The meteoric rise of e-wallets in Asia and Europe

Tristan Chiappini, PPRO, has drawn an extensive map of the wallet landscape in Europe and Asia, aiming to help merchants and PSPs navigate this ever-changing space

That’s more than the total value of all European ecommerce, and it has huge implications for any payment provider or ecommerce merchant either operating in or planning to expand into Asia.

In Vietnam, for instance, consumers pay for 14% of all online transactions using e-wallets. That’s up from just 11% last year. And the interesting thing is that consumers are not, as you might expect, merely switching from cash payments to e-wallets.

In fact, the number of online transactions paid for using cash also increased year-on-year, from 17% in 2018 to 21% in 2019. Existing consumers are switching from cards, which dipped in market share from 37% in 2018 to 35% in 2019, at the same time new consumers (a younger generation and burgeoning middle class) are coming online and boosting the ranks of cash payers.

At the same time, e-wallets are spreading beyond online commerce to the real world. A recent report in Reuters describes how street vendors in Ho Chi Minh City, selling everything from soup to sandwiches, accept most of the country’s 28 e-wallets. That’s an impressive level of acceptance for small businesses. Consumers who’ll pay for a snack with an e-wallet are not likely to go through the effort of inputting card details to make an online purchase. They’ll simply find a merchant who accepts their e-wallet.

And Vietnam is not alone. The same trend is on display in other countries. In Indonesia, for instance, e-wallets were used in 17% of transactions in 2019 compared to 14% in 2018. In the Philippines, the figures are 8% in 2019 compared to 1% in 2018; in China, e-wallets are used in 56% of transactions this year compared to just 49% the year before.

How Europe fits into the picture

The ubiquity of e-wallets in Asia often takes Europeans by surprise. In Western and Central Europe, consumers use e-wallets in only 21% of all transactions. In some countries, that figure is significantly lower still. In Sweden, for instance, e-wallets are used in just 6% of all transactions.

And even in European markets where e-wallets are more common, ‘e-wallet’ is often just a synonym for ‘PayPal’. In the UK, for example, e-wallets are used in 25% of all online transactions. But in over 70% of those transactions, the e-wallet used was PayPal.

Again, this is not specific to the UK; it’s a trend across a fairly broad range of mature European ecommerce markets. In Germany, consumers used PayPal in 84% of all transactions paid for using an e-wallet. In both Belgium and France that figure is 79%, in Sweden 66% — and so on.

Merchants and payment processors moving from Europe — or other Western and Westernised markets — into Asia are often not prepared for how diverse the online payments market is in Asia. And this is particularly true for e-wallets. In Vietnam, for instance, PPRO supports twenty-one locally preferred payment methods — of which over half are e-wallets or mobile wallets of some kind.

The road ahead for merchants and payment service providers

A large part of the reason for the rise of e-wallets in Asia is the success of Chinese e-payment giants such as AliPay and WeChat Pay. With huge domestic user-bases — 700 million and 1 billion respectively — and budgets to match, these massive companies have the scale they need to experiment and optimise and break into new markets. AliPay, for instance, already has 200 million users outside China, mostly in other Asian countries.

But there are signs that the Chinese market leaders in the region are not going to have things all to themselves. In Indonesia, for instance, the home-grown ecommerce platform Tokopedia is currently in talks to raise USD 1.5 billion from investors. In October of 2018, Tokopedia announced that it was teaming up with the mobile-wallet developer Ovo — which already has over 110 million users — to allow its customers to pay with the Ovo e-wallet. With a potential USD 1.5 billion investment behind it, it seems safe to bet that the venture will attract many more Southeast Asian e-shoppers.

In almost every Asian market, there is at least one well-placed domestic challenger to market entrants from China, the US, and elsewhere. In India, for instance, the local e-wallet Paytm has over 350 million users. In Southeast Asia, Grab has 144 million users.

In addition, in some competition from leading US e-wallets, PayPal bought a 70% stake in China’s GoPay this October. It’s abundantly clear that e-wallets are set to become an even bigger part of the Asian digital payments mix than they are today.

While Western Europeans are likely to remain hooked on cards for some time – a payment method that many Asians have leapfrogged – e-wallets are catching up. As companies remove friction from the shopping experience, consumer loyalty to the e-wallet will strengthen and spread.

And it’s not just consumers who benefit from e-wallets: by accepting e-wallets, merchants can operate at lower costs, expand their reach to more customers, and increase conversion by making the checkout process as natural as checking a text message.

So, therefore, the question is: how fast can merchants enable their acceptance of e-wallets?

The editorial was originally published in the Cross-Border Payments and Commerce Report 2019 – 2020, which depicts the major trends driving growth in cross-border payments, cross-border commerce, and marketplaces.

About Tristan Chiappini

Tristan Chiappini is VP, Head of Partnerships, APAC at PPRO, a specialist for local payment methods (LPMs) and value added services, with offices worldwide. He joined the company in 2016 as Head of Account Management and is now taking over the responsibility for PPRO ́s business in the APAC region. Tristan has over 10 years of experience in the payments industry and with his excellent understanding of the Asian market, he will support PPRO´s approach to globalise the company and to create the world´s leading global platform for local payments.

About PPRO

PPRO enables integrated electronic payment processing on a global scale spanning the entire payments value chain from acquiring through processing, collection, and settlement. PPRO acts as a B2B payments hub, connecting PSPs and other merchant aggregators, such as acquirers and processors, with local payment methods.