Voice of the Industry

A financial revolution in your pocket – are local payment methods making Visa and Mastercard less relevant?

Wednesday 15 May 2024 10:39 CET | Editor: Estera Sava | Voice of the industry

Adam Lee, Chief Product Officer at Boku, offers insights into local payment methods (LPMs) and how they challenge Visa and Mastercard.


We are seeing change in the payment landscape at a greater pace than ever before. Long gone are the days when the only way to pay online was to share the 16 digits printed on your credit card. Instead, the mobile phone has broken the stranglehold of cards and brought more ways to pay than ever before.

Furthermore, younger generations have grown up with a mobile device that facilitates nearly every digital interaction, reducing analogue artefacts like paper books and vinyl records into nostalgic curiosities. This generation has no attachment to the Visa/Mastercard logos that have long powered all our ecommerce payments, freely trying any popular payment method they see trending instead.

Add to the mix an ever-more-connected world where social media has facilitated an increasingly borderless culture, and you can see how newly formed payment habits popularised in Asia can so easily spread worldwide.

These new challengers to Visa/Mastercard are made possible largely through the democratising effect of the mobile phone, welcoming an explosion of local and regional payment innovations that have resulted in a growing category of payments – LPMs. The earliest form of LPM was direct carrier billing (DCB) which allowed wireless carriers to facilitate payments through SIM cards, turning airtime into digital cash and monthly invoices into microcredit. However, the newfound ubiquity of smartphones has ushered in a massive wave of local fintechs and banks that are introducing their proprietary brand of payments through mobile wallets and mobile banking apps. Free to compete directly with Visa/Mastercard, these new LPMs promise more convenience, value, and security, making the payment landscape more dynamic and exciting than ever before.

Consumer behaviour and how it affects payment trends

Boku recently commissioned extensive research from Juniper Research that analysed data from 37 major global markets and 10,500 ecommerce customers to understand the payments trends across the globe.

The most striking output is that credit card transactions online are falling dramatically – from 21% of all ecommerce by value in 2022 to a forecast of just 11% in 2028. In contrast, A2A payments (real-time bank transfers) will be the fastest-growing LPM for ecommerce, forecast to grow from 8% (2023) to 18% of transaction volumes by 2028. Globally, LPMs will represent 53% of all ecommerce transactions by volume in 2028.

These findings show that legacy card-centric payment systems are failing to keep pace with the needs of rapidly developing markets. We have already seen Visa/Mastercard lose relevance in the two most populous countries: China and India. China easily leapfrogged cards via Alipay and WeChat Pay, while India did the same with UPI. It shouldn’t be surprising that installing an app and scanning a QR code will see faster adoption than mailing out cards and leasing card terminals, and that mobile ecommerce will naturally favour mobile-native payment methods. Not to mention the obvious preference that national governments will have for supporting local payment solutions over foreign ones. The acceleration of this trend is best observed in Brazil, where Pix has already become the fastest-growing new payment method in the world, adopted by 160 million in less than four years.

But even in markets where consumers have little appetite for giving up their cards, local payments prove they don’t need to replace cards to grow. With local payments being so easy to activate and store (it’s just an app!), they can be used in tandem with cards, growing their share of checkout as consumers switch between multiple payment methods – gradually steering their payment preferences to whichever payment offers the best value or experience. This is evident when seeing how many merchants across Asia, particularly in card-heavy markets like Japan, South Korea, Taiwan, and Singapore, routinely accept payments from cards and apps. This hybrid approach offers a real-world preview of how local payments will eventually penetrate places like the US and Europe.

We can already see LPMs catching on in a variety of Western settings. In Poland, almost everyone uses their phone to pay by BLIK; in Italy, many customers scan QR codes to pay. Even in the US, more and more point-of-sale terminals display digital QR codes next to NFC readers.

Of course, LPMs aren’t just good for consumers – they are helping merchants reach more customers, convert more sales, and prevent fraud. The benefits of accepting LPMs are higher today than ever, making them an essential part of any ecommerce growth strategy.

If you want to learn more about how LPMs are reshaping the way the world pays online – take a moment to read Boku’s report, ‘2024 Global Ecommerce Report: The Changing World of Payments’.

About Adam Lee

Adam has served as Boku’s Chief Product Officer since 2012. As head of product, Adam has directed various new product innovations related to contactless payments, instant payments, card-linked offers, text-to-pay, direct carrier billing, carrier bundling, mobile e-wallets, and mobile identity.



About Boku

Boku helps global businesses localise their payment options so their customers can pay how they want, using everything from mobile wallets to instant account-to-account payments (instant bank transfers). Its network includes over 300 LPMs, reaching 7.5 billion consumer payment accounts in over 70 countries. Boku enables the world’s biggest brands to grow their business in every corner of the globe.

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Keywords: payments , paytech, mobile payments, local payment method, LPM, QR code, ecommerce, digitalisation, fintech, e-wallet, merchants, POS
Categories: Payments & Commerce
Companies: Boku
Countries: World
This article is part of category

Payments & Commerce


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