Alternative payment methods challenge plastic's supremacy

Alternative payment methods such as ewallets are overtaking cards as the most popular way to buy online, according to new research from WorldPay.

The global ecommerce market is growing fast, hitting US$1.66 trillion in 2015, up 14% on 2014, according to WorldPay's Global Payments Report, based on research in 30 countries. For the first time, more than half of this turnover was accounted for by non-card payments (what Worldpay calls alternative payment methods (APMs)), such as ewallets, direct debits and bank transfers.

The research predicts that the rise of APMs will continue, with them accounting for 55% of ecommerce turnover by 2019. However, this is down on previous predictions, with slower than expected growth blamed on delayed launches of card scheme wallets and sluggish uptake in China. There are strong regional variations: In North America, APM's accounted for just 28% of ecommerce turnover in 2014, compared to 49% in Emea and 58% in Asia Pacific.

By far the most popular APM is the ewallet typified by PayPal and AliPay. By 2019, WorldPay expects ewallets to account for $647 billion, or 27%, of global turnover, compared with credit cards’ $577 billion, or 24%. Debit cards will be the third most popular payment method, followed by bank transfers and prepay.

Kevin Dallas, chief product officer, global ecommerce, Worldpay, says: "The first age of digital payments kicked off with the eCommerce boom in the early 2000s when companies like PayPal and AliPay introduced eWallets to the mainstream. The second phase coincided with the rise of the smartphone at the beginning of the decade, and we’ve since seen a proliferation of new mobile apps that quickly raised the bar for convenience in payments.

"However, with so many options being rolled out so quickly, a sense of app fatigue has begun to set in leaving both consumers and merchants unsure of which approach is best and questioning the convenience of using multiple eWallets. I expect the next few years will see a consolidation of the market as the public hones in on their preferred payment methods and conscientious merchants feel more confident buying into technologies that their customers have already embraced."

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Comments: (4)

A Finextra member 25 November, 2015, 13:36

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That's all semantics. Ultimately, the money is in the bank account. It doesn't matter (much), from that perspective, how the instructions to allow for the funds to be moved are generated/fronted - debit card or DD or pigeon post.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 November, 2015, 15:40

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PayPal ewallet is often funded via credit card. It's also possible to pay by credit card via PayPal without having a PayPal account, which means PayPal but no ewallet. If WorldPay subtracts the volumes of these two types of transactions, its prediction might go awry. Which makes for a good candidate of the "#3. Exploiting Calculitis" method of How To Lie With Big Data.

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A Finextra member 25 November, 2015, 17:09

0 likes Is not most of these non bank wallets simply closed loop account systems managed by one entity and the real payment orders transferring monies from payer institution to payee institution take place with visa or mastercard? Thereby these non bank methods simply put a facade on the real payment means, adds an extra layer of cost and gets the merchant to pay the extra fee because of the percieved higher conversion rate and convinces the consumer that they offer better security. Due to the duplicate cost layers these wallets are dead on arrival but it will not be obvious to the market yet. As competition increases they will fold. Do not invest your retirement pension in such duplicated services.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 26 November, 2015, 08:43

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@AnonFinextraMember:

While ewallets do use V/MC, that's not the only rails they can use. Some of them support TELCO rails e.g. Boku, Zong. Others use ACH rails e.g. PayPal, PayTM
I regularly use an ewallet because it eliminates the friction associated with the conventional payment process. For the merchant, that means manifold increase in conversion. Real - not perceived - increase. Due to reduced friction, not higher security. HDFC Bank's PayZapp Ends My Bill Payment Woes
Gone are the days when middleman automatically meant higher cost. When I pay a bill directly, many biller websites levy a surcharge of 1-2% for accepting credit cards. Whereas, when I pay the same bills via a third party mobile wallet like PayZapp, not only do I escape the surcharge but I actually get a cashback at the end of the month. So, thanks to funding from sugar daddies / VCs, middleman could actually mean LOWER costs! Both for the consumer and merchant.
As long as the funding tap doesn't dry up, ewallets are not dead-on-arrival. Personally, it's never a good idea to invest your nest egg in the private markets but, as long as the party lasts, why shouldn't savvy consumers and merchants partake of the festivities?