Real-time Digital Payments Fuels Growth Across APAC

Real-time Digital Payments Fuels Growth Across APAC

by July 4, 2023

The Asia Pacific (APAC) region is rapidly emerging as a stronghold for digital payments, underpinned by customer preferences for a multitude of customised payment journeys, including those for e-commerce purchases, at the point of sale (POS), and business-related transactions.

The most recently released Global Payments Report 2023 from Worldpay by FIS emphasises that any company keen on maintaining a competitive edge must thoroughly comprehend the payment methodologies favoured by their consumers. It also underlines that payment experiences differ significantly across different regions, thereby eliminating the possibility of a one-size-fits-all solution, and making each market uniquely interesting.

Digital Wallet Adoption in APAC

China currently holds the global lead in digital wallet adoption, but the rest of APAC is swiftly following suit and at least five countries in the region prefer e-wallets to make e-commerce payments. Concurrently, India and Southeast Asia are projected to witness the most robust e-commerce growth in APAC through 2026.

Adoption and Use of Digital Payments Surges in APAC: Worldpay

Source: GPR 2023 The Global Payments Report, Worldpay by FIS

This has resulted in buy now pay later (BNPL) schemes accounting for more than US$100 billion of APAC’s e-commerce transaction value in 2022. Digital wallets have seen their share of e-commerce transaction value more than double over the past five years in APAC, with further consistent growth expected in the coming years.

Real-time Digital Payments Fueling A2A and BNPL

Despite the accelerated decline of cash due to the proliferation of QR code digital identity and payments systems, the region is far from becoming a ‘cashless society’. Interestingly, APAC stands as a global leader in real-time digital payments, boosting account-to-account (A2A) transactions and cross-border commerce. Specifically, India’s Unified Payments Interface (UPI) is gaining momentum as a global leader in real-time payments.

Adoption and Use of Digital Payments Surges in APAC: Worldpay

Source: GPR 2023 The Global Payments Report, Worldpay by FIS

While global wallet leaders like Alipay, WeChat Pay, Paytm, Apple Pay, and PayPal are active throughout APAC, local wallets are beginning to dominate the digital payments market in several countries. These include GrabPay in Singapore, MoMo in Vietnam, GoPay in Indonesia, and GCash in the Philippines.

The APAC region’s low credit card penetration and high percentages of unbanked consumers have created an ideal environment for BNPL providers, according to Worldpay. Often, pay later firms leverage consumer data from their parent platforms to make more informed credit decisions, leading to BNPL schemes accounting for over US$100 billion of APAC’s e-commerce transaction value in 2022.

E-commerce Growth, Cash Decline in APAC

Furthermore, the region is poised to see robust e-commerce growth through 2026, with consumers showing a keen interest in alternative forms of credit. So while BNPL has been called into question in recent times due to questionable regulatory practices and purportedly poor credit behaviour from certain quarters, BNPL remains a viable option for making delayed digital payments on mobile app and e-commerce platforms across APAC.

Source: GPR 2023 The Global Payments Report, Worldpay by FIS

The Global Payments Report also pointed out that the use of cash in APAC is expected to halve between 2021 and 2026, from 16% to 8% of POS transaction value, due to the widespread adoption of mobile payments and QR codes. However, there remains a vast disparity in cash use across individual countries, with Thailand having the highest cash use (56% of 2022 POS transaction value) and Australia having the lowest (6% of 2022 POS transaction value).

Real-time and Interlinked Digital Payments in APAC

The APAC region is making considerable strides in the area of real-time digital payments. This progress is facilitated by cooperation among the central banks that developed them, with many of the region’s real-time payment schemes becoming increasingly interconnected.

In 2021, Singapore and Thailand inked a bilateral agreement enabling users in both nations to transfer funds using a mobile number.

In addition to this, five central banks comprising Bank Indonesia (BI), Bank Negara Malaysia (BNM), Bangko Sentral ng Pilipinas (BSP), Monetary Authority of Singapore (MAS), and Bank of Thailand (BOT) have signed a memorandum of understanding to strengthen and enhance cooperation on payment connectivity to support faster, cheaper, more transparent and inclusive cross-border, real-time payments.

Source: GPR 2023 The Global Payments Report, Worldpay by FIS

The Global Payments Report 2023 highlighted India’s leading digital payments platform UPI as contributing significantly to this growth, driving a remarkable increase in the transaction value share of A2A transactions and digital wallets in the Indian subcontinent. UPI, which operates on open banking principles, provides an easy, secure, and free method for consumers in India to transfer funds between bank accounts.

The system utilises single-click, two-factor authentication and tokenised payments, ensuring consumer details remain confidential. This versatile platform allows UPI transactions through almost every bank in India and provides multiple payment options at checkout.

These real-time, instant digital payment linkages are growing across APAC. UPI has linked with Singapore’s PayNow system, and PayNow in turn has also linked with Malaysia’s DuitNow and PromptPay in Thailand. Indonesia, Malaysia and Thailand have linked their QR code payment systems, and many more tie-ups like this are anticipated region-wide to support both cross-border commerce as well as collaboration between aligned countries.