15 November 2017
The popularity of different payment methods across the world depends on a few factors, but namely a country’s economic status and history. Local payment types are often tied to historical traditions and in APAC this couldn’t be more evident.
The benefit of understanding local payment types is it offers a way towards understanding the various markets within the APAC region and how to go about attracting existing and new customers from different areas.
The local payment methods we see across the region give us unique insights into each country’s way of life, too, and the methods themselves hold a fair few surprises.
Let’s look in more detail at some current preferred payment methods across APAC’s diverse collection of countries, and emerging trends in the mobile and digital space.
Top local payment methods across APAC
Australia & New Zealand
- Credit and debit cards
According to a new study from PayPal (reported by CNBC), cash is still the dominant method of payment in Asia despite the many digital alternatives. PayPal’s study polled 4,000 consumers across India, Hong Kong, Singapore, Thailand, the Philippines and Indonesia, finding that 57% of people preferred cash for daily purchases. In Hong Kong and Singapore, Asia Pacific’s financial hubs, about 44% and 43% of people prefer cash respectively.
In other parts of Asia, cash also dominates – and not where you’d expect. Despite its bullet trains and high-tech environment, Japan calls cash its preferred payment method with Konbini payments (stored-value cards) coming in second place and Furikomi – bank transfers – in third place.
This isn’t due to a lack of options, though. In Japan, mobile wallets debuted as early as 2004 but the country is the perfect example of historical factors effecting the uptake of certain technologies. As a conservative country, there’s an underlying mindset that the uptake of credit cards will encourage consumers to spend more than their means. In addition to this, Japan might be worried about going cashless because of years and years of economic inertia, as well as concerns over virtual security. While virtual security might seem promising to other, just as developed countries, Japan’s incredibly low crime rate indicates that people feel comfortable carrying yen in their pockets.
China tells a different story: it sits at the cutting edge of digital payments. Shoppers have readily adopted and fully incorporated mobile payments into their lives. The likes of Alipay and WeChat Pay have seen massive uptake in recent years, propelling digital payments into the limelight in China at least.
But why is China looking different to the rest of Asia right now?
Firstly, Alipay and WeChat have made it convenient for consumers to purchase online. They’ve also added a layer of additional services that consumers find engaging, like gamification and the idea of sending gifts on the Chinese New Year — red envelopes — that have successfully engaged people with their systems.
Conversely, in Australia, 86% of our transactions are on credit and debit card and we’re leading the mobile adoption space. According to the ANZ Banking Group, who were the first bank to offer EFTPOS through Apple Pay in Australia, about a quarter of a million of their customers are using Apple Pay – succeeding uptake expectations. The number is predicted to rise, with the news that ANZ’s MasterCard customers will also be able to load credit cards into Apple’s digital wallet.
Cards are increasingly being used for lower-value transactions, too. This reflects our nation’s steady adoption of ‘tap and go’ which is gaining traction after the technology has shown to make serious inroads further field in a big way – primarily in the UK where Londoners in particular use the functionality in and around the city.
For Australians, the most common reason for using cash is when merchants do not accept alternative payment methods or have minimum spend requirements. In other words, cash isn’t our preferred payment method.
New Zealand consumers also prefer credit and debit card as their top payment method, with electronic credit transactions coming in second.
Where China leads, will the rest follow?
There’s no denying that China is not just APAC’s fastest digital adopter, but the world’s. A recent fintech adoption report from EY shows China at a staggering 69% digital adoption rate, and India – another big adopter – sitting at 52%, with the USA and South Africa sitting in the median at 33% and 34% respectively. Australia is at 37%.
The same EY report predicts that fintech adoption is expected to increase in all markets, with a future average adoption rate of 52%, and Singapore, South Africa and Mexico are tipped to be markets the next highest usage intent.
Back in APAC, Singapore is an interesting country to watch. Despite its high smartphone penetration, mobile payments have been slow to take off. Given Singapore’s focus on manpower and the shopping economy’s reliance on hawker stands and malls, going cashless would benefit productivity (as seen in China). Furthermore, another survey conducted by EY found that only 38 out of every 100 Singaporeans are comfortable paying on their phones, whereas 83 out of every 100 Chinese persons are more than comfortable!
There’s certainly competition to become Singapore’s version of China’s popular WeChat and Alipay – and there’s plenty of incentives for Singapore to adopt mobile payments. Currently, consumer spending in Southeast Asia is expected to reach USD$2 trillion by 2020 and there’s plenty of benefits for countries like Singapore, Indonesia, Thailand and the Philippines to start mining digital data. China has been mining their payments data and feeling the associated benefits of fintech for a long time. Chinese consumers are not afraid to shop online, making their market penetration easier for eCommerce businesses, and the reason for its booming eCommerce market is most likely associated to having more bricks and mortar stores going online – something that other businesses across Asia haven’t done yet.
Digital payments are becoming more popular
But digital adoption across Asia is on the up, and the Chinese eCommerce market offers a good model to follow. A recent study by anti-fraud organisation (and Bambora partner) ACI, shows that new payment methods are being embraced across Asia Pacific particularly by Gen Y consumers (24-34 year old’s). The study highlights the increased usage of Shared Economy services across Asia Pacific and while the continued dependence on cash is prevalent, it predicts that smartphone payments are likely to replace cash, as 62% of survey respondents showed high intent to use them in the near future. For this to happen, there would need to be great collaboration in the payment ecosystem between banks, telco and fintech companies as consumers diversify their payment behaviours.
Importantly, the intention (and the technology) is there. Watch this space.
Interested in hearing more about accepting local payments in APAC? Get in touch with one of the Bambora team today to chat it through.
About the author
Victoria Galloway is Bambora APAC's Technical Copywriter, and has been writing and producing in the payments and eCommerce space for a number of years, both in the UK and Australia.