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Digital wallets are the fastest growing payment method in Asia-Pacific (APAC), accounting for 70% of online payments and 50% of in-store payments, according to Worldpay. In major commerce markets like China, by 2027 86% of e-commerce and 79% of in-store sales will be transacted using digital wallets.
For merchants located in or expanding into Asia-Pacific, digital wallets are going to be a key area of revenue growth. But the digital wallet landscape in APAC is dynamic and rapidly evolving, and it’s important to understand who the key players are and today’s consumer usage trends.
Understanding digital wallets
Digital wallets, also known as e-wallets, are software-based systems or apps that store the user’s payment data and allow them to purchase goods and services, transfer money, or pay bills from their phone without a physical credit or debit card.
When a digital wallet user wants to make a payment, they simply scan, tap or swipe their phone and the payment is sent to the payment processor, either directly or through a payment gateway or payment orchestration platform.
Digital wallets offer several key benefits:
- Convenience - Digital wallets eliminate the need for carrying a physical wallet or card; users can simply pull out their phone and transact.
- Security - Digital wallets limit the risk of a user’s personal or financial information being stolen. Additionally, digital wallet transactions are encrypted - some with tokenization - which masks a user’s payment data in the event of a data breach of fraud attack.
- Access - Digital wallets don’t require an account at a bank with a physical branch. This gives unbanked and underbanked communities greater access to financial services and promotes financial inclusion.
Digital wallet trends in APAC
The adoption of digital wallets in the APAC region has been swift, largely due to the increased accessibility of smartphones and the internet. In areas like Southeast Asia, where nearly 70% of the population is unbanked or underbanked, digital wallets have become an integral part of daily life, allowing consumers to access financial products and services like never before.
Additionally, the decline of cash usage during the COVID-19 pandemic, only accelerated digital wallet usage across Asia. Thanks to the growth of mobile wallet adoption, there has been a proliferation of new digital wallet apps and services in the last few years.
The rise of Super Apps
Running parallel with the trend of digital wallet adoption in APAC is the rise of “super apps” which combine multiple mobile services - including digital wallets - through one interface. Super apps from APAC-based companies like WeChat, AliPay, Grab, and Gojek have amassed billions of users worldwide, allowing their users to make payments, book rides, order food, and more without the need to switch between different apps.
While digital wallets offer a number of benefits, some argue that super apps that integrate digital wallets will lead the future of digital wallet integration. The global super app market is expected to grow at 27% CAGR over the next 5 years, with APAC leading the way in adoption and usage.
The challenges of digital wallet integration
If you’re a merchant looking to expand payments revenue in key markets like APAC, you’re almost certainly going to be thinking about how to support and integrate the digital wallets and super apps your consumers want to use. After all, consumers are more likely to transact with merchants that offer the payment methods they use in their daily lives.
But digital wallet integration isn’t as simple as it sounds, and can present a number of challenges for merchants:
- Integration Costs - Integrating a digital wallet into your payment stack requires time and developer resources to ensure transactions flow smoothly. If a merchant wants to integrate multiple digital wallets, they’re going to have to set up and manage multiple integrations, which can be costly.
- Compliance and Regulatory Risks - One of the key features of digital wallets is the streamlining of cross-border payments across multiple regions. However, every country has its own set of regulatory, anti-money laundering (AML), and know your customer (KYC) requirements that merchants will need to navigate to avoid fines or data privacy violations.
- Payment Processor and Gateway Integration - Digital wallets need to be seamlessly integrated with a merchant’s various third-party processors, gateways and acquiring banks otherwise there is a higher risk of payment failure. Again, this requires significant developer and maintenance resources, and becomes increasingly challenging to manage as a merchant begins to scale its payment operations.
Optimizing digital wallet integration with Yuno
As the digital wallet landscape in the APAC region continues to expand, merchants have a golden opportunity to engage this rapidly-growing consumer segment, while also helping to drive broader financial inclusion and payment security. Digital wallets, and integrated super apps, are the key to capitalizing on the APAC consumer market - if you can find a way to streamline integration and ongoing management.
That’s where Yuno comes in. As a leading global payment orchestration platform, we simplify digital wallet integration for merchants. Merchants on the Yuno platform can integrate 300+ payment methods - including the leading digital wallets and super apps - into their checkout experience through a single API. Our dynamic routing and advanced fraud solutions help optimize the flow of payment transactions, empowering merchants to boost conversions and reduce the risk of payments fraud.
Discover how to super-charge your digital wallet strategy with Yuno. Book a demo to see our solution in action:
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