E-Payments: Speeding Up, Firing Up Market Growth

Summary

• The use of cashless payment methods has proliferated over the past decade.
• The pandemic has stimulated payment apps and virtual credit cards (VCCs) growth.
• Singapore leads the transformation in the Asia Pacific region.
• The market will keep expanding as e-commerce and cryptocurrencies continue to flourish.

The fintech industry continues to prosper as the VCC and e-payment market expands. Thanks to the impact of the pandemic that opened doors for more online businesses. Now, the demand rises as almost everyone goes cashless. In the advent of the economic rebound, its growth prospects appear to be more auspicious. It is no wonder that it makes a viable business or investment option.

The Expansion of the Fintech Industry

Since the early 2010s, the demand for cards and e-payments has risen. Singapore has emerged as one of the top users of these payment methods. Cards and e-payments comprised almost 70% of transactions. It was next to the US and South Korea and higher than the global average of 66%. But from 2014 to 2016, the card and e-payment market slowed down.

A study sponsored by the Monetary Authority of Singapore (MAS) observed the trend. It confirmed that cash transactions increased again to 60%. Wet markets, retail stores, and other small shops drove this. These comprised 80% of the overall cash payments.

For the next three years, cashless payments dominated the global payment systems. Singapore took part in the cashless revolution, and cash payments slowed down again. For instance, Spenmo came at the right time, and more companies joined the bandwagon. The businesses accepting cashless payments rose from 48% in 2016 to 81% in 2019.

Likewise, Indonesia and Malaysia started to catch up with the market transformation. These were some of the largest cash-based economies in recent years. For this reason, over 60% of its population had no bank accounts. Meanwhile, 96% of the adult population never tried to buy using credit or debit cards.

Even so, it has seemed that cash domination would no longer persist for a longer period. In 2019, a larger part of the population in Indonesia started to use cards and e-payment apps. Cashless transactions exceeded 50%, and e-payment users reached over 2 billion. There will be more demand for these alternative payment schemes in a few years.

In 2017-2019, the whole fintech industry had uninterrupted growth. Global fintech revenues rose by 15% and reached €92 billion. It confirmed the growth in the Asia Pacific, comprising 42% of the global revenues. During the pandemic, the market size further expanded to 7.3 trillion.

Meanwhile, the volume of transactions from digital payments amounted to $5.2 trillion. It is no wonder that the actual global revenues exceeded previous estimations. The three major regions had an increasing revenue pattern. But, the Asia Pacific had the most visible market share growth.

For the next few years, global fintech revenues may reach €188 billion. The Asia Pacific is projected to speed up with a market share of over 50%. My 2021-2024 estimation using the Linear Trend Analysis adheres to the optimistic outlook. I used it to estimate the revenue distribution in 2021-2026.

Taken from Statista

Taken from Statista

Projected using the Linear Trend Analysis

The Contactless Payment Market in Asia Pacific Boomed During the Pandemic

VCCs and E-payment apps saw a massive influx of customers at the height of the pandemic with the increased demand for online transactions. The restrictions paved the way for further growth in e-commerce and SMEs. During the first quarter, cash deposits and withdrawals dropped by 11%. It was the highest rate of decline, as the average rate in 2017-2019 was about 5% only. It made VCCs and e-payment apps vital for market rebound and potential growth.

More so, about 100,000 customers in Singapore did online transactions for the first time. The massive increase came from the continued emergence of essential online stores. For instance, online groceries and food deliveries grew by 44% and 40%, respectively. Likewise, online spending on e-commerce shops rose by 36%. It led to 85% of businesses accepting cashless payments in 3Q and 4Q 2020. It could translate into higher revenues for card and e-payment providers.

Taken from Statista

Singapore's cash usage percentage plunged to 37% in 2020. It was lower than the estimated cash usage of 39%. The popularity of cashless transactions continues to spread across the region. They now appear a viable business and investment choice in the fintech industry. Growth may accelerate as some estimate VCC transactions to reach $6.8 billion in 2026.

Today, e-payment apps remain the top cashless payment option. Since 2020, these have overtaken the demand for cards in the Pacific. 46% of the population in the region is now using e-payment apps daily. In a more recent survey, 66% of the respondents used cashless payment methods. Meanwhile, 78% planned to be 100% reliant on e-payment apps for the next few years.

Likewise, other studies project a further increase in e-wallet users in 2025. In a survey, 74% of business owners in Southeast Asia are now open to cashless payments. The percentage was even higher in Singapore at over 80%. Moreso, 49% of the commercial bank customers in urban areas have digital payment apps. Hence, studies estimate that 84% of the population will have access to e-payments apps in 2025.

Potential Growth Catalysts

Other Untapped Potential in the Region

Indonesia may still be far behind Singapore. But its growth and development over the past few years have been impeccable. Now, bank penetration is only 48%, but the emergence of e-payment apps is turning the tide.

In 2020, cashless payments through mobile payment apps grew by 38.6%, reaching $13.95 billion. Given this, top local fintech companies, such as GoJek and Dana, continue to thrive today. International payment apps like PayPal and Google Pay benefit from it. Growth prospects are promising as projections show it will reach $18.47 billion.

Taken from Statista

Malaysia is also keeping up with the fast-paced transformation. But, cash transactions in 2020 remained high at almost 60%. Even so, this is an example of countries that the fintech industry may penetrate. The economy is rebounding, and the emerging ones show more growth potential.

Studies estimate that 84% of the population will have access to e-payments apps in 2025. In another survey, 60% of the population in the Asia Pacific are now using digital payment apps.

Taken from Statista

The industry can also tap the potential in the Middle East and Africa. In 2017-2020, revenues in Europe, the Middle East, and Africa (EMEA) grew from €19-23 billion. But, the market share has been in a consistent decrease from 24% to 18%. In other words, the industry is still expanding but slower than the other regions. If this trend continues, the market share may even lower at 15% in 2026, as estimated.

But, capital inflows can create more avenues to keep up with the global competition. Given the data, the industry can find many growth opportunities in the region. The recent development in certain countries like South Africa and Nigeria were promising. These emerging economies may continue to lead the growth in Africa. Also, the cryptocurrency market is expanding there, creating more demand.

Taken from Statista

Taken from Statista

The Continued Growth in the Cryptocurrency Market

The growth in the cryptocurrency market has advantages for VCCs and e-payments. Its promise of a decentralized financial system has not been realized yet, yet it drives the changes in the payment systems. Cryptocurrency transactions in different exchanges are done online, mostly with E-Payment apps and VCCs. Now, more forms of cryptocurrencies are circulating.

Its market size exceeded $2 trillion earlier this year. The substantial growth took place when Bitcoin (BTC) broke $60,000. Now, crypto prices remain in an uptrend, pushing the total market value to over $3 billion. Meanwhile, the YTD Blockchain solution spending is set at $6.6 billion. Given this, more cryptocurrencies may circulate for the following years.

For this reason, investments are viable as more companies gear towards crypto payments. This transformation is in line with the digital revolution. In Singapore, the government is proactive in supporting the crypto market. For example, it accepts crypto contracts like Ethereum as payments. That is why the country has become a cryptocurrency and cashless payment hub in the world.

E-Commerce Expansion

E-Commerce is a primary industry growth driver since payments are mostly online. Over the past decade, it had drastic revenue growth to over $500 billion. In 2020, its growth accelerated by 30%, exceeding 600 billion. This was due to more businesses and buyers going online. Now, the YTD e-commerce revenues for this year are $720 billion.

Amidst the continued digital revolution, e-commerce may keep expanding. Given this, the volume of online payments through VCCs and e-payment will rise. This will have a domino effect on transactions, and stimulate the market growth of the fintech industry in the following years.

Taken from IBISWorld

Capital Inflows

The ASEAN region proves to be a conducive place for the fintech and crypto market. It is no longer surprising that wire transfers, e-wallets, and VCCs are primarily used. Since more industries are becoming open to crypto transactions, e-payments flourish more. That is why fintech companies are competing amidst the fast-paced crypto market trend.

Now, the industry shows more promising growth prospects. With more capital inflows, the operating capacity of many companies is expanding. For example, Spenmo capitalized on growth through a $34-million Series A investment round. The raising of capital involved some companies like Alpha JWC and Operator Partners.

Given this, the company will increase its operating capacity in the region. It can help increase the volume of cashless transactions. More so, a more secure and efficient market will emerge in the following years. This milestone adheres to the optimistic view of the potential growth.

Key Takeaways

The fintech industry remains unstoppable, especially in APAC and the Americas. The increased capital inflow, can cater to more businesses and buyers. It will grow further and provide more income. But, there is a lot of untapped potential in emerging economies that companies must check. This can speed up their growth as more opportunities come their way. Surely, investments in the industry will flourish as the global economy rebounds.