By Praful Morar, Global Expansion Officer at Nuvei
Consumers in Asia Pacific (APAC) are by far the most enthusiastic adopters of digital payments worldwide, increasing their use of at least one digital payment method in the last 12 months by 69%. Card payments remain the post popular in the region and APAC dominated the global card payments market last year with a 57.8% share of global card payments by value. For online businesses that already have a large customer base in APAC, working with an acquirer that holds local licenses in the region is critical to improving acceptance rates and increasing revenues. Looking at shopping and payment trends in Australia, Hong Kong and Singapore, it’s evident that establishing customer trust and loyalty via local acquiring in these regions will pave the way for further growth of digital payments and eCommerce across APAC.
Business is booming
eCommerce across APAC has increased at a staggering rate since COVID19, when digital payments became a necessity and the preferred way to pay ever since. In the eCommerce sector alone, revenue is projected to reach US$2,139 billion in 2023, with an expected annual growth rate of 11.7% until 2027. This is great — and probably unsurprising — news for merchants across the globe, who will be looking to tap into this market if they haven’t already. Even if they have, local acquiring isn’t always a priority for merchants and in a digital payment hub like APAC, this could have a significant impact on a business’ revenue – as well as its relationship with customers.
So are digital payment methods
Card payments across APAC are expected to grow at a CAGR of 12.9% until 2025, reaching $39.7 trillion in 2025. Despite other alternative payment methods growing in popularity across the region, it’s clear that on and offline payments in APAC are still driven by credit and debit cards, with major card schemes including VISA, Mastercard, CUP and JCB. In Singapore, for example, 68% of e-commerce transactions take place via card, in Australia it’s 50%, while in Hong Kong cards have a usage rate of 93%. It’s important to note that digital wallet payments will amount to three-quarters of e-commerce payment methods and over half of POS payments in the Asia-Pacific region by 2025. In other words, card payments across APAC aren’t going anywhere anytime soon, making it more important than ever for merchants to use a payments platform that can provide local acquiring in these regions.
For those merchants considering expanding their business, APAC is a good place to start. Cross-border shopping continues to grow in popularity across the region and shows no signs of slowing down. In Singapore, for example, consumers are more likely to shop with international merchants than domestic ones, with 78% of online consumers having made at least one cross-border purchase. Cross-border eCommerce makes up 55% of all sales in Singapore, suggesting that international merchants have excellent potential for growth in this market. Australia is not far behind, with 61% of consumers having shopped cross-border, which totals to a $4.2 billion market. Due to Hong Kong’s relatively small size, the island’s cross-border e-commerce market takes an astonishing quarter of all e-commerce transactions.
Whether merchants have an existing customer base in APAC or are looking to expand into this rapidly growing centre for eCommerce and digital payments, the benefits of working with a platform that offers local acquiring could be a gamechanger for online businesses.
Increase sales, boost revenue, gain trust
The not-so-secret formula for any business that wants to succeed. The significance of choosing a payment provider that has local acquiring in key regions should not be underestimated by merchants operating cross-border, who will gain a considerable competitive advantage in the following ways:
1. Increasing the number of approved transactions. Routing transactions through a local bank will lead to higher authorization rates for merchants. This is largely due to the higher rates of fraud that occur when making international transactions, resulting in banks declining payments. Inevitably, declined payments will more-often-than-not result in consumers shopping elsewhere, resulting in financial loss for merchants.
2. Avoiding cross-border fees. When the consumer’s issuing bank and the merchant’s acquirer are in different locations, this often results in an increase of transaction fees. Businesses could be charged an additional 1.4% per transaction, depending on variables such as currency and card issuer. In addition, consumers could be charged a foreign transaction fee (between 1%-3% of the purchase value) when they use their card abroad or pay for something online from a foreign merchant. Working with a local acquirer can minimize the chances of additional costs for both the merchant and the consumer.
3. Improving the customer experience. Working with a local acquirer would mean fewer hidden fees for the consumer, and therefore a more predictable, seamless checkout experience. In addition, since local acquiring can ensure higher acceptance rates, this could also drive customer loyalty and trust, encouraging consumers to make more purchases in the future.
To conclude, choosing the correct global payments provider for your growing business can boost sales and accelerate revenue at a rapid rate. In APAC in particular, where digital payments are increasing in quantity and type, consumers are looking for seamless checkout experiences – that means no hidden costs, no soft declines and no surprises when they shop. For businesses looking to expand in the region, local acquiring in the big three, Australia, Hong Kong and Singapore, could unlock growth across APAC, which still remains a largely untapped market for many international eCommerce businesses.
This article was originally published in Fintech News Singapore.