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In an increasingly digital era, it is no wonder that cashless transactions are now dominating. Even in brick-and-mortar stores, all merchants will offer the option of paying with a credit or debit card or even latest solutions including Apple Pay. As for online shopping, alternative payment adoption rates are currently soaring – and Asian markets seem to be leading in that trend.
58% of e-commerce in Asia spent through alternative payments
According to a recent report focusing on digital money spent on the travel industry, Asian consumers are much more prone to embrace alternative payment solutions than their European or North American counterparts. As the commissioned report dubbed ‘The Travel Payments Guide’ explains, alternative payments account for a staggering 58% of e-commerce spending across Asia, which is currently leading the market globally. Europe is following closely with over half of spending carried out through alternative payment methods – 53%, to be exact. North America is still trailing behind at 38%, with credit and debit cards still dominating the market at 58%. However, this is lower than the 62% share attributed to card spending in the previous year.
The region showcased as Asia in the report features some of the most popular holiday and travel destinations across the globe. As such, it is interesting to note that according to the same data, there are over 300 different payment methods for prospective travelers to pay for their trip across various merchants all over the globe. In the US, e-wallets are set to surpass cards by 2025 as the most popular payment method, having already risen by 4% compared to the previous year. Asian countries are still leading the way, as e-wallets are preferred twice as much as cards for travel payments in China, making up 49% of the travel online payment industry within the country, currently valued at $155 billion.
The rise of mobile-based payments
Yet travel spending is not the only sector embracing alternative payments – many predominantly digital industries are early adopters of this type of tech-driven payments. China-based online retail giant Alibaba launched its very own alternative payments platform in 2004, aptly named AliPay. Online retail is one of the sectors leading in alternative payment methods, with US-based Amazon also launching its very own Amazon Pay payments platform to streamline purchases. Another sector used to handling large volumes of deposits and payments on a daily basis is the online casino industry, with some of the best Asian bookies offering several alternative payment options – including e-wallets like Skrill, Neteller and UnionPay. Across India, debit and credit card payments are still considered the norm, with Visa currently claiming the biggest portion of the market. Yet even there, e-wallets are becoming increasingly popular, with ITZ card and OxiCash continuing to grow.
Both OxiCash and ITZ card, in particular, are mobile-based payment solutions. As such, they are geared towards mobile users, which means that they are harnessing the high mobile-based internet penetration across various regions in India. After all, it is expected that mobile payment gateways will be the dominating trend in the alternative payments market. The mobile app development industry is focusing on integrating innovative features to enhance mobile-based payment security, while it also strives towards streamlining cross-border payments and B2B transactions.
Developing a sound cybersecurity protocol that effectively prevents hacking is among the top priorities for companies in the sector, as preventing identity theft and phishing attempts is key for consumers to be able to trust an app with their money. As such, boasting of efficient security practices such as two-factor authentication and fraud detection algorithms can work wonder towards increasing market shares for contenders in the mobile payments market.
Use of e-wallets growing across Southeast Asia
Across Southeast Asia, alternative payments are on the rise, even though there are differences across countries. In Singapore, where the economy is very fintech-focused with most consumers having access to a bank account, cards are still the frontrunner. Yet where bank account access decreases, e-wallets seem to experience a boom. Global leading brands like Apple Pay and Google Pay are benefiting from their brand awareness across Southeast Asian markets.
Yet there are also more locally driven solutions, including Pay Maya in the Philippines and Mono Pay in Vietnam, along with GrabPay that is rising in popularity across the Southeast Asian region. These are all mobile-based solutions, demonstrating once again that smartphone penetration rates and expansion of fast and cheap Internet access could be a game-changer in the market.
Popularity also depends on adoption by merchants – so the fact that many mobile e-wallets are offered as a payment option not only by e-shops and digital merchants, but also at in-store POS can go a long way towards influencing mainstream adoption by consumers and relevant market trends. As Statista reports, worldwide adoption of digital and mobile wallets is currently set at 41.8% across the world, surpassing credit cards at 24.2% and debit cards at 10.6%. In the Asia-Pacific region, card payment rates are even lower, with credit cards accounting for just over 20% of all e-commerce volume in 2019 and debit cards even lower at 4.2%. By contrast, bank transfers make up 7.6% of e-commerce payments, compared to 5.9% in North America and 9% worldwide. Lastly, cash on delivery is still preferred in the region in 5.1% of payments, slightly higher than the global average of 4.5%.
As e-commerce continues to grow, new payment platforms and providers keep popping up. The advent of 5G tech and subsequent higher internet speed might play a crucial role in changing this landscape and propelling mobile-based solutions forward.