With a push from COVID-19, contactless is now the dominant mode for point-of-sale (POS) payments — over 90% in some countries. Many consumers no longer carry cash.
The coming contest is between different contactless payment methods, and will be fought across both POS and e-commerce.
Driving change in digital payments
Digital payments via e-wallets are in the minority globally but growing fast. Companies building a super-app ecosystem often include their own e-wallet offerings such as WeChat and AliPay in China, Grab and GoTo in Southeast Asia, Careem in the Middle East, and Rappi and Mercado Libre in Latin America. In some regions such as Southeast Asia they are already more common than physical card payments and set to dominate POS overall. They will further gain from antitrust cases forcing Apple to open up near-field communications (NFC) ‘tap and pay’ to all iPhone apps.
Non-NFC methods to convey payment details such as QR code and phone number also work equally well online or at POS, even without merchant terminals.
In 2023 and beyond, I expect these real-time payment rails will extend across borders
Often these new payment journeys are championed by national payment rails. The newest are mobile-first and use QR codes by default. It's reported 72% of countries now have their own real-time payments (RTP) schemes. India’s Unified Payments Interface is universal, and the rate of adoption is only increasing for new schemes. Brazil’s Pix reached over 110m users (67% of adults) in just 15 months.
Real-time cross-border payments today are rare, via bilateral links such as Singapore’s PayNow and each of Thailand, Malaysia, India, and the Philippines. However, multilateral agreements are coming. ASEAN central bank governors have signed an agreement for a true cross-border system using QR codes, and the European Union is pushing Eurozone banks to offer 24/7 instant payments. The Bank for International Settlements (BIS) has published technical documents for a bridge (Nexus) that could work between all national payment systems.
For banks and merchants, this emerging contest means a growing number of payment options to choose from. Payments are increasingly built into wallet and banking apps on mobile, and more complex than a simple card offering. The payment options you offer to customers are now a differentiator; understanding the underlying technology and the payment preferences of your target customers is vital.
This is an expanded version of our contribution to the Mambu Partner Predictions 2023 report.