The digital transformation sweeps across the Asia-Pacific region rapidly changing the payment preferences. Based on the info from the 2024 Fintech Industry Report: Overview and Growth Predictions by Transferty we will explore this landscape and discover the key payment trends in the APAC fintech ecosystem and the factors driving growth in each segment.
The Rise of Digital Wallets
APAC has emerged as a global leader in digital wallet adoption, with 70% of online transactions occurring through this method. In countries like China, digital wallets such as Alipay and WeChat Pay are handling approximately 82% of online transactions.
Digital wallets owe their success to a combination of factors, including high smartphone penetration, ease of use, and enhanced security. By integrating seamlessly with various digital ecosystems, these wallets support contactless payments, online shopping, peer-to-peer transfers, and even in-store purchases through QR codes. The convenience they offer has made them the preferred payment option for many consumers across the region.
In countries like Indonesia, India, and the Philippines, mobile wallets such as GCash, GrabPay, and Paytm have seen similar success. These markets, characterised by large unbanked populations, have been quick to embrace mobile wallets as a means to achieve financial inclusion. As of 2023, APAC accounted for over $7.8 trillion in digital wallet POS transactions, reflecting the immense market size and growth potential.
Real-Time Payment Systems
Real-time payment systems are changing the way transactions are conducted in APAC. Countries such as India and Thailand have developed robust RTP infrastructure, with India’s Unified Payments Interface. Launched in 2016, UPI has rapidly grown to become a critical component of India’s digital economy, facilitating seamless transactions between banks, businesses, and consumers. UPI processed billions of transactions in 2023, underscoring its popularity and utility. One key factor driving RTP adoption is cost-effectiveness. Unlike credit card transactions, which involve fees, RTP systems enable instant and low-cost transfers, making them particularly attractive to small businesses and consumers in markets where affordability is vital.
Credit Cards Spread
Despite the surge in digital wallets and real-time payments, credit cards remain a significant player in APAC. In Japan and South Korea, for instance, credit cards account for approximately 23% of online transactions. These mature markets value credit cards for their established infrastructure, strong consumer protections, and rewards programs.
In Singapore and Australia, credit cards continue to be the preferred payment method for high-value transactions. This preference is driven by the strong consumer loyalty to established financial institutions, coupled with incentives like cashback, travel miles, and purchase protections. However, the 2024 Fintech Industry Report projects that digital wallets will continue to chip away at credit card market share, especially as younger, tech-savvy consumers drive demand for digital-first solutions.
Debit Cards Usage
Debit card usage varies across APAC, with countries like India and Indonesia seeing significant adoption. Debit cards are particularly popular in these markets, where they constitute around 17% of online transactions. They offer a secure, straightforward alternative for consumers transitioning from cash to digital payments.
Debit cards also play an important role in financial inclusion, as they are often linked to government-backed bank accounts in countries like India. This linkage ensures that even those with limited financial literacy can access digital payment solutions, aiding in the region’s broader financial inclusion goals.
BNPL on the Rise
The Buy Now, Pay Later sector has gained traction across APAC, with countries like Australia, Singapore, and Malaysia seeing rapid adoption. The appeal of BNPL lies in its flexibility, allowing consumers to make purchases upfront and pay for them in instalments. While BNPL currently accounts for a smaller share of total transactions compared to digital wallets, it is growing rapidly. BNPL accounted for 4% of online spending across APAC in 2023, with strong growth projected through 2027.
QR Code Payments
QR code payments have become a staple of APAC’s payment ecosystem, especially in Southeast Asia. Countries like Thailand, Singapore, and Vietnam have adopted QR codes for both domestic and cross-border transactions. This interoperability supports a frictionless payment experience, which is essential for a region characterised by significant cross-border trade and travel.
QR code payments have been widely embraced by small businesses due to their low setup costs and ease of use. Additionally, governments in countries like Indonesia and the Philippines have introduced initiatives to promote QR code standardisation, further driving adoption.
Key Drivers of APAC’s Payment Landscape
Several factors contribute to the rapid adoption and diversification of payment methods in APAC:
- Smartphone Penetration
With high smartphone penetration rates, APAC consumers have easy access to digital payment solutions, which has accelerated the shift from cash to digital wallets.
- Government Initiatives
Many APAC governments are actively supporting digital payment adoption through regulatory frameworks, subsidies for digital infrastructure, and financial literacy campaigns.
- Consumer Preferences
Younger, tech-savvy consumers are driving demand for innovative payment methods that offer speed, convenience, and security. This demographic shift is particularly evident in countries like Indonesia and the Philippines, where mobile wallet adoption is highest among millennials and Gen Z.
- Financial Inclusion
Digital payment methods are expanding financial services access to the unbanked and underbanked. Mobile wallets and debit cards, in particular, have been instrumental in bridging the gap for millions across the region.
Conclusion
The APAC region’s payment landscape is poised for continued growth, with digital wallets, RTP systems, and QR codes expected to gain even greater traction. According to the Transferty Report, APAC will continue to lead in digital payment innovation, driven by a blend of consumer demand, technological advancements, and supportive government policies. Credit cards will likely retain a strong presence in mature markets, but digital wallets and real-time payments are expected to dominate in the coming years. As businesses and consumers alike embrace these digital solutions, the APAC region is setting a global example of how technology can transform financial transactions.
