In Asia-Pacific (APAC), the payment landscape is rapidly evolving, driven by the integration of advanced technologies, growing use of alternative payment methods and the rise of digital currencies.
A new analysis by Forrester explores this dynamic ecosystem, highlighting the key trends and innovations that are reshaping the payment landscape.
Integrating cutting-edge technologies
The report emphasizes APAC’s innovative payment landscape, which has evolved from QR code payments in China to the integration of AI and blockchain. AI, in particular, is transforming payment processing, enhancing transaction speed, accuracy, security, customer experience, and fraud detection, the report says.
For example, Visa has been using AI-based technology for risk and fraud management since 1993. Today, the firm has several hundred AI models in production that power over 100 products. Similarly, companies like Klarna, a buy now, pay later (BNPL) leader, and Fiserv, a global fintech and payments company, employ AI to offer personalized shopping experiences, streamline payment processes, and enhance security.
In Japan, megabanks Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group, are currently trialing blockchain technology to enable instant international payments, aiming for commercial use in 2024, Nikkei reported on September 05, 2024. The system is expected to support corporate transactions with the possibility of consumer usage in the future.
The rise of alternative payment methods
The Forrester report also highlights the growing prominence of alternative payment methods beyond just QR codes and digital wallets, noting that innovations such as biometric payments, buy now, pay later (BNPL) schemes, and mobile payment solutions like Apple Pay and Google Pay are becoming increasingly prevalent.
BNPL, in particular, has surged, rising from accounting for 1.6% of e-commerce payments in 2022 to 4.4% in 2023, according to GlobalData. By 2028, BNPL is projected to reach 7.7% , especially in markets with limited access to credit like India.
Biometric payments, which use facial recognition or other biological characteristics for authentication, are also on the rise. In China, for example, biometric payments are already widely used, with services like Alipay offering facial recognition for payments since 2015.
Juniper Research forecasts global biometric payments to grow over 100% between 2024 and 2028, and reach US$3 trillion in mobile, biometric-secured payments by 2025.
APAC leads the world in digital wallet adoption. Last year, 70% of online payments and 50% of in-store payments in APAC used digital wallets, the highest among all the regions, according to the latest report by payments processing firm Worldpay. Total spending in the region for digital wallets amounted to almost US$10 trillion in 2023, led mostly by China.
Digital currencies and stablecoins
Finally, the Forrester report notes that stablecoins, which are digital currencies pegged to traditional assets like the US dollar, are gaining momentum in APAC.
In March 2024, Southeast Asia’s super-app Grab teamed up with payments firm Triple-A to allow users to make payments via cryptocurrencies including bitcoin, ether, StraitsX’s Singapore dollar-backed stablecoin XSGD, and Circle’s USDC stablecoin.
Global payments firm Circle Internet Financial believes that stablecoins are especially promising in APAC, where many people lack access to traditional banking but rely on digital apps for financial transactions. The company claims that the region is also ahead of the curve in digital asset adoption, accounting for 29% of digital currency value received in 2022, compared with 19% in North America and 22% in Western Europe.
As stablecoins grow in popularity, regulatory frameworks are being developed across the region.
In Singapore, the Monetary Authority of Singapore (MAS) regulates stablecoins through the Payment Services Act. In August 2023, the regulator built on existing rules and proposed a framework to establish a MAS-regulated stablecoin. In Japan, stablecoin rules came into effect in June 2023. These rules are designed to enhance oversight and ensure the stability and security of stablecoins in the country. Finally, in Hong Kong, financial regulators plan to present a stablecoin bill to the Legislative Council later this year.
Featured image credit: edited from freepik
