Global payment methods present “a complex landscape brimming with diversity,” reports Worldpay in its latest Global Payments Report.
The global payment processing group finds that alternative payment methods are rising to meet the needs of consumers online, led by eWallets and bank transfers. Although its “long reign of supremacy is nearing its end”, cash remains the leading payment method at point of sale (PoS).
Worldpay comments that the right mix of payment options “opens doors to increase consumer satisfaction”.
It projects a continued “meteoric rise” for e-commerce, to surpass $4.6 trillion globally by 2022, with alternatives to credit and debit cards now accounting for more than half of e-commerce transaction volume.
Over 36 countries, the reports finds over 140 online payment methods in use, with e-wallets at the forefront of payments change by offering seamless convenience. Online shopping demands equal measures of convenience and security and digital wallets deliver on both counts. Mobile applications integrate the act of payment into daily lifestyles and routines, while preloaded credentials speeds online checkout.
E-wallets do all of this safely with encryption, tokenisation, and device authentication providing extra layers of security. Worldpay expects continued growth in China and a surge of adoption in North America will see e-wallets become the leading e-commerce payment method globally within five years.
Bank transfers are also growing in popularity as an online payment method, helped by their convenience for consumers, lower costs of acceptance and fewer chargebacks for merchants, a regulatory push from Payment Services Directive (PSD2)/open banking mandates in Europe, and a rise of banked populations
The report concludes that predictions of a cashless future won’t be realised anytime soon; indeed, cash remains the most popular payment method at the PoS globally today.
However, cash usage is declining in every global region with even more dramatic shifts forecasted. Worldpay expects cash to be supplanted by debit cards as the leading PoS payment method in 2019, falling to fourth place in 2022 trailing debit cards, credit cards, and e-wallets, while traditional credit card and debit card use holds steady through 2022.
North America is corporate home to global innovators in payment technology, retail, and financial services, says the report. Its consumers demand the latest in secure and convenient payment methods. Yet progress towards newer technologies is tempered by mature technology infrastructures, habits, and preferences.
Credit cards remain the undisputed champion of consumer payments, both online and at the PoS. Consumers are heavily banked – the US Federal Reserve estimates the unbanked share of Americans at just 5% in 2017 – and debit cards remain a strong preference with 34% of spend at the PoS and 19% share online.
Despite many new payment options globally, PoS spend in North America remains dominated by cash, credit, and debit. The near-universal acceptance of card payments and the ingrained habits of generations have proven difficult to break. Cash remains formidable at the PoS, yet its use continues to drop. The ease and convenience of contactless payments is driving the decline of cash, as are alternatives such as e-wallets.
Projections see the e-commerce market growing at 9% and 10% annually through 2022, although concerns about fraud and the overall convenience mean that some consumers avoid online shopping.
Over the next five years, the report predicts the use of cash to drop by about 5% at the PoS, the majority of that spend migrating to e-wallets, which will more than double in PoS share by 2022. On the e-commerce side, e-wallet adoption is set to surge in North America and move towards the global average in the next five years.
Europe, the Middle East and Africa (EMEA) offer vast differences in economies, cultures, and politics within each country.
Payments at the PoS are split relatively equally among cash and card-based payments, with debit cards the far and away leader over credit cards.
However, debit cards are strongly preferred at the PoS by consumers in Denmark, the Netherlands, and Norway. Cash is king in the UAE and dominates in Nigeria but is receding from its once dominant position in most Western European countries.
E-commerce in EMEA paints an evenly distributed picture with debit cards, credit cards, e-wallets, and bank transfers all making their case. Bank transfers show remarkable strength and lead e-commerce payment share in countries as diverse as Germany and Nigeria, while e-wallets have become the leading payment option among Danish consumers.
Future payment innovation is poised to flourish under the European Union’s Second Payment Services Directive (PSD2), which updates the EU’s regulatory framework in an effort to boost competition and innovation in payment services.
Informed consent of data sharing combined with improved security and customer authentication aims to increase privacy, reduce fraud and provide more personalized consumer services. PSD2 went into effect in January 2018. The EU offers a test case for others, with regulatory bodies and payment industry leaders from other regions watching developments closely.
Over the next five years within e-commerce, the report expects e-wallets to maintain their top position and bank transfers to move into second place displacing credit and debit cards.
European consumers have a strong history of preference to bank-based payments as opposed to credit utilities. That trend is likely to accelerate and the disposition to non-cash payments to continue at the PoS, with debit cards surpassing cash as the most prevalent payment method in 2020.Further, PSD2 is likely to generate innovations at the PoS such as increased use of bank transfers.
The use of cash at the point of sale is projected to decline from 47% to 30% over the next five years, with debit cards and e-wallets capturing the majority of that spend.
Asian consumers demand and expect seamless ease and security in all aspects of their digital lives, most of all when it comes to shopping and payments.
Payment methods vary widely across the region, both between and within countries and across the spectrums of development from urban to rural. Companies operating in Asia thus face a complicated and demanding payment landscape.
The outlook for e-commerce continues to be defined by extraordinary rates of growth, with five-year compound annual growth rates projected at 21.3% in Malaysia, 20.2% in Vietnam, 18.6% in the Philippines and Indonesia.
The report notes that growth at the PoS is helping to redefine the contours of regional commerce. Taiwan’s PoS is set to grow at 10%, for example, trailing close behind China’s expected 11% growth.
China’s headline payments story remains the widespread adoption of digital wallets. Led by Alipay and WeChat Pay, app-based payments via mobile devices redefine the scope of the possible. Chinese consumers are choosing the seamless integration and trusted environment offered by these all-inclusive apps. E-wallet use is ubiquitous in China online, accounting for nearly two-thirds of e-commerce transactions.
Elsewhere in the region, the report predicts growth and dramatic shifts in payments in India. Home to the world’s second largest population that remains far from saturation in either internet access or mobile phone penetration, e-commerce growth in India is projected at 21.2% for the next five years.
Bank transfers lead the way online in Indonesia, Thailand, and Malaysia. Although cash on delivery only accounts for just over 4.5% of e-commerce spend regionally, it’s the leading payment method in the Philippines.
At the PoS, the report predicts project dramatic shifts from cash to e-wallets over the next five years with debit and credit cards maintaining current share. On the e-commerce side, continued global leadership in the adoption of e-wallets; led by China, is expected with e-wallets to account for two-thirds of regional payment volume by 2022.
Macroeconomic headwinds and political instability have constrained growth in recent years but are both easing, reviving hopes that the economic fertility of the region can be more fully realised.
Overall retail sales and especially e-commerce growth will far exceed the 2% growth estimates for the region’s economy. Worldpay estimates over $61 billion in transactional value for e-commerce in 2018 rising to over $94 billion in 2022.
Cash dominates at the PoS across Latin America, reflecting the comparably low rate of banked consumers. Close behind cash are credit cards that continue to lead electronic payments at thePoS.
The payments landscape for e-commerce is more complex and dynamic. Credit cards are the overwhelming choice for purchases online, accounting for 44.6% of e-commerce spend overall and even higher rates in certain verticals such as travel.
Beyond that, online spend is fragmented with debit cards, charge cards, e-wallets, and bank transfers competing for market share.
Installment based purchasing continues to be a defining characteristic; instalment payment agreements are especially popular for higher priced consumer goods such as appliances. Payment industry leaders join with local issuers to make this option practical by authorising the full transaction but settling it in instalments.
Latin America’s financial technology and e-commerce innovation includes Argentina based MercadoLibre, Latin America’s most popular digital platform. Argentina was home to pioneering e-commerce efforts and continues to offer opportunity online. A growing base of young, educated consumers, the highest ratio of mobile users in the region, help explain Argentina’s enviable 16% annual e-commerce growth rate.
Looking forward, the overwhelming dominance of cash is expected to wane. Cash will remain the most popular PoS payment method, but a significant drop in cash share through 2022 is expected. That spend will shift to credit cards, debit cards, and e-wallets, which will see a large increase in payment share. Within e-commerce, credit cards will continue to be strong, but will lose share to debit cards.
UK ‘not yet ready to go cashless’
An independent report predicts that within 15 years, cash will nonetheless account for only 10% of all payments.