The payments landscape in the Asia Pacific (APAC) region is rapidly changing due to the integration of advanced technologies, increasing use of alternative payment methods, and the rise of digital currencies.
A new analysis from Forrester examines this dynamic ecosystem, highlighting key trends and innovations that are reshaping the payments landscape.
Integration of cutting-edge technologies
The report highlights APAC’s innovative payment landscape, which has evolved from China’s QR code payments to the integration of AI and blockchain. The report specifically states that AI is revolutionizing payment processing and improving transaction speed, accuracy, security, customer experience, and fraud detection.
Visa, for example, has been using AI-based technologies for risk and fraud management since 1993. Today, the company produces hundreds of AI models that power more than 100 products. Similarly, companies like Klarna, a leader in buy now, pay later (BNPL), and Fiserv, a global fintech and payments company, use AI to deliver personalized shopping experiences, streamline payment processes, and enhance security.
Japan’s major banks Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group are currently piloting blockchain technology to enable instantaneous international payments, with the aim of commercial use in 2024, Nikkei reported on September 5, 2024. The system is expected to support corporate transactions, with consumer use also possible in the future.
The rise of alternative payment methods
The Forrester report highlights the growing importance of alternative payment methods beyond QR codes and digital wallets, noting that innovations such as biometric payments, buy now, pay later (BNPL) methods, and mobile payment solutions such as Apple Pay and Google Pay are becoming more common.
BNPL in particular is set to soar, growing from 1.6% of e-commerce payments in 2022 to 4.4% in 2023, according to GlobalData. By 2028, BNPL is expected to reach 7.7%, particularly in markets with limited access to credit, such as India.
Biometric payments, which use facial recognition or other biological characteristics for authentication, are also on the rise. In China, for example, biometric payments are already widely used, with services like Alipay offering facial recognition for payments since 2015.
Juniper Research forecasts that global biometric payments will grow by more than 100% from 2024 to 2028, and the mobile biometric secure payments market will reach $3 trillion by 2025.
APAC is leading the world in digital wallet adoption. According to a recent report from payment processing company Worldpay, 70% of online payments and 50% of in-store payments in APAC last year used digital wallets, the highest of any region. Total spending on digital wallets in the region is expected to reach nearly $10 trillion by 2023, driven primarily by China.
Digital Currency and Stablecoins
Finally, the Forrester report noted that stablecoins, digital currencies pegged to traditional assets such as the U.S. dollar, are gaining traction in the Asia-Pacific region.
In March 2024, Southeast Asia’s super app Grab partnered with payments company Triple-A to allow users to pay with cryptocurrencies including Bitcoin, Ether, StraitsX’s Singapore dollar-backed stablecoin XSGD, and Circle’s USDC stablecoin.
Global payments company Circle Internet Financial sees stablecoins as particularly promising in the Asia-Pacific region, where many people lack access to traditional banking services but rely on digital apps for financial transactions. The company claims the region is also ahead in digital asset adoption, accounting for 29% of digital currency value received in 2022, compared to 19% in North America and 22% in Western Europe.
As stablecoins grow in popularity, regulatory frameworks are being developed across the region.
In Singapore, the Monetary Authority of Singapore (MAS) regulates stablecoins through the Payment Services Act. In August 2023, the regulator proposed a framework for establishing MAS-regulated stablecoins based on existing rules. In Japan, stablecoin rules came into effect in June 2023. These rules are designed to strengthen supervision and ensure the stability and security of domestic stablecoins. Finally, in Hong Kong, the financial regulator plans to submit a stablecoin bill to the legislature later this year.
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