Visa is one of the biggest brands in the world with adverts present at almost every major international sporting competition that I can think of. Together with MasterCard, American Express and JCB, Visa has been the dominating method of payment that the masses have known for decades. As a company, it can be said that Visa’s investment moat is second to none in the payment networks sector.
In our increasingly connected world and with the government driving the country towards a cashless society, there has been a lot more new ways to make payment such as Google Pay, Apple Pay, PayNow, GrabPay DBS PayLah, PayPal and so on. With the introduction of so many avenues of payment, it seems like the investment moat for these traditional old boys is being disrupted. Moats do not last forever, perhaps the moats of these companies is starting to be drained? Or perhaps, it is already drying?
True Blue Wallets
- DBS PayLah
- Singtel Dash
DBS PayLah and Singtel Dash are what I considered the True Blue Digital Wallets in Singapore. Both DBS PayLah and Singtel Dash are one of the earlier digital wallets that made its way to the masses.
DBS PayLah was launched by DBS and links directly to your bank account. DBS PayLah allows you to send and receive money to your friends who are on both PayLah and PayNow. It allows you to pay your utilities bills, cab fares, meals and shopping using a QR Code.
For merchants, they would just have to display a QR code and they will receive their funds that they receive at the end of the day. A helpful feature as it will definitely assist SMEs in their cashflow needs, a concern previously aired by some hawkers on other platforms.
For users, the process is similar to PayNow In order to pay using PayLah, I have to
- Take out my phone
- Unlock my phone
- Log onto DBS PayLah.
- Scan their QR code and key in the amount.
Singtel Dash is a wallet that allows you to make contactless payments with Visa at retailers, bus, trains and taxis. It also allows you to pay and top up your Singtel bills and prepaid cards. It allows you transfer funds locally and remit funds overseas. Coverage for fund transfers and remittance is currently a bit limited.
DBS PayLah and Singtel Dash is similar to the super apps of Alipay and WeChat Pay from China where you can use both of them to pay for absolutely everything, send and receive funds, buy and sell investment products, make orders and book services.
Currently, Alipay and WeChat Pay are so dominant in China and overseas that overseas merchants has to start accepting Alipay and WeChat Pay just to cater to Chinese tourist. Reminds me of the days where Visa, MasterCard, American Express and JCB are starting out.
Now that is disruptive, with the inability of traditional payment companies entering China, Alipay and WeChat Pay were able to thrive and now the world has to adapt to the change in China and accept this new payment method.
How similar are DBS PayLah and Singtel Dash to Alipay and WeChat Pay?
Well they were created by companies as a form of payment method to enhance their services. Alipay was created so that users can easily pay for their online purchases on Alibaba’s e-commerce websites. WeChat Pay was created so that Tencent can connect fund payment between users of their messaging apps. Both apps has expanded to be a whole lot more than what they started out with.
There are also two renowned digital wallets in Singapore that didn’t come into public’s minds as early as DBS PayLah and Singtel Dash. They are Favepay and Grabpay.
Favepay is pretty much a discount app, an app that allows you to pay for your purchases and get discounts. This is good for both customers and merchants as customers receive discounts that encourages customers to visit the merchant again. For merchants, they receive their monies quick and easy and at the same time, it invites more business. Win-win.
For Grabpay, it taps on its user base of Grab users that will be using GrabPay to pay for their Grab rides. Users can use their credits in GrabPay to pay for their spendings at participating merchants by scanning a QR Code.
Enhances consumer’s experience when using a particular service. By linking one app to multiple platforms, it creates a consumer loyalty. It also simplifies payments to multiple parties and businesses.
By using the apps to pay, users gets discounts as well.
For Alipay and WeChat Pay, both apps allows the users to do almost everything. Enough said.
Alipay and WeChat Pay are so dominant in China and only in China. They don’t really support users without China bank accounts, although it is changing for tourists going into China.
Which means to say, all these apps are currently not very friendly to make payments out of their country of operations. An example would be, if I travel to USA, I doubt I can use any of these apps for payment at Walmart. However, I am sure my Google Pay and my Visa cards can work.
How they disrupt Visa Investment Moat?
As Alipay and WeChat Pay are so dominant in China, they are effectively the Visa/MasterCard/American Express/JCB of China. As of current economic climate, these companies has almost no chance to get as strong a foothold in China as much as they have around the world.
By having an app that is so dominant and sticky around users, Alipay and WeChat Pay bypass the traditional payment networks and clear the transactions themselves. The same could be said of DBS PayLah. If one day, everything is paid using DBS PayLah, the transactions will be going through the banks itself bypassing Visa, MasterCard, American Express and JCB. However, is that likely? I doubt so.
As for Singtel Dash, FavePay and GrabPay. They are innovative ways that enhances the user experience as well as make payments more convenient for users. However, they are linked to your credit cards which is linked to the traditional payment networks. Therefore, they are actually complementary to the traditional payment networks. Especially Singtel Dash, who only accepts Visa currently.
Payment Processors & Online Payment Gateways
- First Data
The next part of the article is almost as important as the payment networks. Especially in our world where e-commerce are getting more and more common.
They are the Payment Processors and Online Payment Gateways. What is a Payment Processors? In traditional brick and mortar stores, before the era of e-commerce, a payment processor is a company that connects merchants to the payment networks of Visa, MasterCard and American Express. A payment processor will provide you with a credit card machine as well as a linkage to the payment networks. Companies such as First Data and Shift4.
What about a payment gateway? In very simple sense, a payment gateway is simply an online version of the payment processor, existing to handle the online transactions in online stores. Examples of online payment gateways are PayPal, Stripe and Square.
Watch this video below on what is a payment gateway.
Essentially, think of payment processors and payment gateways as a platform that integrates all the parties together onto one platform for merchants.
By using the service of payment processors, the merchants are provided with the credit cards machines, access to various different payment networks as well as being able to collect cashless payments from customers from their credit and debit cards. All in 3 seconds.
Often, when we make a purchase online, we will be paying via our credit cards. With an online payment gateway, security is provided to consumers and online merchants as they provide an encrypted service among consumer and merchants.
There are a thousand and one service providers out there. Therefore, some can provide better or worse service. Unlike the payment networks which are pretty much consistent and global.
How does it disrupt Visa Investment?
With the emergence of e-commerce, there are new payment options such as PayPal on top of Visa, MasterCard and American Express on e-commerce stores. To the consumers, it is another way of making payment or for some websites, it is the only way to make payment. Therefore, consumers and online merchants have to use their services.
Using PayPal as an example, PayPal gives consumers a better piece of mind as they are deemed as safer as they prevent loss of credit card details to nasty beings who are not supposed to have them. Therefore, their online presence are huge and preferred.
However, both payment processors and online payment gateways tap on these payment networks as well. Therefore, they do not disrupt the operations of the traditional payment networks like Visa, instead they enhances it.
After looking through so many different payment methods for consumers in the 3 articles, there are some things that I can conclude:
- There really are a lot of different ways of payment methods that emerged in the past few years. #technology
- The traditional payment networks are here to stay because they have the widest reach.
- New payment methods that appear in many different aspects of our lives, they seem to be taking over transactions from traditional payment networks like Visa and MasterCard. However, the truth is, more often than not, these payment networks are integral in these new payment methods. Therefore, creating a system where these new payment methods are complimentary on the traditional payment networks instead of taking over them.
- The global presence of these traditional payment networks makes it so convenient for cross-border transactions that they are almost certain to stay relevant.
What can disrupt Visa Investment Moat?
In my humble opinion, it is actually the banks that can disrupt these payment networks. We can see that Alipay and WeChat Pay has already done that in China, although they are not banks. For the rest of the world, if they can completely bypass these payment networks, and conduct transactions among themselves, such as the vision of PayNow and to a certain extent, DBS PayLah. Traditional payment networks will be made irrelevant.
However, to have them in a country requires the co-operations of all the banks and the government. Itself, is a huge task. To have it worldwide, it requires the co-operations of the banks and governments around the world.
It seems unlikely that would happen. Perhaps it is a better idea to complement than to take over. The pie is definitely big enough for all.
Investment in Singapore for Beginners
To prepare yourelf to take advantage of the opportunities the stock market presents you, is to educate yourself. Chloe Lin, the founder of Invest Travel Play (ITP), was featured on Singapore national papers 联合早报 (Lian He Zao Ba) on 22 Aug 2018, which she actually shared a simple strategy to help readers to start investing safely with just $360 and building up your passive income in Singapore!
If you are looking for investment in Singapore for beginners, and are interested in learning how to make money safely and consistently from the stock market, check out Stock Investing and Options Made Easy Workshop and it’s Skillfuture credit claimable. It is a 2-day workshop that teaches students how to perform fundamental analysis on stocks and ultimately, decided whether to invest in certain stocks. Moreover, the course will also be teaching options strategy, a derivative which combines investing and options to increase your return on investment.
By the way, we also wrote an article on Facebook and Tesla, Singtel Share Price, 800 Super Share Price, Future of ESR-REIT and Viva Industrial Trust (VIT) if you are looking to invest to make passive income. Oh yes, we also wrote an article sharing how you can invest in bitcoin Singapore, just in case you’re looking for alternative ways of investment.