The Evolution of Digital Payments in Asia
There can be little doubt that the SARS-COV-2 crisis has changed the way many of us live our lives – perhaps for good. Mask wearing has become a normal part of life all over the world (of course, Asian countries were ahead of the curve on this) and we’ve all become more wary about how we come into contact with surfaces and other people.
Even before the pandemic, cash payments were declining in popularity, but that trend has only accelerated in the wake of COVID-19. Many stores now request that customers pay using alternative methods where possible, as cash is a notorious vector for bacterial and viral transmission.
This is not to mention the increase in online shopping due to lockdowns and vulnerable people needing to shield from the virus. This has led to an increased desire among customers for digital and contactless payment options to make their shopping experiences as seamless and convenient as possible, whilst reducing the chances of spreading the coronavirus.
There has been a steady march towards digital in the Asia Pacific region for many years now, but recent research by MasterCard has suggested that this pattern has only been accelerated and cemented by the coronavirus pandemic.
30% of customers in Australia, 49% in India, 55% in China and 34% in Japan have all stated they plan to make more purchases online moving forwards, and 38% in Australia, 68% in India, 57% in China and 40% in Japan believe that the reduction in brick-and-mortar shopping will continue – even after the pandemic.
“Our shift to digital commerce is here to stay as people embrace the benefits of safety, security and convenience,” said Sandeep Malhotra, Executive Vice President, Products & Innovation, Asia Pacific, Mastercard. “Consumers now want on-demand products and services – whether it’s food delivery, groceries, fitness courses, telemedicine, conferencing, learning or entertainment. This demand and these expectations will continue to drive ecommerce long after COVID-19 subsides.”
Asia Pacific is ahead of the curve when it comes to embracing digital payments as well according to MasterCard, with 91% using tap and go payment options, compared to 79% worldwide. Around three quarters of global customers have stated that contactless payments are here to stay.
When we talk about friction in the world of commerce, we are talking about the factors which could give a customer cause to hesitate and provide them with an opportunity to exit from the purchase process.
Think about your own online shopping experiences for a moment. How many times have you filled a digital cart with goods, only to bail at a certain point in the checkout process? This is why many large ecommerce platforms such as Amazon and eBay have introduced one-click ordering on their apps. By reducing the number of steps necessary to completing a purchase, the chances of the customer not completing is likewise reduced.
Payments are one of the biggest causes of friction in the ecommerce world. The customer has to pause to find a payment card and enter the details, or be redirected to PayPal, or some other digital payment platform, log in, then be sent back to the original site to complete the purchase. These are all steps which can cause friction and lead to the customer abandoning the process and failing to complete the sale.
However, payments should be seen as an opportunity, rather than a source of friction. With the onslaught of new payment technologies, including e-wallets, mobile payment, contactless cards, and more, there are so many chances to create new and exciting customer experiences.
Rewards schemes are an obvious choice. With digital payment platforms becoming ever more ubiquitous, it becomes a matter of simplicity to seamlessly merge payments and rewards into one process. Reward schemes can be attached to digital payment platforms so, when the customer pays for their products, points are automatically added to their reward scheme – without the need to scan or even carry a separate card.
Another opportunity comes from the rise of m-commerce – shopping using smartphones or tablets. With mcommerce sales predicted to account for 44% of all ecommerce transactions by 2024, these technologies can be leveraged to remove friction from the sales process even further. With both Apple and Android both having their own proprietary e-wallet functionality – Apple Pay and Google Pay – we are seeing more and more ecommerce brands allowing customers to check out using these options.
Because a high proportion of Apple and Android mobile device users already have a payment option registered on their device, ecommerce brands can allow them to check out, simply by clicking a button – without needing to enter any new payment details or even register their details – almost completely eliminating friction from the process.
Data and Security
One side effect with the increased use of digital payment options is the greater volume of data which is generated and the security concerns which naturally walk hand in hand with it.
Data is a powerful marketing tool for brands to take advantage of and can be used to analyze shopping habits and craft bespoke product recommendations and offers for customers – especially when combined with rewards programs as discussed above. However, data science is a discipline all of its own and can provide a significant challenge to ecommerce brands which aren’t equipped for it.
“That transaction data has a lot of meaningful information to extract,” said Santosh Tripathy, Practice Leader, Digital Payments at SmartStream. “At the same time, you have to create infrastructure where you are storing this data securely, and you have to then mine this data to extract information.”
Increased data gathering also brings with it a sympathetic increase in security concerns. For years now the news has been full of stories of large scale and devastating data breaches which can leave customers vulnerable to fraudulent activity such as identity theft, and companies open to massive fines and litigation. When embarking on a digital payment strategy, businesses must therefore give equal weight to security concerns as they do to convenience and other factors.
Digital payments are here to stay, and the coronavirus crisis has only accelerated their proliferation. The Asia Pacific market has long been embracing these technologies and they are now beginning to spread across the world at an exponential rate.
As long as brand are mindful of the data and security concerns which come hand in hand with digital payments, there is no reason why they can’t leverage the convenience, opportunity, and reduced friction they facilitate.