Conquering the World with Alternative Payments

alternative walletsAlternative payments around the world have tremendously grown in such a short span of time. Let’s find out what’s driving the evolution of payments.

In the past few years, alternative payments have grown at an average of 35% and it is anticipated that by 2017, alternative payment methods within domestic eCommerce will take over with a market share of 59% of online transactions. Drivers of this evolution comprises of eWallets, the digitalisation of banking, and mobile payments. Today, we’ll be assessing the trends in alternative payments that’s kicking the world by storm.

eWallets

Mobile networks have long envisioned the shining prospects of eWallets and it’s been anticipated that eWallet transactions are ready to reach a 41 per cent market share by 2017 with Alipay and PayPal as dominating the worldwide market.

In China, eWallets are largely preferred and accounts for 44 per cent of the market share while in the US, cards are still being favoured as the most popular payments method and eWallets on the rise of being the next significant payment form with PayPal leading the market share with 16.2 per cent.

Not wanting to be outdone, established card payment leaders such as Visa and MasterCard have made the leap onto the eWallet bandwagon.

Watch this video to see how it is transforming the world of digital payments.

Unveiled in 2013, MasterCard’s’ eWallet solution -MasterPass simplifies the way consumers shop with the perfect combination of security and convenience by introducing a checkout service that provides merchants a consistent way to accept electronic payments regardless of where the consumer’s location. Online shoppers have the privilege of utilizing a simple check-out process by eliminating the annoying requirement of entering long-winded shipment details and card information with every purchase.

Think about it, as more consumers ascend the “digital-lifestyle” ladder and constantly adopt newer and convenient shopping experiences, it’s only natural for leading card providers such as MasterCard and Visa to deliver payments solutions with agility and advanced security. These two factors are important for consumers especially when it helps in reducing the risk of exposing personal information over potentially unsafe networks and to not share direct details with merchants that have not gained their loyalty, for now at least.

Mobile Payments

Mobile payments through the use of smart phones and other mobile devices is one of the biggest revolutions in financial services. Consumers are using them for banking, online shopping and, increasingly, making purchases at the checkout.

According to PWC, the demand for mobile payments on a global scale includes new revenue opportunities with $20 billion in play, banks having an early lead with customer relationships and data and new business models and partnerships that will eventually help to drive adoption and usage.

The revenue opportunities include new fees from mobile spending as well as the conversion of small cash transactions to mobile payments and definitely new value-added services, such as mCommerce, mobile ads, mCoupons and virtual currencies. Although it’s important to also note that the risks that entail includes a loss of fees and revenue and the erosion of brand equity and customer loyalty for those that fall behind in the playing field of mobile payments.

From this perspective, the revenue stream from mobile payments may be seen as a double-edged sword. But really, it all depends on how much of an impact a merchant can make into the creation and fostering of customer loyalty with a nifty tool at hand.

Digitalisation of Banking

According to DBS – Singapore’s largest bank by assets, it stated that the Asian banking industry is on a “burning platform” of competition from mobile and internet companies and are required to embrace digital banking to ensure long-term survival.

So what would this then mean for bank branches? The truth is, it won’t go anywhere not at least for now especially when banks have complete assurance in knowing that their customers are fully adopting mobile payments and so, the closure of branches and roll-outs of better mobile and online banking services aren’t the only solution, well not just yet.

Consider this, banks inherently possess a competitive advantage in the digital world. They have a large customer base that supports a substantial amount of customer and transaction data with added capabilities to enable payments, security and financing. The synergy of these three are not only difficult to replicate but it takes a long time to build and develop as well.

In Asia, the demand for retail banking services are being driven by a rising middle class in markets such as Southeast Asia and India combined with the adoption of eCommerce technology such as mobile banking applications used by not only the young, but the tech-savvy crowd.

For example, Citigroup claimed to have more than 7.4 million digital banking clients in Asia and for the year ahead, Citi Philippines is ready to make a breakthrough in innovative digital payments through a partnership with Smart e-Money Inc. that leverages on the the combining purchasing power of its credit card and mobile technology.

In Singapore, the DBS Home Connect is a mobile application that assists home buyers in making informed decisions over purchasing their next home. The bank has also launched a mobile wallet earlier in May to allow customers to use their smartphones to make financial transactions as well. Through leveraging such digital tools, this allows banks to meet the shifting demands of customers today.

As the lines between industry sectors blur all around, financial services are consistently taking on a new meaning in the minds of consumers albeit very quickly.

To be a profitable sector, banks cannot simply rely on providing accounts and access to funds. The future of the sector will depend on its ability to provide services that help customers save and better manage money in their everyday lives.

The Asia Pacific region doesn’t exactly form a uniform payment market but with countries such as Japan, Australia, South Korea and Hong Kong that possess high-developed payment-related infrastructures, the expansion of mobile payments with a well-established payments and card systems is a clear indication of the growing possibilities of alternative payments.

Although the development of cards and mobile payments in China and India are still behind such established markets, these countries offer a strong potential in development. Both countries are among the world’s fastest growing smart card markets and it’s only a matter of time until for the adoption rates for alternative payments to be absorbed into their respective payments ecosystem.

To conclude, alternative payments are increasingly gaining traction with an unstoppable momentum but it’s definitely a prerequisite for merchants to understand the trend as well as the local preferences of their preferred choice of alternative payments if they want to successfully expand globally and maximize their transaction rates.

[Image: Isis]

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