FIS: Asia Pacific continues to set the pace in digital wallet
- Globally, especially in APAC, e-commerce payment preferences continue to shift away from cash and credit card and more towards digital wallet and buy now, pay later.
- Digital wallets made up almost half of e-commerce transaction value globally in 2021 whereas in APAC particularly, it accounts for more than half.
- Though accounting for only 0.6% as of last year, BNPL is projected to grow its transaction value share to 1.8% of regional e-commerce by 2025.
Years to come, we can expect buy now, pay later (BNPL) to be a juggernaut in payments. For now though, digital wallets are still reigning the global payment method, according to the recently published 2022 Global Payments Report by US financial technology company FIS. As expected, Asia Pacific (APAC) continues to set the pace when it comes to that payment method.
Globally, FIS said digital wallets make up almost half (48.6%) of e-commerce transaction value globally in 2021, valuing just over US$2.6 trillion. By 2025, wallets are projected to rise to 52.5% of transaction value. “APAC continues to set the pace in digital wallet use driven by the overwhelming popularity of Alipay and WeChat Pay,” the report indicated,
To be precise, in APAC, digital wallets represented 68.5% of regional e-commerce transaction value for the whole of 2021. That amount, as FIS forecasts, is projected to expand to over 72% of transaction value by 2025. In terms of countries, the report shows that digital wallets are the overwhelming choice of consumers in ChinA. Alipay and WeChat Pay alone account for nearly 83% of 2021 e-commerce transaction value for China.
Elsewhere within the region, digital wallets also lead the e-commerce payment method with India (45.4%), Indonesia (38.8%) and the Philippines (30.5%). Regional wallets including GCash, GrabPay, LINE Pay, OVO and Paytm are the contributing factors to a diverse and competitive payments ecosystem, FIS said.
The slow death of credit, debit cards?
Overall, FIS’ report shows that e-commerce payment preferences continue to shift away from cash and credit cards’ and more towards digital wallets and buy now, pay later (BNPL). Accounting for 21% in 2021, credit’s share of global e-com spend is projected to fall to 18.8% in 2025, though absolute value will rise to over US$1.56 trillion,” the report stated.
Debit on the other hand, is projected to fall less dramatically, from 13.2% of e-commerce transaction value in 2021 to 12.9% in 2025, with absolute value rising to over US$1.07 trillion. As for bank transfers, it only accounted for 7.4% of global e-commerce transaction value in 2021 and is projected to decline further to 6.2% by 2025.
In APAC however, credit and charge cards represented 12.8% of the region’s e-commerce transaction value in 2021 with a modest decline in share to 11% projected by 2025. “Credit card shares vary across the region as mature economies in Japan (58.3% of 2021 share), South Korea (56%) and Hong Kong (42.8%) continue to see strong use,” FIS said.
Then there’s China where credit’s share of transaction value is comparatively low at 4.1%. Credit card usage also lags in emerging economies of India (13.3%), Indonesia (10.2%) and Thailand (12.2%). “Debit cards accounted for 7.8% of regional e-com spend in 2021, with modest growth projected to 8.6% in 2025. Debit card transaction value shares range from a regional high of 15.3% in Australia to a low of 3% in Taiwan,” the report added.
Move away digital wallet, BNPL is about to reign
For starters, BNPL is proliferating globally, accounting for 2.9% of global e-commerce transaction value in 2021. By the next three years, FIS is projecting BNPL to grow to 5.3% share. Players that are leading globally include Klarna, Afterpay (acquired by Square) and PayPal, with challengers such as Zip, Sezzle and dozens of smaller local competitors emerging to compete for this fast-growing payment segment.
In APAC, though accounting for only 0.6% of e-commerce transaction value in 2021, BNPL is projected to grow its transaction value share to 1.8% (or US$78 billion) by 2025. “Tencent recently launched a BNPL feature within WeChat, and regional players Atome, Hoolah and Rely are seeing strong growth in Singapore,” FIS said.
- Apple’s market share peaked in China — with 1 in every 4 devices sold being iPhone
- 5G to become the leading technology in Southeast Asia by 2028
- Weavr sets up in Singapore as it aims to simplify embedded finance
- Asia United Bank partners Alipay+ for e-wallet cross-border payments
- Intelligent video will fast-track smart cities of the future, but comes with great responsibility