Digitally empowered customers, digital-savvy regulators, buoyant digital platforms, and digitally transforming banks are four key catalysts to boosting digital payment adoption in Asia Pacific (AP).
As the COVID-19 epidemic rages and is turning the world contactless, our clients in financial services and retail are asking whether this will boost the adoption of digital payments. During the crisis, we believe that digital payment usage will rise due to increased online shopping. Whether hygiene concerns about the use of physical currency and cards will play a role or not is less clear. The Forrester Analytics Consumer Technographics® Asia Pacific financial services surveys later this year will reveal if this crisis has driven a meaningful and sustained change in customer behaviors. But one thing is sure: COVID-19 will not change the payment behaviors of unbanked or underbanked people and those who don’t own smartphones, which is a nonnegligible part of the AP population. While COVID-19’s impact on payment behaviors is still unclear, a perfect storm had been brewing long before the crisis broke out. Our research found that four key catalysts are driving adoption of digital retail payments in the region:
- Digitally empowered customers. Consumers in AP are increasingly digital-savvy and willing to experiment. They rely on personal devices and integrate the digital and physical worlds to create the best experiences for themselves. Forrester surveys indicate that varying but often substantial percentages of consumers in AP are Progressive Pioneers — consumers who proactively embrace digital innovation, including digital retail payments.
- Digital-savvy regulators. Digital payment is a key building block to build a digital economy. Regulators in AP take three kinds of approaches to creating these. First: Introduce regulations to support digital payments; in 2018, Japan introduced a “cashless plan,” aiming to double the cashless payment rate (to 40%) by 2025. Second: Build the payments infrastructure; India created the Unified Payments Interface, a national digital payments infrastructure. Third: Enforce rules to change consumer behavior; in 2016, India withdrew all high-denomination banknotes from circulation, forcing people to adopt digital payments.
- Buoyant digital platforms. AP is home to some of the most successful digital platforms. In China, Alibaba and Tencent each deliver digital retail payments to more than a billion consumers across the globe. Ride-sharing platforms like Grab and DiDi nurture customers’ digital payment habits with steep discounts. The fact that these digital platforms cover more lifestyle needs and enable related transactions is also a massive growth driver.
- Digitally transforming banks. Retail banks drive digital retail payments usage to generate streams of customer data. This helps them offer personalized services to improve customer experiences, increase revenue, and innovate in adjacent industries. Banks also incentivize digital retail payments from the merchant side. In Hong Kong, Hang Seng Bank launched One Collect, an all-in-one point-of-service terminal for retailers to collect payments via a variety of methods, including digital wallets.
While adoption has risen significantly over the past two years, significant hurdles remain, and local characteristics such as consumer behaviors, payment ecosystems, and financial regulations make this market a very diverse one. For further information on digital payment challenges, the digital retail payment landscape in individual markets, and recommendations to banks and fintechs, read the report, “The State Of Digital Retail Payments In Asia Pacific,” which analyzes six Asia Pacific markets: Australia, mainland China, Hong Kong, India, Japan, and South Korea.