From instability to inflation, the only thing that’s constant nowadays is uncertainty. Take a look at what the outlook is for alternative payment methods in the years to come.
Cashless payments have been on the rise in recent years thanks to the COVID-19 pandemic, and because of this, consumers and merchants worldwide have begun changing accordingly.
Besides cards, alternative payment methods or APMs such as e-wallets and direct bank transfers are also getting into the mainstream. And Asia Pacific is one part of the world where APMs have taken off in a big way.
And while the uptake of BNPL schemes has been slow, these payment methods have gradually gained momentum as the retail sector struggles to stabilize itself.
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According to a 2021 study, 94% of residents in the APAC region have already adopted alternative payments, including e-wallets, cryptocurrencies, and QR payments. E-wallets are set to overtake cash and card payments in the e-commerce space.
With rising inflation and recession on the horizon, there's sure to be plenty of uncertainty in the near future. But first, let's take a look at:
Why Alternative Payments Have Taken Off
The internet stands alongside the wheel, vaccines, telephones, and the printing press as one of humanity's most important inventions. It enables people worldwide to remain in constant contact with one another.
The internet has also led to the rise of e-commerce with online shopping, making up 19.6% of global retail sales. This number is set to rise in the years to come as internet penetration grows worldwide.
So, what does all of this have to do with payment methods?
The answer is simple: payment forms the backbone of all commerce. Without the means to facilitate online payment, the entire online economy would fall apart.
While card payments have been around for quite some time, they are ill-suited to the e-commerce sector for reasons such as:
The rise of mCommerce: More consumers are choosing to shop on their mobile devices, which makes card payments ill-suited for such devices.
Security concerns: Scammers and cybercriminals have become increasingly sophisticated over the years. Thus more online shoppers are not comfortable revealing their financial details.
These factors are just some of the reasons why consumers favor the use of alternative payment systems over more traditional methods. For example, Malaysia's real-time payment system, DuitNow, allows customers to transfer funds directly into a merchant's account without ever accessing their debit card. All of which provide shoppers with a remarkable degree of convenience.
The same applies to physical, on-premise retail outlets where e-wallets are now widely accepted. A customer only needs to scan the QR code provided or display their own automatically generated barcode to make a payment. This is easily done on the e-wallet payment app with minimal fuss, which speeds up the checkout process and reduces customer stress.
Why Alternative Payment Methods Matter to The Economy
As we can see, alternative payment methods play a large part in facilitating online and offline payments. Through their use, merchants can smoothen out business friction and provide customers with more channels for payment, hence increasing overall revenues.
Alternative payment methods also provide unbanked communities with needed financial services that range from investments to insurance and even microfinancing. All of which will drive spending and economic growth in the long term.
5 Predictions for The Next 5 Years
1. Continued Shift Away From Cash Payments
Usage of cash has been continually decreasing since the outbreak of COVID. This change was mainly due to fears of viral infection via touch. Since then, customers have had rising demand for cashless payment solutions.
In Singapore, for example, most consumers have already shifted towards going 100% cashless by making payments with e-wallets and other alternative payment methods. As globalization spreads and internet penetration increases, we can expect to see more countries shift towards going cashless.
2. Wider Adoption of BNPL Schemes
Buy Now, Pay Later or BNPL is a form of microfinancing typically offered by fintech companies and e-wallets. As the name goes, these plans allow customers to defer their payment or spread it out over several installments.
BNPL plans provide customers with much-needed short-term liquidity due to the bleak economic outlook and rising inflation. All of which is one reason we're likely to see an increase in uptake of these arrangements.
3. Increased Penetration of E-Wallets
The combination of COVID and rising internet penetration has sped up the uptake of e-wallets and other alternative payment methods in many developing nations. Besides providing unbanked communities with vital financial services, APMs also allow these groups to access the larger global market.
Asia Pacific is one part of the world that has significantly benefited from the e-wallet revolution, with 69% of e-commerce payments in 2021 made by e-wallets. And with globalization on the uptake, it is also possible that merchants and customers alike in developed economies will also turn to e-wallets to process their payments.
4. A Push For Greater Security
As e-wallets become a part of daily life, hackers and scammers will naturally seek ways to take advantage of this. Whether it's scamming users or outright stealing e-wallet balances, users need to be aware of the risks posed by cybercriminals.
While most alternative payment methods are perfectly safe, there have been instances where e-wallets were hacked into and had sensitive data stolen.
Naturally, users will demand that service providers implement stricter security measures and new regulations from governments and various monetary authorities. Merchants may also have to comply with multiple know-your-customer and anti-money laundering procedures.
5. Possible Resistance Towards Cashless Payments
Despite the inroads made in the cashless payments sector, some segments of society may still reject going 100% cashless. A lack of trust and security concerns are the main reasons why some choose to continue paying with cash.
Others, meanwhile, fear government surveillance and the loss of privacy that comes with cashless payments. For this reason, adoption rates of cryptocurrencies such as Bitcoin and Ethereum will probably rise in the years to come as individuals turn to the world of decentralized finance.
Prepare For The Future With XanPay
Whether you're looking to offer additional payment channels or looking for a way to expand overseas, XanPay is here to help. We are a trusted alternative payments platform that has helped our partners break into new markets and open up new payment channels.
With XanPay, you can enjoy:
Attractive mid-market FX rates
Competitive domestic transactions fees
Seamless cross-border transactions
Easy integration with plug-ins like WooCommerce, OpenCart, Wordpress, and Magento
Interested in transforming your business? Then why not visit our website here to learn more about how XanPay is preparing you for the future.
If you'd like to learn more about alternative payment methods or fintech, check out the XanPay blog.