Establishing trust and offering value can sustain growth in digital payments—whatever the market conditions, says this local-payments expert.
The COVID-19 pandemic has transformed the way we interact with one another, the way we buy goods and services, and it has also led to a drastic change in payment habits. For the first time, many consumers who have until now primarily purchased groceries and other essentials in-store are forced to turn to online merchants—which are themselves branching into delivery for the first time—or are insisting on digital payments as a more hygienic alternative to cash.
Coinciding with the change in payment habits has been a sustained push by countries in the APAC region to reduce the use of cash. These efforts include financial institutions in China quarantining and in some cases destroying banknotes collected by hospitals, wet markets, and buses to ensure the safety of cash transactions. Or the setting up of local government initiatives to distribute free digital coupons on mobile payment platforms such as Alipay and WeChat Pay to help stimulate domestic uptake of local digital payment methods.
In Singapore, the Monetary Authority of Singapore has identified the use of digital payments as a key public health strategy to support social distancing measures, mounting an ongoing campaign to promote the use of digital payment methods like PayNow, PayNow Corporate and SGQR over the coming months.
The MAS is also helping local SME retailers to change their business model and diversify their revenue streams.
The great digital shift
This comes as no surprise. At the beginning of the COVID-19 outbreak, the media was already predicting a shift toward digital, not only for payments but also for the way businesses work and how people connect with friends and family.
What is interesting, however, is the speed at which the population at large has adopted digital payment methods. According to Mastercard’s recent consumer poll, 91% of respondents in APAC said they were now using tap-and-go payments, with 51% swapping their regular card for one that offers contactless payments in February and March this year.
E-wallets have experienced a similar wave of growth, with popular e-wallets such as Maybank’s MAE and GrabPay seeing double the subscriber numbers and transaction volumes in Malaysia.
Behind this growth is the change in consumer behavior. Recent research from Ipsos indicates that consumers from 11 out of 12 APAC markets are purchasing products online. This highlights change, not just at a consumer or national level, but in more seismic regional shifts that could present a huge opportunity for merchants looking to expand in APAC, which was already an attractive target.
For those actively exploring the market, the largest increase in online purchases in APAC is in Vietnam (57%), followed by India (55%) and China (50%). In Singapore, data from Nielsen shows that 37% of consumers have increased their online shopping activities since the outbreak, with 76% of them indicating that they will not return to pre-outbreak online shopping levels. The statistics are clear. The time for online merchants to succeed in APAC has never been more opportune. But is this rapid growth really sustainable post-COVID-19?
Growing digital payments successfully
There is no doubt that we are at an inflection point when it comes to the adoption of digital payments. As people are allowed to return to the shops and malls it is unclear as to what extent hygiene concerns over the use of physical currency and cards will have on driving long-term behavioral change. But one thing is certain: payment behavior and the e-commerce landscape in APAC will evolve as merchants continue to innovate and create solutions to respond to the specific challenges across payment infrastructures and consumer preferences in the region.
A case in point can be made with the example of Japan. Long known as a tech-savvy nation, 93% of the Japanese have an internet connection—and are willing to spend their hard-earned income online. In 2018, the country registered the second-highest volume of B2C e-commerce transactions in APAC with US$147 billion spent online, and this figure continues to grow.
However, despite the high adoption of digital payments and further growth due to COVID-19, the country went into recession as a result of the pandemic, and its economy is expected to experience a record 21.5% GDP contraction this year. Numbers show that other countries are likely to follow. So, this poses the question: What will be the impact of the recession on consumer and payment trends?
From our perspective, the current economic downturn does not alter the fundamentals of the Japanese market. Japanese consumer spending has traditionally been a dependable prop for the economy, even when exports declined. What may happen is that Japanese consumers will look to online merchants they can trust, and to those that can offer them value during turbulent times.
E-commerce players can rise to this challenge by establishing trust with their consumers. The principles of establishing trust and offering value ring true as a way to sustain growth in digital payments—whatever the market. In Japan, Indonesia, and Malaysia, a lack of payment options has been cited as one of the main barriers to cross-border e-commerce trade. With over 450 significant local payment methods across the globe, it is crucial that merchants looking to succeed in a particular market understand payment local payment nuances.
When the dust from COVID-19 has settled, businesses that are able to offer customers a great experience will come out of the pandemic with a larger and more loyal customer base than those who neglect the user experience by failing to incorporate local payment methods into their e-commerce operations.
