Issues and Challenges of Electronic Payments in Emerging Markets

Having looked at the landscape and its drivers, it’s clear that the future of electronic payments in emerging markets is bright and that opportunities abound. However, emerging markets can also be complicated and unpredictable.


Regulators have been playing an active role, realizing that increasing electronic payments can accelerate the economic growth of a country. At the same time, they must also implement measures to manage security and fraud on these new networks. Consequently, positions taken by regulators sometimes lean more towards security than convenience. For an emerging market to thrive, it needs regulators that can balance growth with security.

Since electronic payments are mature in other countries, regulators know what challenges to look for, such as data theft or credit risk. Different countries with different regulators have their own set of challenges, which is why regulators need to plan requirements carefully in collaboration with commercial and financial sectors.

Unfortunately, sometimes international companies are limited by local regulations to serving as technology and infrastructure providers only (in an effort to protect local companies). This can actually slow the progress of e-payments implementation if not managed carefully.

Unique Infrastructure Requisite

If a certain market requires an infrastructure investment, how will it get paid off in a low-margin business, where each transaction may be only 50 cents? High volume is typically the answer in emerging markets. Therefore, low ticket values must be offset by high transaction velocity. Looking again at Indonesia or the Philippines, where the populations are large and spread across many islands – how do the right people and networks get put in place? Potential market entrants, governments and other stakeholders must work together, and coordinate their investment efforts and objectives to overcome these challenges inherent to many emerging markets.

Financial Business Model

Finally, designing a viable overall business model in emerging markets can be the most difficult of all. With respect to new types of payments – for which there is often no precedent – it can be unclear where the eventual profits will come from.

In emerging markets, the population is generally large and the average transaction size small. This is the opposite of mature markets, which have completely different dynamics. For example, a typical business model in Singapore is based on large ticket sizes – but emerging markets currently skew towards small ticket sizes and low volumes, with the promise of reaching high volumes eventually.