Payments are at the heart of commerce in any economy. The future of payments is changing rapidly, driven by a growing demand from customers who expect fast, seamless transactions as well as customized user experiences. With the globally burgeoning trend towards open banking, it means that banks no longer have the monopoly on customer account and financial information.
The growth of eCommerce is expected to surpass $4.6 trillion globally by 2022. The main driver of change is the blinding speed with which payments technology is developing in the Asia Pacific region. Emerging technology is top of mind across APAC, where digital leaders are competing head to head in a battle to optimize their operations and enhance customer experiences. Eight of the top ten countries to embrace mobile payments are in the Asia Pacific region. For example, in 2018 in China, 86% of subscribers used mobile payments in stores – and 37% in Vietnam, far exceeding the global average of 24%.
Smart phones and eWallets are influencing the payment processing landscape
The increasing penetration of smartphones and the widespread usage of the internet has been accelerating the adoption of mobile wallets for years. China and India currently account for more than 50% of the smartphone population across the globe and have universally adopted the use of eWallets. Offering both payment processing convenience and security, they are now at the forefront of payments change.
Through mobile applications, primarily led by key players Alipay and WeChat, eWallets integrate encryption, biometrics, tokenization, and device authentication, redefining the scope of what’s possible. As a result, many banks and payment processors in Asia are re-evaluating their business strategy, increasing investment in infrastructure and accelerating technology transformation in order to retain their customer base and market share.
APAC leading the cashless revolution
One of the more unique features of the Asia-Pacific payments landscape is that governments are actively pursuing policies that incentivise cashless payments. In 2016, India made 500 and 1000 rupee notes illegal, effectively removing 86% of the country’s physical cash. South Korea also plans to be cashless by the end of 2020.
Governments have yet to adopt such drastic policies in the UK, US and Canada, although in the UK the £30 limit on Apple Pay and Android Pay transactions has recently been lifted.
The outlook for eCommerce across Asia continues to be defined by incredible growth rates, with five-year compound annual growth projected at 21.3% in Malaysia, 20.2% in Vietnam, 18.6% in the Philippines and Indonesia.
The forces driving the creation of alternative payment methods and the growth of payments technology are consumers themselves. With Gen Zs representing 40% of global spending power, they’ve been born with technology, and have high expectations as consumers. They want payments in real time… instant transactions with a touch or swipe – or even a smile or selfie. They want a positive user experience and are quick to embrace anything technologically new.
How will Asian outbound tourism influence global payments?
The latest data from the China Tourism Academy shows that the outbound tourism market amounted to about 81.3 million trips in the first half of 2019, up 14% year-on-year. With continued economic growth, easier access to visas, more direct routes and other tourism facilities, outbound tourism has penetrated the lower-tier markets.
As a result, Chinese tourists are driving the development of mobile payment overseas and fuelling the growth of the mobile payment market for outbound tourism while taking the market to the next stage.
Will the rest of the world follow APAC in the payments space?
The Asia-Pacific payments landscape opens a window onto an increasingly fast-moving future. Physical currency will gradually disappear, payments will be automatic and effortless, and probably even deviceless altogether.
The developments in the Asia Pacific region are certainly influencing the payments space on a global scale, but what works in China, South Korea and other countries in APAC may not necessarily be embraced as quickly by the rest of the world.
At our recent APAC Summit in Sydney, we spoke to a number of our customers to get their insights on what will determine success as the payments space continues to evolve:
Analytics and insights: This came up again and again as a focus for organizations. Regardless of industry, size or business objectives, the requirement for access to deep data and analytics was universal. Data is revolutionizing the digital world and the emphasis is shifting to analysing that data, using it to better inform business decisions and more effectively plan for the future.
Security: As the volume of data grows, the security of that data is front of mind of all the biggest player in the payments space. As my colleague Greg Clancy said in an earlier blog, data breaches are highly destructive to a company and a major destroyer of consumer trust. No matter the size of an organization, data security is critical to survival.
Real-time visibility: The ability to see transaction volumes, decline levels, errors, thresholds and traffic in real-time is critical. Not only does this allow teams to quickly pinpoint and resolve issues, but it enables them to move from reactive to proactive management, pre-empting problems before they impact customers.
This will become increasingly important as the volume of digital payments increases and payment types further diversify, and organizations are tasked with expanding and adding further complexity to their environments to accommodate.
The payments landscape in Asia holds a lot of promise but that promise does not come without its challenges. With providers having to contend with worldwide changes and the rapid growth of technologies, to stay ahead of the game, payment transaction monitoring should be a priority for all payment processors.