The Asia Pacific region is at the forefront of the race towards a cashless world. Wirecard's Carine Low outlines four key trends reshaping the landscape that retailers need to track closely.
It is an exciting time for payment solutions in the Asia-Pacific (APAC) region. In the short span of five years, registered mobile money accounts in the APAC region increased almost ten times and makes up 44% of the total number of registered mobile money accounts in the world today.
This regional growth is not surprising, as it comes on the heels of an e-commerce boom led by China in the past decade. Online retail in Southeast Asia is forecast to reach US$53 billion by 2023 , from US$18.7 billion in 2018. Along with this growth, we have also seen a proliferation of digital payments solutions. Southeast Asia alone has at least 150 e-wallet licence holders, including by companies such as Grab, Gojek and Ovo.
This trend is set to grow as more initiatives encourage mobile payments across the region. PayNow in Singapore, Faster Payment System (FPS) in Hong Kong, PromptPay in Thailand and New Payments Platform (NPP) in Australia have made it possible for instantaneous fund transfers between individuals and merchants.
Looking ahead, here are the payment solutions you can expect to see more of in the next five years and how brands and marketers can leverage these trends to drive better engagement with a bigger audience.
1. International payments paving the way forward for cross-border commerce
According to Statista, cross-border purchases will account for more than 22% of global e-commerce. The role that digital payments play in simplifying and streamlining the payments process in cross-border commerce cannot be ignored.
With solutions like multi-currency prepaid travel cards, brands can offer customers and their employees the ease and security of making international payments without having to worry about fluctuating exchange rates and high foreign exchange fees. Traveling can now be less of a hassle with such globally accepted means of payment – available as a physical card and on smartphones.
Meanwhile, companies like leading Chinese travel payment company, YeePay, are partnering with global payment providers to expand its payments offering to provide payment to customers outside China, contributing to a potential transaction volume of more than EUR 17 billion.
Brands that want to grow their business beyond the domestic market need to ensure they are able to support different payment methods. According to Wirecard’s 2019 Global Shopping Survey, consumers in Singapore (78%), Hong Kong (80%) and Australia (82%) revealed that a lack of a familiar payment method would heavily influence their decision to order products from foreign websites.
Only by making the cross-border payment processes seamless, whether online at e-commerce stores or offline in physical shops, can businesses truly realize their growth potential with satisfied customers.
2. Biometric authentications allow for safer and more convenient transactions
Using biometrics to authenticate payments promises a more seamless experience for merchants and customers. The use of fingerprints, iris scanning, voice or facial recognition will free customers from the need to carry a smartphone or a wallet when making transactions.
These technologies are also developing rapidly. “Smile to Pay” from Alipay, which was first introduced in 2017 uses facial recognition to authorize payments. The company upgraded the service last year, to make it more accessible to merchants and customers. Now, it is not only cheaper but also more convenient to implement. This removes the barrier for smaller enterprises who were previously unable to adopt biometric payments due to costs or the lack of space for the infrastructure.
The use of biometrics will personalize the retail experience beyond just payments. Voice assistants, for example, will start to play a bigger part in the purchasing journey, with APAC already leading the way in the use of voice technology . A new report by Juniper Research found that by 2024, biometric authentication will be used to secure US$2.5 trillion worth of mobile payment transactions .
As the technology continues to improve, it would be almost impossible to fool biometric security systems, ensuring that transactions are more secure than ever before.
For consumers, the proliferation of mobile devices with facial or fingerprint recognition has made biometric authentication a ubiquitous feature. Brands will need to integrate this feature into their payments journey to keep up with consumers’ expectations for a seamless checkout that doesn’t require them to key in or store their credit card details.
3. Frictionless shopping across all channels
Digital payments will also encourage the development of integrated payment ecosystems and enable retailers to keep up with consumers’ demand for unified commerce. Despite the popularity of e-commerce, most consumers still prefer to shop in-store. To attract and retain customers, providing seamless checkout processes and payment methods is now a must, and an opportunity to engage with customers through high quality and differentiated experiences.
In fact, according to Wirecard’s Global Shopping Report 2019, 42% of Singaporean shoppers and half of Hong Kong shoppers are less likely to shop in a physical store if it did not offer ways to pay via their mobile phones.
In response, retailers are finding ways to integrate common mobile payment methods. In 2018, Singapore pioneered a unified Quick Response (QR) code, which encouraged merchants to adopt e-payments from over 30 digital wallets and acquirers without favouring any industry player. Other countries like Indonesia have also launched a similar ecosystem.
One reason for the boost in the popularity of QR code payment ecosystems in some countries is the lower cost of adoption and deployment compared to chip cards. QR codes often require merchants to do no more than print their unique code and download a mobile application.
However, the humble point-of-sales (POS) terminals remain important touchpoints. Wirecard’s report found that consumers in countries like Australia (66%), Hong Kong (69%) and Singapore (64%) prefer swiping their debit or credit cards when paying in-store. To enhance the experience, POS terminals need to serve as a unified platform that offers additional services such as tapping for loyalty rewards.
Once these ecosystems are implemented, further payment innovation in the region will be possible, depending on the adoption of data analytics, artificial intelligence and automation . Over time, we can expect to see more diverse payment options, and retailers must ensure that they are equipped with the payment capabilities to keep pace and cater to consumer preferences.
It is also vital for retailers to continuously adapt how they understand and connect with their customers across all channels to provide a personalized shopping experience. By relying on smart data to focus on customers and understand their needs and preferences, retailers can create hyper-personalized offerings to shoppers, from new product recommendations to targeted discounts.
4. Creating the digital currency of the future with blockchain
In this region, blockchain technology is slowly but surely being embraced. This new form of payment – and in some cases, a new currency – provides a means for financial inclusion and more transparent processes, given the rise of cross-border commerce. Industry players in the private and public sectors are beginning to come together to leverage the potential of blockchain to simplify interpersonal and cross-border transactions.
This will greatly benefit the APAC region, with its potential to minimize risk and fraud due to paperwork-based, technology-light bureaucracy and the confusion arising from the use of 14 different currencies in business processes.
The value of blockchain in streamlining cross-border payments cannot be underestimated. For example, cross-border payments powered by blockchain can revolutionize global trade in raw materials, allowing farmers to bypass unnecessary intermediaries, thus improving production and lowering costs .
The potential of blockchain technology to increase transparency, reduce costs between merchants and customers, and open new opportunities to help the unbanked is becoming increasingly apparent. Although still in a nascent stage, given the increasingly legitimacy of blockchain, it is definitely a technology that will transform the way we make payments in future.
A cashless future
The biggest payment mega trend in the APAC region is the movement towards a cashless world, supported by blockchain, digital wallets and instant payments.
We can also expect to see a rise in financial inclusion. This means that many who were previously unable to apply for credit facilities or even open bank accounts are now free to find alternative means to make payments.
Ultimately, the retail landscape will be shaped by these payment solutions and retailers need to be forward-thinking and ready to incorporate smart technologies into their processes to enhance the consumer experience and to stay ahead of the game.