A global payments report has confirmed findings from PCM’s proprietary research and other sources that card use is now in slow decline in developed markets and is being replaced by the use of digital wallets and other P2P systems.
The Global Payments Report 2020 found that digital and mobile wallets already lead e-commerce payment preferences with 42% of spending in 2019 — up from 36% in 2018. China leads the world in digital and mobile wallet use online, with these methods accounting for a remarkable 71% of e-commerce spend, but adoption is increasing everywhere: 32% of e-commerce spend in India, 25% in Germany, and 24% in the US.
Mobile wallets are also transforming payments at the point of sale: over one billion shoppers will make a digital or mobile wallet payment in 2020.
Point of sale (POS) acceptance for digital and mobile wallets increased from 16% in 2018 to 22% in 2019. The world’s most advanced market for digital wallet use at POS is China—where mobile proximity payments via QR codes drove nearly half (48%) of point of sale payments in 2019.
China’s overwhelming adoption of mobile and digital wallets at the point of sale remains an outlier from the rest of the world, yet the global trend is clearly following China’s lead.
Digital and mobile wallets already account for 22% of global point of sale spend in 2019 and we project they will account for nearly a third (30%) of consumer payments within five years.
A new player among the pays
In the West, digital payments have been dominated by Big Tech firms such as Apple Pay, Google Pay, and Samsung Pay. However, those incumbents now face competition from another “pay” — Amazon Pay.
Amazon reported growth of 59% in active merchants and 103% in overall revenue from between 2017 and 2018, with all Amazon Pay markets globally showcasing double-digit growth.
WorldPay’s projection for growth in the market share of mobile and digital wallets comes at the expense of gradual declines in the physical use of credit cards, debit cards, and charge/ deferred debit. Cash on delivery, pre-paid cards, and PostPay services will continue to provide essential services in some markets yet WorldPay predicts we will likely see their overall share slowly decline through 2023.
The only other online payment method WorldPay predicts will gain market share is the “buy now/pay later” sector, typified by companies such as Affirm, Afterpay and Klarna. These services are forecast to account for nearly 3% of global e-commerce spend by 2023.
At the point of sale, PCM predict more transactions will be conducted digitally—driving further decline in cash use. Despite a wider trend of decline in card usage, PCM predicts there will be modest global gains for both credit cards and debit cards at the point of sale.
They will continue to represent nearly half of global point of sale spend in 2023 as consumers follow the ingrained habit of reaching for a card when making a purchase.
When it comes to specific regions, PCM notes credit and debit cards will continue and modestly extend their dominance in North America over the next five years – however, digital wallets will become the leading online payment method in North America, accounting for 37% of online spend by 2023.
As business moves online, with e-commerce growing around 30% faster than physical sales, the prevalence of digital payments in North America will continue to rise.
Latin America, with its continued emphasis on cash and persistently large unbanked population, is the only world region predicted to buck the trend towards digital payments.
Card use – especially through national schemes – is predicted to continue to grow in Latin America, and e-commerce will maintain its growth trajectory at almost twice the rate seen in the West, with a compound annual growth rate (CAGR) of around 11%.
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