Why Has Credit Card Usage Fallen Across Asia Pacific?

Customers in Asia Pacific have begun shifting up their payment habits in a big way. Now instead of card payments, e-wallets are slowly making their presence felt.

While cards have long dominated the cashless payments scene, all of that is set to change with the emergence of alternative payment methods like e-wallets. From GrabPay to PayNow and even ApplePay, fintech has forced us to take another look at going cashless.

With its dynamic economies, youthful population, and tech-savvy profile, Asia Pacific has long been ripe for disruption. And this is why we're looking at why card payments across the region have dropped recently.

5 Reasons Why APMs Are Overtaking Card Payments

1. eCommerce Growth

Globalization, rising internet penetration, and the COVID pandemic have contributed to solid eCommerce growth over the past few years.

While credit/debit cards remain the dominant payment method, digital wallets are quickly making their presence known. Anyone who's ever shopped online will understand the frustration of keying in your card and financial details in the middle of a transaction.

With e-wallets, however, everything becomes a lot simpler. You can preload your wallet for any future purchases or provide your handphone number. All of this makes it easier and safer to perform transactions online.

2. The Dominance of Superapps

Asia has always been a hotbed for super apps with the emergence of giants like Grab, Gojek, Wechat, Alipay, and Paytm to name a few. From online shopping to ride-hailing and even paying bills, super apps have become an integral part of daily life.

With the outbreak of COVID, many super apps also began offering e-wallets. By incorporating QR codes, these e-wallets would revolutionize the way consumers pay for their purchases.

Rather than struggling with card payments, users only needed to scan a QR code or show the cashier theirs. Thus, allowing for quick, zero-contact payments — precisely what was needed in the wake of the COVID pandemic.

Because of this, we've seen e-wallets steadily gain traction with users worldwide. The Asia Pacific region is one area that has embraced e-wallets wholeheartedly. A recent report found that most Singaporeans surveyed preferred to use e-wallet payments.

This benefits both customers and merchants because:

3. Alternative Payment Methods Are Cheaper

Unlike credit cards, alternative payment platforms require less setup and incur significantly lower costs.

For example, a merchant only needs to register for a Grab wallet and display their QR code to start receiving payments. Other APMs, such as real-time payment systems, utilize the same method and allow customers to bank in payments directly into a merchant's account.

More importantly, these payment methods are 100% contactless. And while the fears of COVID have abated, consumers and merchants alike are still wary of issues related to safety and hygiene. This is why it's easy to see why APMs have proven to be one of the more popular payment methods to come along in recent times.

4. BNPL On The Rise

Credit cards are one of the world's most used forms of financial services. It provides you with a short-term line of credit with a repayment period of about 30 days. Thus, helping you better manage your cash flows and cover any emergency expenses.

While useful, credit cards do come with their fair share of problems. For one, credit cards incur high-interest rates and fees for late payments, which can cause any outstanding debts to grow out of control. In fact, credit cards are widely recognized as one of the top contributors to bankruptcy worldwide.

Recognizing this, alternative payment platforms and e-wallets have begun offering their form of short-term financing known as "Buy Now, Pay Later," or BNPL. Unlike credit cards, customers divide their purchases into several interest-free repayments. This model softens the impact of purchases by requiring consumers to pay less upfront without worrying about interest payments.

And the results speak for themselves, with the uptake of BNPL schemes rising across Asia. Analysts predict that credit card payments across Asia are set to fall even further in the days to come as consumer habits start to change.

5. eWallets Provide Access to Underserved Communities

According to a study, more than 60% of Southeast Asia remains unbanked with no access to financial services. And this has been a strong contributing factor to the growth of alternative payment methods in this region.

How so?

Well, the answer is simple. Alternative payment methods or APMs do not have the same KYC requirements as banks and other financial institutions. For example, applying for a bank account requires an applicant to submit various documents and be physically present at a local branch.

However, if you're an individual living in an isolated or underdeveloped community, this is just not possible due to the lack of development in your area. But what you do have is a mobile phone and access to the internet, which is everything you need to sign up for an e-wallet.

And this is what has allowed e-wallets to bring financial services such as value storage, insurance, and even loans to isolated communities. In fact, the Malaysian government previously used the Touch n' Go e-wallet to distribute financial aid and stimulus packages to its citizens.

XanPay: Your Partner For The Future

It is clear that card payment will likely be relegated to the sidelines as consumers come around to using APMs. Besides that, the flexibility and convenience offered by these payment methods are invaluable for businesses looking to break into new markets.

By bringing financial services to previously underserved communities, e-wallets can open up a new market for merchants. But with such a vast diaspora, tying everything together across Asia Pacific isn't easy.

And this is why XanPay specializes in providing business owners with a unified platform that allows them to accept payments from customers across Asia Pacific. With XanPay, you get:

Check out our website for more information on how XanPay can transform your business.