While most online transactions in North America and Europe are handled by credit or debit cards, cash/checks, and bank transfers, alternative payment methods such as digital wallets and mobile are displacing traditional payments in the Asia-Pacific region (APAC).
GlobalData, a leading data and analytics company, forecasts the APAC eCommerce market to grow from $1.6 trillion in 2018 to $2.3 trillion in 2022.
According to the latest Consumer Payments Insight Survey by GlobalData, alternative payments grew from 49 percent in Q1 2017 to 51 percent of the total eCommerce transaction value in APAC in Q1 2018.
At the same time, payment cards, bank transfers, and cash/checks accounted for 28 percent, 15 percent, and 6 percent respectively.
China, Australia, and India
Chinese consumers lead the adoption of alternative payments in APAC, where alternative payment solutions accounted for 53% of the total eCommerce transaction value in Q1 2018.
Alipay remains the most popular payment tool overall with a 41 percent share, followed by WeChat Pay with 7.1 percent.
Tencent, which owns the Tenpay brand, introduced WeChat Pay to leverage the popularity of its social media app WeChat, which has a huge customer base of around one billion.
Similarly, alternative payment tools account for nearly one-third of the total eCommerce transaction value in Australia in Q1 2018, with PayPal being the preferred solution with a share of 15.9%.
In India, the major push towards electronic payments came from the government with the demonetization initiative implemented in November 2016 which displaced cash to a large extent in favor of alternative payments in 2017.
However, in India, the share of alternative solutions declined in 2018 partially as a result of the cash supply restoring to normalcy and the central bank’s regulation regarding stricter KYC (Know Your Customer) procedures for digital wallet users.
“Adoption of alternative payments in the APAC region has occurred well ahead of that in the West. Asia’s card infrastructure and payment behavior are not well entrenched and therefore alternative payment tools offer a welcome substitute to cash. Rising smartphone penetration coupled with a large unbanked population has also turned the region into a potential growth market for alternative payments.”
Ravi Sharma, Senior Payments Analyst at GlobalData
What it Means for North American and European Sellers
For most sellers in North America and Europe, PayPal is the simple way to try to gain sales in APAC countries. PayPal is actively trying to get a license to operate in China and it is also working to gain large access to the Indian subcontinent.
In other places, such as Australia, PayPal is widely accepted for online transactions and therefore is a no-brainer for Western sellers.
While there are some ways for Western sellers to accept local options such as AliPay or Paytm in China and India respectively, the setup process may not be that straightforward and may require international bank accounts.
It’s certainly worth to continue to look at these alternative payment methods, especially if they form partnerships in the West or expand their own operations to make it easier for North American and European sellers to sign up.
Absent from this report are digital currencies such as Bitcoin or Ethereum. Presumably, despite all the hype over digital currencies, they are not accounting for much in everyday transactions.
Have you looked at alternative payment solutions in the APAC region for your business? Head over to our Facebook Discussion Group or use the comments section below.