APAC e-commerce market booms thanks to digital wallets: survey

digital wallets
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Asia Pacific’s e-commerce market is outperforming Europe and North America as regional consumers embrace mobile apps, smartphones and digital wallets, according to new findings from GlobalData’s, Consumer Payments Insight Survey.

GlobalData estimates the Asia Pacific e-commerce market at $1.4 trillion in 2017, up from $535 billion in 2013, representing a CAGR of 27%. In comparison, the European and North American e-commerce sectors have registered respective CAGRs of 14% and 13%.

Ravi Sharma, analyst at GlobalData’s Payments Practice, said the e-commerce market in Asia Pacific is undergoing a period of rapid growth, driven by rising internet penetration, widespread smartphone adoption, a fast-growing middle-class population, and the increased availability of convenient payment solutions.

The bulk of online spending in Asia comes from China, which surpassed the US in 2014 to become the largest e-commerce market globally. China alone accounts for 75% of e-commerce sales by value among the 15 Asian markets covered in GlobalData’s E-commerce Analytics database. Japan and India are the second and third largest e-commerce markets accounting for 10% and 3% of e-commerce by overall transaction value respectively.

“More interesting than fast growth is Asian consumers’ advanced approach to e-commerce when compared to consumer behavior in most developed economies where consumers still use cards as the preferred payment method,” said Sharma. “Consumers in Asia prefer to use digital and mobile wallets – for example Alipay, Paytm, etc – when shopping online.”

According to GlobalData’s survey, 47% of total e-commerce transaction value in Asia Pacific was carried out using digital and mobile wallets in 2017. Payment cards, bank transfers, and cash/cheques account for 28%, 13%, and 11% respectively.

The growth of new payment methods in Asia Pacific largely comes at the expense of payment cards. The total share of digital and mobile wallets for e-commerce payments in Singapore doubled from 10% in 2013 to 22% in 2017, while debit and credit cards account for 42% – declining from 55% in 2013.

Similarly, in India, the share of digital and mobile wallets tripled from 7% to 29% during the same period.

The survey also found that comfort and security are increasingly important drivers of choice when it comes to digital and mobile wallets, which are perceived to be more secure than card payments.

Sharma said the rest of the world is likely to follow Asia as digital wallets offer a secure, quick and more convenient way to make online purchases.

To seize this opportunity, local and international payment service providers, banks and mobile operators have made significant investment in this space. While global players, including PayPal, Apple Pay, and Android Pay have forayed into Asian markets, so far they have struggled to compete with well-established local payment solutions. Alipay holds a 40% share in the Chinese e-commerce market, while Paytm holds a 10% share of the Indian e-com market. In contrast, Apple Pay, launched in Australia in November 2015, holds only a 2.7% share in that country’s e-commerce market (its strongest presence in the region), while Android Pay has a 0.4% share.

There is a strong preference towards using mobile technology for e-commerce transactions in Asia Pacific with 56% of e-commerce transactions in China carried out on smartphones and/or tablets – in contrast with 23% and 26% in the developed markets of the US, and the UK, respectively. The majority of these transactions in China are carried out in-app, with 70% of respondents preferring a mobile app when conducting online transactions, GlobalData says.

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