In Asia-Pacific (APAC), digital wallets are gradually booming in popularity. By 2023, these apps and digital platforms are expected to become the preferred payment method for consumers in Hong Kong and India, a new whitepaper by payment solution provider HPS says.
Within the next two years, digital wallets usage will surpass card usage in the two nations, taking a 47% market share in Hong Kong and a 38% market share in India, the report says.
Payments Landscape in Key APAC Markets 1/2, Sources: HPS, IBS Intelligence (IBSi)
In 2019, cards were the preferred payment method in the two countries, representing 40% of transactions in Hong Kong and 31% of transactions in India, it says.
In Hong Kong, cards’ dominance is forecast to decline to 34% by 2023. In India, card usage will remain stable but the surge in digital wallet transactions will be at the detriment of cash transactions, which are projected to decrease from a 15% market share in 2019 to 9% in 2023.
In all major APAC nations, digital wallet usage is expected to increase. Between 2019 and 2023, their market share is set to increase by 8% points in Singapore, 7% points in Vietnam, 6% points in Indonesia and 4% points in Thailand. Only Malaysia will record unchanged digital wallet usage levels, while card transactions will pick up.
Payments Landscape in Key APAC Markets 1/2, Sources: HPS, IBS Intelligence (IBSi)
Globally, Southeast Asia is set to witness the fastest growth in mobile wallet adoption. London-based fintech company Boku estimates that the number of mobile wallets in use will grow 311% from 2020 to almost 440 million by 2025 across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
The rise of real-time payments
The emergence of real-time payment systems will further help push mobile wallet usage. In India, the Unified Payments Interface (UPI), an instant payment system, was launched in 2016, allowing for real-time fund transfers between bank accounts. Since the beginning of 2021, monthly transaction value has grown by close to 79% while the number of transactions has increased by more than 83%.
In Singapore, Fast and Secure Transfers (FAST) was launched in 2014 to allow retail and corporate customers of participating banks to transfer funds 24/7/365. In 2017, a second scheme called PayNow was launched to consumer, allowing for peer-to-peer (P2P) instant payments.
In the first ten months of 2020, the value of PayNow transactions by UOB customers grew 220% while the volume of PayNow transactions also grew 127%.
Thailand rolled out its real-time payment system PromptPay in 2017. The number of daily transactions made via the PromptPay platform currently averages 28 million, a considerable jump when considering the 2019 average of 7 million and the 2020 average of 14.5 million.
Malaysia launched its real-time payment network DuitNow in 2018, which allows users to transfer funds instantly using a mobile number or an ID number. In 2020, Malaysia recorded more than 69 million real-time payments, a surge of 864% compared to the 7 million of 2019.
Governments are now working to linkup their domestic payment systems to enable real-time cross border transactions. Singapore, for example, is linking its real-time payment system to that of Malaysia, India, Thailand and the Philippines.
Payment card innovations
Despite a boom in digital wallet adoption, cards will continue to remain relevant, an opportunity bigtechs and fintech players have been looking to tap into.
Apple launched in 2019 a credit card in partnership with Goldman Sachs and Mastercard; Google is partnering with existing banks and credit unions; Neat, a Hong Kong-based fintech, became a member of Visa network to issue its own Neat Visa card for small and medium-sized enterprises (SMEs); and Grab launched in 2019 the GrabPay Card, Asia’s first numberless payment card.
One particular trend that has emerged over the past year is virtual cards. Data from US expense management and business budgeting software Divvy show that virtual card transactions climbed to make up more than 50% of business card transactions in March 2020, up from less than 40% in January and February.
In South Africa, Standard Bank saw demand for virtual cards surge. In 2020, the number of virtual cards issued grew by more than 400%.
Credit Suisse forecasts virtual card payments to reach US$286 billion in volume in 2021, rising at a compound annual growth rate (CAGR) of 19% between 2017 and 2020.
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