The Asian payment landscape is undergoing a fascinating transformation, marked by exciting technological innovations, regulatory changes, and evolving consumer preferences. As we continue to see innovations in 2024, several key developments stand out, shaping the future of payments in a region with a total digital transaction value worth almost US$6 trillion.
Rise of Digital Wallets and Super Apps
How does Asia stand out compared to other regions? Digital wallets and super apps have become a dominant force in Asia. QRC Payments are prevalent in countries such as Vietnam, South Korea, India, China, Indonesia, Singapore, Malaysia, and Thailand. In 2023, China continued to lead all global markets in e-wallet adoption across shopping channels, representing an estimated 82% of e-commerce transaction value or nearly US$1.8 trillion.
Source: The Global Payments Report 2024, Worldpay, Mar 2024
Chinese companies like Alipay, WeChat Pay, and Malaysian GrabPay dominate the Singapore e-wallet market with a staggering 35.3% market share, but Indonesian GoPay, developed by Gojek, is also leading. In December, PayPal announced the acquisition of GoPay. PayPal is one of the few wallets with a truly global footprint.
These payment platforms offer a seamless blend of financial services, e-commerce, and everyday utilities, creating an integrated ecosystem that caters to a wide range of consumer needs. E-wallets are so prevalent in parts of Asia that tourists will be surprised to see how local beach vendors on the remotest Thai and Vietnamese islands offer their customers alternative payment options like PromptPay and MoMo. Mobile payment methods have proven revolutionary from the financial inclusion perspective for the unbanked. Now, let us explore some of Asia’s regions.
China’s Mobile Payment Users 2013 – 2023 (in millions)
Source: Statista 2024
China: Alipay and WeChat Pay continue to dominate, with millions of active users leveraging these platforms for everything from grocery shopping to utility payments. As of December 2023, around 954 million people used mobile payments in China. The Chinese government’s push towards a cashless society has further accelerated the adoption of these digital wallets. China’s two dominant mobile payment service providers, Alipay owner Ant Group and WeChat Pay operator Tencent Holdings, are enhancing operations to make it easier for foreign visitors without a Chinese bank account to pay with WeChat Pay and Alipay as locals by registering with their documented names.
India: The Unified Payment Interface (UPI) instant payment system is breaking records at home as it looks to go global, including possibly expanding to Japan. A PwC report estimated that UPI would see 1 billion daily transactions in 2027.PhonePe is India’s number one digital payment platform in the world’s most populated country, with 50% of the market share, followed by GooglePay and Paytm. PhonePe provides a distinctive “All-in-One Payments Mode” feature, allowing clients to make payments through multiple methods within a unified platform. Paytm boasts over 300 million users, capturing a market share of 14.7%. According to data from the National Payments Corporation of India (NPCI), the top three apps accounted for nearly 96% of all UPI transactions by value.
Source: INC42
Southeast Asia: GrabPay and GoPay have expanded their offering, which includes a suite of financial services, including insurance, lending, and investment products. Their super app model is gaining traction, providing users with a one-stop shop for various services. GoPay was developed in Indonesia, a country with a population of over 278 million people. GoPay is Indonesia’s most popular eWallet, followed by OVO, Dana, and ShopeePay. Mobile payments are the future in a country where mobile penetration has soared from 58.6% in 2020 to  GrabPay is Singapore’s dominant eWallet. Grab has generated 162% year-on-year revenue growth from its financial services provision. Surprisingly, Grab discontinued its GrabPay Card services on June 1, possibly because of the rise of GXBank, a Malaysian digital bank born from a joint venture between Grab and Singapore’s Singtel, which began operating last September.
Japan, Taiwan, and South Korea: The Japanese, South Korean, and Taiwanese e-commerce markets are still very much dominated by credit cards. Credit cards accounted for 56% of Japanese e-commerce transaction value and 34% of POS spending in 2023, combined with more than $820 billion. The use of PayPal is widespread, and cash still plays a vital role in e-commerce via codes paid for at Konbini (convenience) stores. E-wallets were used in 20% of all Japanese transactions in 2023, figures still way below adoption in China, India, Vietnam, and Indonesia.
Central Bank Digital Currencies (CBDCs)
Several Asian countries are at the forefront of exploring and implementing Central Bank Digital Currencies (CBDCs). These digital currencies, issued by central banks, aim to enhance the efficiency of payment systems and provide a secure, digital alternative to cash.
China: The People’s Bank of China (PBOC) has made significant strides with its digital yuan (e-CNY) project. Formally known as Digital Currency Electronic Payment (DCEP) and now called eCNY, China’s CBDC project is the most advanced in the Asia Pacific region. Extensive pilot programs have been conducted across various cities, and digital currency is used for transactions ranging from retail purchases to salary payments.
Hong Kong is leading the way in the wholesale CBDC sector, ranking first in PwC’s global wholesale CBDC index for 2023, with Thailand second and Singapore third. Currently, Hong Kong is engaged in several pilot projects, including mBridge, Ensemble, and Sela. The most technologically innovative is mBridge, which is exploring a multi-CBDC common platform for cross-border payments. Several commercial banks have already started using the mBridge platform to facilitate cross-border CBDC payments among participating jurisdictions. The platform supports real-time, peer-to-peer transactions and foreign exchange operations using the mBridge blockchain Ledger. This initiative has facilitated over 160 payment and foreign exchange transactions totaling around US$22 million.
Thailand and Hong Kong: The Bank of Thailand and the Hong Kong Monetary Authority have collaborated on a joint CBDC project, Project Inthanon-LionRock. This initiative aims to facilitate cross-border payments and reduce transaction costs.
India: India’s government believes a retail CBDC will foster financial inclusion. The central bank’s digital currency is called the e-rupee. It was devised as a digital alternative to physical cash and built using distributed-ledger technology. Reserve Bank of India (RBI) officials stated in July that 13 banks were participating in a retail CBDC pilot launched in late 2022.
Cross-Border Payment Innovations
Cross-border payments have historically been complex and expensive, but innovations in this area are making transactions faster, cheaper, and more transparent.
ASEAN Region: The ASEAN Payment Connectivity initiative seeks to link payment systems across member countries, promoting financial inclusion and economic integration. Countries like Thailand, Singapore, and Malaysia already work on interoperable QR code payments, enabling seamless transactions for travelers and businesses.
Blockchain and Cryptocurrencies: Blockchain technology is being leveraged to streamline cross-border payments. Companies like Ripple and Stellar partner with Asian financial institutions to facilitate real-time, low-cost international cryptocurrency transfers.
Regulatory Developments and Open Banking
Regulatory frameworks are evolving to keep pace with technological advancements and ensure consumer protection.
Open Banking: Countries like Japan, Singapore, and Hong Kong are pioneering open banking initiatives. By mandating banks to open their APIs to third-party providers, regulators aim to foster competition, innovation, and improved customer experiences. This shift enables fintech companies to offer personalized financial services and products, leveraging customer data (with consent) and mirroring the success of open banking in the EU.
India: The Reserve Bank of India (RBI) has introduced guidelines for payment aggregators and gateways to enhance the security and efficiency of digital transactions. The RBI’s move towards a comprehensive regulatory sandbox provides a controlled environment for fintech innovations.
Buy Now, Pay Later (BNPL)
According to this MasterCard Infographic, The Buy Now, Pay Later (BNPL) model has gained significant popularity across Asia, especially among younger consumers seeking flexible payment options.
China: According to a recent Market and Research Report, BNPL payments in China are expected to grow by 14.3% annually to reach US$136.63 billion in 2024. BNPL payment adoption is expected to grow steadily over the forecast period, recording a CAGR of 9.2% during 2024-2029. The BNPL gross merchandise value in China is set to increase from US$119.59 billion in 2023 to a spectacular US$212.28 billion by 2029.
Southeast Asia: In this region, 400 million people are still unbanked. BNPL pushes financial inclusion and is becoming very popular, with a projected market growth of US$33.6 billion by 2027. Companies like Atome, Hoolah, and Kredivo are expanding rapidly, offering interest-free installment plans for online and offline purchases. These services are particularly appealing to millennials and Gen Z consumers who prefer to manage their cash flow without incurring credit card debt.
Regional BNPL Players are:
- Atome, Shopback, and Pace in Singapore
- Akulaku, Kredivo and Indonana in Indonesia
- Reepay and Fundiin in Vietnam
- Plentina, Cashalo, and Tendopay in the Philippines
- Split and Pine Labs in Malaysia
India: BNPL platforms like pioneer ZestMoney (2015), Simpl, and LazyPay are witnessing robust growth, driven by the increasing adoption of e-commerce and digital payments. These services enhance consumer spending power and contribute to financial inclusion. According to PCMI, BNPL loans are projected to reach US$14.3 billion in India in 2023. Additionally, the GMV (Gross Merchandise Value) of the industry in the India market is expected to grow at a CAGR of 12% from 2023 to 2028, which would take the gross value of BNPL purchases in the country from US$11.6 billion in 2022 to an astounding US$25.4 billion by 2028.
Artificial Intelligence and Machine Learning
Artificial intelligence (AI) and machine learning (ML) are crucial in enhancing payment security, fraud detection, and personalized customer experiences.
AI-driven systems monitor real-time transactions, identifying and flagging suspicious activities. This proactive approach helps reduce fraud and enhance the overall security of payment ecosystems. This technology has led to a buzzing market of regulatory technology providers (Regtech) that help financial institutions manage complex risk, compliance, and KYC/AML processes.
ML algorithms analyze transaction data to offer personalized recommendations, optimize payment routes, and provide insights into spending patterns. This level of personalization is helping businesses better cater to their customer’s needs and preferences, improving the customer experience and loyalty.
Conclusion
The Asian payment business is at the forefront of global financial innovation, driven by a unique blend of technological advancements, regulatory support, and changing consumer behaviors. As digital wallets, CBDCs, cross-border solutions, and AI continue to reshape the digital payment business, Asia is set to create a more efficient, inclusive, and secure payment ecosystem. Businesses and consumers alike stand to benefit from these developments, marking a new era of financial empowerment and convenience in the region.
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This article was written by @SandeCopywriter on behalf of Segpay Europe.
