What everybody ought to know about the size of the ecommerce payments market – part I

The article delineates what drives growth when it comes to the ecommerce payments space, with the end goal of providing a concise overview of the main regional developments

Today’s payments and commerce ecosystem, impacted by technology, innovation, regulation, and regional developments, is constantly changing and getting more complex than ever before. In this article, we will look into what drives growth when it comes to the ecommerce payments space and we will present the size of this market, with the end goal of providing a concise overview of the main regional developments and specificities. 

The growth of the ecommerce payments market 

The ecommerce market has grown steadily for years, with continuous further growth expected. According to Statista, in 2019 the retail ecommerce sales worldwide totalled USD 3.53 trillion, and they are expected to reach USD 6.54 trillion in 2022. Moreover, as online shopping keeps on gaining in popularity and as the range of devices with internet connections available to online shoppers has diversified, Statista forecasts that in 2021 over 2.14 billion people worldwide will buy goods and services online – up from 1.66 billion global digital buyers in 2016. The preferred device for placing orders has remained the desktop PC, but mobile purchases are catching up. Currently, two-thirds of the world’s unbanked citizens have access to a mobile phone, and mobile ecommerce sales worldwide are forecasted to total USD 3.56 trillion by 2021. 

How is the ecommerce payments ecosystem changing? 

In the past decades, multiple payment methods started to emerge in order to cater for the shoppers’ needs in different verticals. According to Worldpay’s Global Payments Report 2020, in 2019 the preferred global ecommerce payment method was the digital/mobile wallet, with 41.8%, followed by credit card with 24.2% and debit card with 10.6%. The report predicts that the share held by digital/mobile wallets will increase by 2023 to 52.2%, while the shares of the following two payment methods will decrease to 18.8% (credit card) and 8.8% (debit card). In this context, in Europe, Strong Customer Authentication as an intrinsic part of PSD2's agenda intends to enhance the security of online payments and reduce payment fraud, in order to protect the consumer by adding an extra layer of security – and the main challenge is implementing these requirements while also offering a smooth, frictionless user experience. 

Getting more people access to payments is on the front burner, and some of the key drivers shaping the ecommerce payments market are technological development, changing customer behaviour, financial inclusion, regulation, and innovation. It is fascinating to understand what drives innovation in this industry, which are the reasons behind the expansive growth of the payments market, what is currently happening in different regions around the world, and how the emergence of the super apps that have payment as a key functionality might influence this market in the following years. 

Versatility is the key feature that all the super apps have in common, and that is one of the reasons why they are part of their users’ everyday lives. Whether we are talking about WeChat, Alipay, Grab, or Go-Jek, these apps provide a variety of services (messaging, shopping, booking, ride-sharing, and more) via one sign-in and one user experience. Other key features of the super apps are the fact that they provide payment services as well (relying on their reach, but also their reputation to consolidate trust among customers), offer invisible payments, and enable customers to make transactions in a smooth manner, via just one app. And companies continuously try to find new ways in which to enrich the customer experience, all with one goal in mind: data. Super apps are not present just in China and Southeast Asia; the West is also showing signs of movement in a similar direction – however, the pace is a bit slower here, mainly due to regulatory constraints. 

According to the Global Payments Report 2020, China has become the largest consumer market worldwide, and the company projects that it will occupy this position through 2022 – followed by the US and the UK. In terms of growth rate, J.P. Morgan argues that the markets worldwide that will enjoy 20%+ growth rates by 2021 for the B2C ecommerce market are Indonesia (34.6% and an ecommerce market size of USD 13.6 billion), India (26.5% and an ecommerce market size of USD 36.5 billion), and Malaysia (24.0% and an ecommerce market size of USD 4.0 billion) – closely followed by Vietnam (18.9%), Mexico (12.6%), and Thailand (12.5%). 

Asia–Pacific, galvanising the world of payments 

With all the new technologies and market participants, the increasing complexity of the payments’ regulation, the adoption of contactless tech, mobile payments, and the latest innovations in the payments landscape, disruption and growth characterise this space. Simply put, the adoption of digital payments is influencing our lives and reshaping societies around the world, by redefining commerce, bringing convenience, and providing a sense of security. And it seems as if the countries that understood this are benefiting from it. 

The Asia–Pacific region remains the hotspot of the ecommerce market. Here, millions of new consumers start buying online every year – not only in the developed markets, such as Japan, Singapore, or Australia, but also in emerging markets, such as Vietnam or Malaysia –, making this region the centre of the global ecommerce payments market. 

Considering the major developments in China’s retail payments, it comes as no surprise that the emergence of giant ecosystem players, such as the super apps WeChat Pay or Alipay, has boosted the growth of digital payments (especially via mobile phone) in the country. However, if one looks deeper into this region that registered a major growth rate, India most certainly stands out. With a population of approximately 1.3 billion (the second largest population in the world after China), the age distribution balance in India is leaning in favour of the younger age bracket. 

According to J.P. Morgan’s ‘2019 Global Payments Trends Report – India Country Insights’, India also catches the eye for its high number of app downloads, which grew by 165% between 2016 and 2018, leading to completed ecommerce sales. J.P. Morgan further reports that shopping apps in particular registered a major growth as well, and mobile commerce became a preferred ecommerce method. 

The National Payments Corporation of India (NPCI) has played a major part in this scheme. It launched the Unified Payments Interface (UPI) in 2016, supporting innovation and financial inclusion, while also encouraging inhabitants to use digital payments. According to NPCI, in 2020 there are 144 banks live on UPI, and users can pay via this system at many online merchants, whenever UPI is displayed as a payment option. The Reserve Bank of India also supported this initiative, further driving consumer adoption – by adjudging that payments made via UPI would be free of charge for the first few years, by inviting banks to be a part of this system, and by supporting the interested merchants with request to pay, in-app, and QR payments. That is one of the reasons why India has registered great progress over a short period by transforming its payments infrastructure and providing a streamlined user experience. 

The second part of the article continues the overview of the main regional developments and specificities, focusing on Latin America, Europe, North America, Africa and the Middle East. You can find it here.

This editorial is also featured in our Who's Who in Payments 2020 – Complete Overview of Key Payment Providers, a report presenting a comprehensive overview of the key solution providers in the payments space, as well as educational insights into the size of the market and the development of the payments ecosystem. 

About Raluca Constantinescu 

Passionately curious, Raluca is fascinated by the way in which technology and innovation impact our lives, and she is always keen on discovering the latest trends in the payments industry. After graduating in Foreign Languages and Literature, Raluca developed a genuine passion for editorial activities, having an extensive background in editing and publishing.