The recently published paper Navigating Digital Payments, got me thinking about my own experience using digital wallets across different markets. As a consumer based in Singapore, my digital wallet usage is ubiquitous - there is almost nowhere I can’t use it. Importantly for the merchants, it’s a low-cost proposition that’s preferred to cash and cheaper than accepting the card. In the world-famous hawker centres of Singapore, I can buy my dinner for as little as a few dollars. Whilst traditionally these were cash only establishments, in 2020 the government launched the “Hawkers Go Digital” program with the aim of having all 13,000+ stallholders adopt low cost e-payment solutions.
As bricks and mortar retail environments emerge from their Covid-19 induced hibernation, it’s likely that they will notice some changes to the way customers seek to interact with them, particularly when it comes to payments.
Over the last two years, many more consumers became avid (and often forced) adopters of eCommerce and digital shopping solutions. As a result, it’s also likely that their payment preferences and experiences have changed to reflect a move away from cash, whether for health and safety purposes or to adopt a more convenient digital payment method they have adopted during their eCommerce experiences.
In a recent survey from Visa in the US, 47% of consumers said they would not shop at a store that doesn’t offer a contactless way to pay.
Beyond “tap to pay” solutions, the adoption of digital wallets and payments has accelerated even faster. And whilst they are now mainstream across many markets, businesses need to be conscious that these are utilised in a range of ways. As global borders re-open and travellers take to the skies again, retailers need to be cognisant of how payment expectations have evolved and how they best support consumers' payment preferences across the markets they operate in or where their customer base originates from.
In the context of digital wallets, one of the easier ways to understand this might be described as an “east vs west” differential.
East vs. west digital wallets.
In Western developed markets, most digital wallets evolved from card payment rails. PayPal, Apple Pay and Google Pay allowed customers to convert a card-initiated payment into a mobile type payment utilising the card account as the underlying payment method. Whilst solutions like Venmo and Cash App are growing, the vast majority of the estimated 700 million digital wallets across Europe, North America and Latin America [1] developed as evolution or extension of card payments.
Conversely, across Asian markets, wallets have evolved from a different sources. Often, they are strongly tied or integrated to the Super Apps available across these markets. The major wallets of Alipay and WeChat Pay dominate China, but across other Asian markets, companies like Gcash, Gojek, Grab, and Bukalapak now have multi-billion dollar valuations and enormous local market shares. Across Asia, these solutions have embedded themselves by providing a more holistic approach through their Super Apps, which provide a range of services accessible by consumers with a payment component embedded in this experience.
Importantly these “eastern” wallets have often developed as a store of value in the region, providing an attractive capacity for unbanked and underbanked populations to participate in the digital economy. In India, digital wallets are not necessarily stores of value, but provide consumers the ability to pass through payments via the UPI network that facilitates real-time payments. Compared to Europe and the US, the market across Asia is much bigger with some 1.8 billion digital wallets in use in the Asia Pacific region. [2]
There is active work by many of these wallet providers to make them just as accessible for their customers offshore as they are locally. Alipay has been cooperating with six European mobile wallet providers in a collaboration to promote interoperability in the use of QR codes for digital payments. There is also an increasing number of examples where local regulators are championing this interoperability of wallets between countries.
How does this affect retailers?
As a result of these different evolutions, the ways and expectations of how customers will utilise these services in a retail environment will also be different. Whilst the western wallet products will primarily operate via merchant terminal infrastructure, the eastern wallets are far more likely to operate via real time transfer or QR code payment activation. These payments can be activated in-store by a simple QR code scanned by the customer, a cheaper and less technologically dependent payment process. As a result, they can offer merchants a low cost of entry and attract a customer base that is much more familiar and confident with this method of payment.
Retailers that have or aspire to have a customer base in, or coming from, the east, should consider how these very popular and very trusted wallet products might be introduced into their existing payment options.
Bridging the East and West divide
Wordline is working closely with the likes of Alipay to extend usage of digital wallets globally. Whether they are in the east or the west, consumer are voting with their devices. Merchants and payment providers that recognise this, adapt and can narrow that east and west divide are best placed to attract this rapidly expanding customer base.
[1] [2] Mobile Wallets Report 2021 Boku commissioned report
