Recently, Worldpay released its 2016 Global Payments Report, an annual compilation of data on payment preferences and trends in 30 countries. The following are several key trends that emerged from the report, poised to potentially pick up steam in 2017 and beyond.
Shift to Mobile
Mobile wallet adoption is picking up speed. In fact, mobile is already a close second payment method for many e-commerce superpowers, and is the most popular payment method in China, with 56 percent of market share. The Global Payments Report predicts mobile wallets are set to grow in market share by 7 percent, overtaking both credit and debit cards in the U.S. by 2020.
Though credit and debit cards still dominated more than 50 percent of the market in most countries last year, including the U.K., U.S., Brazil and Hong Kong, the Global Payments Report predicts a decline in global usage by 2020 — 4 percent for credit cards and 1 percent for debit cards.
Why now? Many factors in the report point to mobile wallet adoption potentially going beyond the tipping point in the next five years. For example, mobile wallets from Apple and Google are being extended into web browsers, enabling any online merchant to support mobile wallet payments. Another factor is that many consumers will make the switch to NFC-enabled phones as their previous models become outdated and they have no choice but to upgrade. Additionally, some merchants will replace their payment terminals in the coming years, leading to increased compatibility for mobile payments.
Fragmentation in Global Payments
Each country adopts different technology at a different rate. E-commerce in India, for example, is growing at 28 percent each year, and the country’s most popular payment method is bank transfers, whereas cards still dominate more than 50 percent of the market in many countries today, including the U.K. and U.S.
China, the U.S. and the U.K. will likely continue leading the charge in adopting new payment technology, but the growing fragmentation in global e-commerce will soon change the way consumers pay for online purchases. In North America and Europe, payment-specific companies such as PayPal are competing for market share with major technology companies such as Apple and Google, as well as hundreds of other offerings from smaller payment providers.
Given this fragmentation, more niche alternatives such as mobile wallets, bank transfers and prepaid cards have the potential to continue taking market share from more traditional payment options like credit cards. In fact, the Global Payments Report predicts adoption rates for alternative payment methods will grow slowly but steadily in the next five years, as options including bank transfers (2 percent) and prepaid cards (2 percent) begin to overtake credit and debit cards, particularly in emerging markets.
Increased access to the internet and the introduction of alternative payment methods has primed the world for 10.4 percent e-commerce growth by 2020, according to the Global Payments Report.
In addition to overall e-commerce growth, India is in a position to challenge China in the battle of e-commerce giants. While it currently accounts for only a small percentage of overall e-commerce spend, as more consumers in India gain internet access, their e-commerce spending is expected to increase. While roughly 350 million Indian citizens are already online, this number is expected to reach 600 million by 2020. This, coupled with a government digital finance initiative to support easier access to debit cards, will have India overtaking the U.S. as the second largest e-commerce market by 2034, according to the Global Payments Report.
Through a combination of technological change, rising income levels and favorable demographics, Southeast Asia is set to be the next center of explosive e-commerce growth after China. According to Worldpay’s projections, China’s share of the world online retail market will reach its peak in 2034, accounting for 50 percent of global spend.
As we continue to see significant differences in payment methods across the world and different markets adopting new technologies at varying rates, we see a key lesson for merchants. A fragmented payments landscape demands a tailored strategy for each market. By offering a mix of payment methods — including traditional credit and debit cards, prepaid cards, mobile payments and alternative payments — you can cater to the needs of diverse consumers both now and for years to come.
Casey Bullock is general manager, global e-commerce, North America at Worldpay, a payment processing company.