Asia Pacific Payment Trends

All of the contents and information contained throughout the entirety of this Sub Menu Page, is representative of ‘certain excerpt materials’ taken from: “The Worldpay (By FIS) Global Payments Report January 2020”

 

Catching the Next Growth Wave in Southeast Asia

A wave of growth is surging across Southeast Asia. The traditional and largely rural societies of Southeast Asia are witnessing rapid transformation. This region is home to over 660 million people, half of whom will live in cities by 2020.

That sweeping change is ripe with opportunity—especially in the realm of eCommerce where growth rates are among the highest in the world. Digitization is changing how consumers shop and providing new opportunities for the unbanked to make purchases. The World Bank estimates that two-thirds of the world’s 1.7 billion unbanked citizens have access to a mobile phone. Digitization is aiding financial inclusion by connecting millions of new consumers to essential financial services—while converting more of the cash economy to digital payments.

The historical wealth gap among the population has also limited access to commerce in the rest of the world, but digitization is helping to close that gap. A growing middle class is emerging that’s expected to reach 350 million representing $300 billion in disposable income by 2022.2 An emerging middle class means rising affluence, internet access, and increased aspirations for convenience—and the disposable income to help achieve those aspirations.

Regardless of class, everyone in the region seems to have a smartphone. Southeast Asia is proving to be the most engaged internet region in the world, with users in Indonesia, Malaysia, the Philippines, and Thailand ranking among the top 10 globally in mobile internet use.

Many leading eCommerce companies are investing heavily in the infrastructure to serve these consumers including marketplace sectors, logistics centers, and payment methods. These developments are combining to stimulate further online growth potential. The region is expected to experience 14.3% CAGR from 2020 to 2023.

The Asia-Pacific region is a hotbed of payment innovation that offers a fascinating study in contrasts. Connecting with APAC consumers requires an understanding of cultural, religious, and economic differences that defy simplistic categorization.

Though consumers pay in many ways, one broad trend is clear: APAC consumers are gravitating toward the use of mobile and digital wallets. A perfect storm of factors is fueling widespread use of electronic payments across the region, both in eCommerce and at the point of sale. Ubiquitous mobile devices, advanced digital infrastructure and the growing power of “super apps” have helped digital/mobile wallets rise fastest in APAC.

Digital and mobile wallets now account for a remarkable 58% of regional eCommerce payments, a number we expect to reach 68.2% by 2023. Far from limited to online, the growing influence of digital/mobile wallets at the point of sale is even more dramatic. China’s influence on payment trends throughout APAC is decisive. Led by Alipay and WeChat Pay, mobile and digital wallets account for 71% of eCommerce transactions in China. At the point of sale, the shift is no less dramatic as digital/mobile wallets now account for 48% of payment volume in China—more than double the rate of cash.

Payment methods reflect a wide spectrum of diversity in economic conditions, government regulations, and infrastructure capacities. Credit and debit cards lead the way in the more mature economies of Japan, Singapore, and South Korea. Cash remains king in developing economies such as the Philippines, so much so that it also plays a major role in eCommerce via cash on delivery.

Bank transfers are the leading payment preference for eCommerce purchases in Indonesia and Thailand. Elsewhere in the region we see credit cards retaining strength in Hong Kong and South Korea, where credit is the leading payment method for both eCommerce and the point of sale. While in fast-growing Vietnam the draw of cash is so great that cash on delivery is the leading payment method for eCommerce.

Opportunities for global brands in the region remain strong, despite risks from weakening global demand and trade tensions between the US and China. Data includes double-digit compound annual growth rates in eCommerce across the region: 13% in China, 19% in India, 16% in The Philippines, 17% in Vietnam. Overall economic growth has moderated from highs of recent years, yet growth at the point of sale is anything but stagnant: 9% CAGR in China, 11% in India, and 10% in Indonesia.

We expect regulatory initiatives and infrastructure development across the region that will continue to promote the growth of digital payments, especially the use of digital and mobile wallets. Companies seeking to penetrate APAC markets need to be able to navigate complexity, uncertainty and change in regulatory schemes. This landscape puts a premium on experienced partners with local knowledge on payment methods tailored to satisfy consumer, regulatory, and operational needs.

Payment types are diverse, but what’s common across the region is rising consumer expectations for speed, safety, and convenience. How—or whether—the rapid pace of digital payment adoption in APAC will influence the rest of the world remains unclear. What is clear is that Asia-Pacific will continue to be the focus of increasing attention from global brands as they seek to connect with the largest concentration of consumers ever assembled.

Asia Pacific

eCom Payment Methods

Asia Pacific

POS Payment Methods

Digital and mobile wallets represent a tremendous growth opportunity as a payment method in Southeast Asia. That’s certainly true for the newly emergent middle class equipped with smartphones, disposable income, and an appetite for consumption. Yet it’s those with the least money that are seeing the greatest impact of digital payments. Digital payment methods can deliver unmet needs for those who historically were unable to access financial services due to a lack of physical banking infrastructure.

Payment methods in Southeast Asia are strongly influenced by local, historical, socioeconomic, and regulatory factors that make them resistant to homogenization. That said, the trend toward digitization of payments is clear. While cash remains the dominant payment method, there are signs that Southeast Asian consumers may leapfrog cards altogether and—like China before them—move quickly to mobile and digital wallets. China’s influence is significant in the Southeast Asian payment landscape. Increased tourism is affecting changes with point of sale transactions as Chinese tourists expect to be able to use the same payment methods abroad as they do at home. Stronger bilateral ties such as common payment methods and expansive infrastructure investments are also helping to open cross-border opportunities for local Southeast Asian brands selling back to Chinese consumers.

Indonesia (19% eCom 2019-2023 CAGR)

The largest market in Southeast Asia, Indonesia is the fourth most populous nation globally and contains the largest regional middle class. Indonesia has the 16th largest economy in the world—larger than Argentina, Turkey, or The Netherlands.4 Bank transfer remains the leading eCommerce payment method, while digital wallets hold second spot at 25% eCom market share.

 

Malaysia (16% eCom 2019-2023 CAGR)

Malaysia’s decade-long period of economic expansion is expected to continue. The World Bank projects that Malaysia will transition from an upper middle-income economy to a high-income economy by 2024.5 Bank transfers represent nearly half of all eCommerce payments. Strong regulatory and currency controls underscore the importance of having an international acquirer with long-standing in-country experience.

Philippines (16% eCom 2019-2023 CAGR)

While eCommerce in the Philippines is growing, it faces headwinds including a high unbanked population, inadequate banking infrastructure, and low acceptance of payment cards at merchant outlets. This makes cash on delivery the Philippines’ leading eCommerce payment method, with cash being used in many convenience stores such as 7-Eleven, Mini Stop, and Alfamart. The central bank of the Philippines hopes to make 20% of all transactions in the Philippines electronic in 2020.

Vietnam (17% eCom 2019-2023 CAGR)

Vietnam has witnessed an almost complete transformation in the past three decades. The country’s emergence from a centrally-planned to market economy has significantly raised the economic output and standard of living for Vietnam’s citizens. Vietnam is a mobile-first society, with almost 99% of internet users between ages 15-64 owning a smartphone.11 Cash on delivery and bank transfers lead the way for online payments, with use of mobile and digital wallets fast picking up steam.

Singapore: (8% eCom 2019-2023 CAGR)

The island city-state of Singapore stands out from its neighbors, offering one of the most mature eCommerce markets in the world. Singapore boasts secure internet infrastructure, an overwhelmingly banked population, and a reliable postal system. Singapore represents a strong cross-border eCommerce opportunity: 73% of online shoppers made a cross-border purchase in 2019.9 In contrast to much of the Southeast Asia region, credit cards dwarf all other eCommerce payment methods, and are the most popular payment method.

Thailand (10% eCom 2019-2023 CAGR)

Thailand continues to experience double-digit eCommerce growth, though the country remains challenged by infrastructure limitations. Thailand 4.0 is a comprehensive strategy for the development of national infrastructure, including the digital transformation of the country.10 That strategy seems to be paying off, as digital and mobile wallets are now nearly on par with cash on delivery and trailing only bank transfer as a payment method. Debit and credit card use remain low in a society that remains largely cash-centric.

Asia has the highest adoption of digital payments in the world. As smartphones and internet access continue to make a big world smaller, those devices offer consumers simple ways to pay in a region still largely driven by cash payments. Coupled with the continued development of physical infrastructure, digital payments are helping to lay the groundwork for a more inclusive society—as well as an inviting market for eCommerce growth.

1 “Financial Inclusion on the Rise, But Gaps Remain, Global Findex Database Shows.” The World Bank, April 19, 2018. https://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows

2 “Understanding Southeast Asia’s Emerging Middle Class.” Florian Hoppe and Aadarsh Baijal, Bain & Company, March 18, 2019. https://www.bain.com/insights/understanding-southeast-asias-emerging-middle-class/

3 “e-Conomy SEA 2019: 4 Things to Know about Southeast Asia’s Internet Economy.” Temasek, October 3, 2019. https://www.temasek.com.sg/en/news-and-views/stories/future/southeast-asia-internet-economy-2019.html

4 “GDP Ranked by Country 2019.” World Population Review. http://worldpopulationreview.com/countries/countries-by-gdp/

5 “The World Bank in Malaysia.” The World Bank, March 2019. https://www.worldbank.org/en/country/malaysia/overview

6 “Philippines Cards & Payments: Opportunities and Risks to 2022.” GlobalData, February 2019. https://www.globaldata.com/store/report/ fs0204ci–payments-landscape-in-the-philippines-opportunities-and-risks-to-2022/

7 “5 Mobile Payment Apps in the Philippines That Will Help You Go Cashless.” Lorenzo Kyle Subido, Esquire, April 8, 2019. https://www.esquiremag.ph/money/industry/mobile-payment-apps-philippines-a00288-20190408-lfrm2

8 “(B2C) E-commerce Index for 2018.” United Nations Conference on Trade and Development, December 18, 2018. https://unctad.org/en/PublicationsLibrary/tn_unctad_ict4d12_en.pdf

9 “Singapore B2C eCommerce Market 2019.” yStats, August 2019. https://www.ystats.com/market-reports/singapore-b2c-e-commerce-mar ket-2019/

10 “Royal Thai Embassy.” https://thaiembdc.org/thailand-4-0-2/

11 “Smartphone Users, Vietnam 2019-2023.” eMarketer, April 2019. https://www.emarketer.com/forecasts/5a4fa066d8690c0c28d1f388

PHILIPPINES

Want to get in touch with Filipinos? Try online messaging. Once known as  the “texting capital of the world,” many  Filipinos now prefer online chats and  messenger communications as a result  of wider availability and increased  services. Despite still having one of the slowest internet connections in  the world, the country is one of the largest social media users globally. Cash  payments remain popular, however; it’s  used most frequently for point of sale  purchases (66%), and cash on delivery  is the preferred method for eCommerce  transactions (27%).

FAST STATS

2019 Sales %
from eCom

2%

2019 Sales %
from mCom

56%

2019 % eCom spend using Digital/Mobile Wallet

16%

2019 % POS spend using Digital/Mobile Wallet

5%

2019* – 2023**
eCom CAGR

16%

2019* – 2023**
POS CAGR

4%

2019* Internet
penetration

73%

2019* Mobile
penetration

69%

FORECAST

2023 %** sales from eCom

3%

2023 %** sales from mCom

63%

Top Tip

Cash remains the most popular consumer payment  instrument in the Philippines. This is due to the high  unbanked population, inadequate banking infrastructure,  limited public awareness of electronic payments, and low  acceptance of payment cards at merchant outlets. However,  with concentrated efforts by the Filipino government and  its central bank, the cash share of purchase is expected to  decline. Be prepared for an influx of mobile options in this  highly mobile-dependent country.

2019 eCom mix by payment method

  • Cash on Delivery 27% 27%
  • Credit Card 23% 23%
  • Digital/Mobile Wallet 16% 16%
  • Debit Card 14% 14%
  • Bank Transfer 10% 10%
  • Charge & Deferred Debit Card 4% 4%
  • Pre-paid 3% 3%
  • Other 2% 2%
  • PostPay 1% 1%

2019 Point of Sale mix by payment method

  • Cash 66% 66%
  • Credit Card 14% 14%
  • Debit Card 8% 8%
  • Pre-paid Card 8% 8%
  • Digital/Mobile Wallet 5% 5%

*Estimated **Forecasted
Numbers adjusted for rounding may impact totals.

2018 Card Breakdowns (eCom and POS)

POS and eCom Projected Growth

Popular alternative payment methods

SINGAPORE

One of only three surviving city-states  including Monaco and Vatican City,  Singapore is a relatively small country.  It has emerged, however, as one of the  world’s most prosperous, achieving  status as a financial center and model  for developing nations. Credit cards are  the preferred method of eCommerce  payment (56%), though cash remains  the most often used form at point of  sale (37%).

FAST STATS

2019 Sales %
from eCom

5%

2019 Sales %
from mCom

52%

2019 % eCom spend using Digital/Mobile Wallet

18%

2019 % POS spend using Digital/Mobile Wallet

7%

2019* – 2023**
eCom CAGR

8%

2019* – 2023**
POS CAGR

4%

2019* Internet
penetration

88%

2019* Mobile
penetration

84%

FORECAST

2023 %** sales from eCom

5%

2023 %** sales from mCom

62%

Top Tip

Singapore is well on its way to becoming a cashless society.  The local network, eNETS, is a popular choice. However,  mobile payments and mobile/digital wallets such as Apple  Pay, Samsung Pay, and PayPal have been the preferred  payment options. GrabPay, SE Asia’s largest super app, has  also started to gain traction with consumers and should be  enabled where possible. Singaporeans also enjoy loyalty  programs such as cash back and discounted promotions – you should consider offering these to entice more spend  through your business.

2019 eCom mix by payment method

  • Credit Card 56% 56%
  • Digital/Mobile Wallet 18% 18%
  • Bank Transfer 10% 10%
  • Debit Card 8% 8%
  • Charge & Deferred Debit Card 6% 6%
  • Pre-paid 1% 1%
  • Cash on Delivery 1% 1%

2019 Point of Sale mix by payment method

  • Cash 37% 37%
  • Credit Card 34% 34%
  • Debit Card 19% 19%
  • Digital/Mobile Wallet 7% 7%
  • Charge Card 2% 2%
  • Pre-paid 2% 2%

*Estimated **Forecasted
Numbers adjusted for rounding may impact totals.

2018 Card Breakdowns (eCom and POS)

POS and eCom Projected Growth

Popular alternative payment methods

INDIA

Bollywood is India’s Hindi film industry, formerly known as Bombay cinema. In terms of feature film output, it’s the world’s largest movie industry. Indians largely use their digital/mobile wallets when making eCom purchases (32%, the equivalent of the next three largest payment methods: credit, debit, and bank transfers). But when going to the movies or paying at the point of sale, India’s population pays predominately with cash (71%, more than all other payment methods combined).

FAST STATS

2019 Sales %
from eCom

6%

2019 Sales %
from mCom

50%

2019 % eCom spend using Digital/Mobile Wallet

32%

2019 % POS spend using Digital/Mobile Wallet

5%

2019* – 2023**
eCom CAGR

19%

2019* – 2023**
POS CAGR

11%

2019* Internet
penetration

41%

2019* Mobile
penetration

62%

FORECAST

2023 %** sales from eCom

7%

2023 %** sales from mCom

57%

Top Tip

While cash is still king, the effects of 2016’s controversial demonetization exercise linger. One outcome has been a move toward digital payments and a sharp increase in mobile wallets like Paytm and others offered by almost every Indian bank. It’s important to know regulatory requirements demand customer data be stored in India, and offering 3DS as part of the checkout flow can be valuable as banks prefer an extra layer of security be included in their cardholders’ checkout process.

2019 eCom mix by payment method

  • Digital/Mobile Wallet 32% 32%
  • Credit Card 17% 17%
  • Bank Transfer 16% 16%
  • Debit Card 16% 16%
  • Cash on Delivery 14% 14%
  • Charge & Deferred Debit Card 3% 3%
  • PrePay 1% 1%

2019 Point of Sale mix by payment method

  • Cash 71% 71%
  • Debit Card 12% 12%
  • Credit Card 12% 12%
  • Digital/Mobile Wallet 5% 5%
  • Charge Card 1% 1%

*Estimated **Forecasted
Numbers adjusted for rounding may impact totals.

2018 Card Breakdowns (eCom and POS)

POS and eCom Projected Growth

Popular alternative payment methods

CHINA

According to the Chinese calendar, the Year of the Rat begins on Jan. 25, 2020. Of the 12 Chinese Zodiac animals, the Rat is characterized by alertness, flexibility, and vitality – much like digital/ mobile wallets, the preferred payment method for Chinese consumers in both eCommerce transactions (71%) and point of sale purchases (48%). However, in both cases, China UnionPay is the dominant card brand, claiming 99% of the market share, making it the world’s largest card network

FAST STATS

2019 Sales %
from eCom

8%

2019 Sales %
from mCom

62%

2019 % eCom spend using Digital/Mobile Wallet

71%

2019 % POS spend using Digital/Mobile Wallet

48%

2019* – 2023**
eCom CAGR

13%

2019* – 2023**
POS CAGR

9%

2019* Internet
penetration

60%

2019* Mobile
penetration

73%

FORECAST

2023 %** sales from eCom

10%

2023 %** sales from mCom

66%