmissingdata,andfinallycalculatingtheIndex.TheIndexisbasedona100-pointscale,where1representstheworstsituationand100thebest.
SelectingtheIndicators
Atotalof44indicatorswereselectedforthe2016APECE-paymentIndex,up5indicatorsfromprevious39in2015.Asidefromthe5newindicators,14indicatorswererefreshedwiththelatestavailablestatistics.Onlyindicatorswithdataavailableforatleasttwo-thirdsofAPECeconomieswereused.Foralltheindicators,thelatestdataavailableatthetimeofresearchwasused,andthevaluesforeachindicatorweretakenfromthesameyear,withtheexceptionofBruneiDarussalam.88
Theindicatorsselectedforeachofthepillarsaresummarisedbelow:
1.Regulation&Policy(8indicators)
2.Infrastructure(8indicators)
3.Demand(19indicators)
4.InnovativeProducts&Services(9indicators)
Timeandcostrequiredtostartabusiness
Commitmenttocybersecurity
AveragedailyuseoftheInternetviaaPCortablet,onsocialmedia(2indicators)
Easeofgettingcreditandventurecapitaldeals
Efficiencyoflegalframeworkinsettlingdisputes
NumberofsecureInternetservers
Useofmobilepayment–tomaketransactions,paybills,receivewages,receivegovernmenttransfers(4indicators)
GraduatesintheSciencesandEngineering
Efficiencyoflegalframeworkinchallengingregulations
NumberofInternetusers
Paymentthroughaccountsinfinancialinstitutions-havinganaccount,receivewages,receivesgovernmenttransfers,orpayutilitybills(4indicators)
Transactionalandconnectede-servicesofferedbygovernment
Businessimpactofrulesonforeigndirectinvestment
Wirelessbroadbandsubscriptions
Useofelectronicpayment–tomakepayments/percentageofpopulationwhousedtheInternettopaybillsorbuythings(2indicators)
PCTICTpatentsapplication
LevelofdevelopmentoflawsrelatingtoICT
Smartphonepenetration
Proportionofpopulationwithcreditcardsandnumberofpeoplewhoused
ICTandbusinessmodelcreation
88The latestWorldEconomicForum’sNetworkedReadiness Index2015didnot includeBruneiDarussalam, therefore incaseswheretheindicatorsusedwerefromthisIndex,BruneiDarussalam’sdatacamefromthe2014Indexwhiletheothereconomiesusedthe2015Index.
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creditcardsinthepast12months(2indicators)
ImportanceofICTstogovernmentvisionofthefuture
Mobilesubscribers Proportionofpopulationwithdebitcardsandnumberofpeoplewhouseddebitcardsinthepast12months(2indicators)
AvailabilityofAmazon,PayPalandeBayinacountry
GovernmentsuccessinICTpromotion
Numberofautomatedtellermachines(ATMs)
Percentageofpopulationusingmobilebankingandpercentageofthenationalpopulationwhoboughtsomethingonlineinthepastmonth(2indicators)
AvailabilityofAlibaba,Taobao,AlipayandTenpayinacountry
Availabilityoffinancialservices
Numberofcommercialbankbranches
Percentageofsmartphoneuserswhohavepurchasedviaphone
NumberofBitcoinnodes
Theindicatorsundereachpillarwereweightedequally.
Normalisation
Astheindicatorshaddifferentunitsandscales,anyindicatorthatdidnotusea100-pointscalehadtobenormalisedtomaketheindicatorvaluescomparable,aswellastoconstructaggregatescoresforeacheconomy.
Someindicators,suchastheoneutilisingtheInternationalTelecommunicationUnionGlobalCybersecurityIndex,andthenumberofInternetusersper100habitants,alreadyuseda100-pointscalesothesedidnotneedtobenormalised.Indicatorsnotbasedona100-pointscale,suchastheindicatorsusingtheresultsfromtheWorldEconomicForum’sExecutiveOpinionSurveywhichgavearatingof1to7foreacheconomy,werenormalised.
Forindicatorvaluesthatrequirednormalisation,minimumandmaximumvaluesweresetinordertotransformtheindicatorsexpressedindifferentunitsintoindicesbetween0and100usingthefollowingformula:
Normalisedvalue=((actualvalue–minimumvalue)/(maximumvalue–minimumvalue))X100
Certainindicators,suchastheoneonmobilesubscriptionper100inhabitantshadvaluesover100.Fortheseindicatorsitwasdecidedthatthemaximumvaluewouldbe100,andanyeconomywithavalueover100wasadjustedto100.
TreatmentofMissingValues
Manyoftheindicatorscontainedmissingvaluesforahandfulofeconomies.BruneiDarussalam,HongKong,PapuaNewGuinea,andChineseTaipeiinparticularhadmissingdataforanumberoftheindicators.Forthisreason,resultingrankingofthesecountriesneedtobeinterpretedwithcaution.ItwasnecessarytoestimatethemissingvaluesbecausemissingvalueswouldhaveledtoabiasincalculatingtheIndexandlimitedtheabilitytomakecomparisonsacrosseconomies.
Toestimatethemissingvaluesforaneconomy,aclusteringtechniquewasused.TheeconomiesweregroupedbytheWorldBank'sincomeclassification,andforaparticularindicatorwithmissing
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value,theaverageofthenormaliseddataforeachincomegroupwascalculatedtoestimatethemissingvalues.
WorldBank’sincomeclassificationusedtogrouptheeconomiesisasfollows:
• High-incomeeconomies(GDPpercapitaofUSD12,746ormore):Australia,BruneiDarussalam,Canada,Chile,HongKong,Japan,RepublicofKorea,NewZealand,RussianFederation,Singapore,ChineseTaipei,UnitedStatesofAmerica
• Upper-middle-incomeeconomies(GDPpercapitaofUSD4,126toUSD12,745):China,Malaysia,Mexico,Peru,Thailand
• Lower-middle-incomeeconomies(GDPpercapitaofUSD1,046toUSD4,125):Indonesia,PapuaNewGuinea,Philippines,Vietnam
Forexample,toestimatethemissingvalueforPapuaNewGuineaforaparticularindicator,anaverageofthenormaliseddataforthelower-middle-incomeeconomies,thatisIndonesia,PhilippinesandVietnam,wasused.
AdisadvantageofthistechniqueistheoverestimationofsomeofthemissingdataforeconomieslikeBruneiDarussalam,ChileandPapuaNewGuinea.
AggregationandProductionoftheAPECE-paymentIndex
Onceallthevalueswerenormalisedandthemissingvaluesestimated,anaveragewascalculatedforeacheconomyineachpillar.Thisallowsustoseetheeconomies’scoreandrankingforeachpillar.
Tocalculatetheoverallscore,thesumofthescoreforeachpillarwasused,takingintoconsiderationtheweightgiventoeachpillar.Forexample,forAustralia,theaveragescoreforeachpillarwasasfollows:
1. RegulationandPolicy(20%)–62.22. Infrastructure(30%)–70.53. Demand(30%)–56.14. InnovativeProductsandServices(20%)–51.0
Theoverallscorewascalculatedasfollows:
(62.2X20%)+(70.5X30%)+(56.1X30%)+(51.0X20%)=60.6
DataSources
TheindicatorsanddataweredrawnfromofficialandpubliclyavailablesourcessuchastheInternationalTelecommunicationUnion,UnitedNationsandWorldBank.
Whilemanyofthedatasetsarehard,factualdatasuchastheInternetpenetrationrate,someofthedataaremoresubjectiveandaretakenfrom,forexample,theWorldEconomicForum’sExecutiveOpinionSurveythatgatherstheopinionsofdecisionmakersandinfluencerswhoarefamiliarwithaparticulareconomy.Thesurveyisusedtomeasureconceptsthatarequalitativeinnatureorforwhichinternationallycomparablestatisticsarenotavailableforenougheconomies,andaratingof1to7isprovidedforeacheconomy,where1correspondstotheworstsituationand7thebest.Forexample,oneoftheindicatorslooksattheextenttowhichgovernmenthaveaclearimplementationplanforutilisingICTstoimprovethecountry'soverallcompetitiveness,1=noplanand7=clearplan.
Thecompletedatasourcesarelistedbelow.
• Bitnodes,GlobalBitcoinNodesDistribution,https://getaddr.bitnodes.io/
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• InternationalTelecommunicationUnion,GlobalCybersecurityIndex2014,http://www.itu.int/en/ITU-D/Cybersecurity/Pages/GCI-2014.aspx
• InternationalTelecommunicationUnion,WorldTelecommunication/ICTIndicatorsDatabase2015,http://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx
• ConsumerBarometer,https://www.consumerbarometer.com/en/• UnitedNations,E-governmentSurvey2014,https://publicadministration.un.org/egovkb/en-
us/Reports/UN-E-Government-Survey-2014• UnitedNationsConferenceonTradeandDevelopment,InformationEconomyReport2015,
http://unctad.org/en/Pages/Publications/InformationEconomyReportSeries.aspx• WeAreSocial.com,http://wearesocial.com/sg/special-reports/digital-2016• WorldIntellectualPropertyOrganisation(WIPO),GlobalInnovationIndex2015,
https://www.globalinnovationindex.org/content/page/GII-Home• WorldBankDoingBusiness2015:GoingBeyondEfficiency,
http://www.doingbusiness.org/reports/global-reports/doing-business-2015• WorldBank,GlobalFindexDatabase,http://datatopics.worldbank.org/financialinclusion/• WorldBank,WorldDevelopmentIndicators,http://data.worldbank.org/data-catalog/world-
development-indicators• WorldEconomicForum,GlobalCompetitivenessIndex2015-2016,
http://reports.weforum.org/global-competitiveness-report-2015-2016/• WorldEconomicForum,NetworkedReadinessIndex2014and2015,
https://www.weforum.org/reports/global-information-technology-report-2014/,http://reports.weforum.org/global-information-technology-report-2015/network-readiness-index/