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Your global guide to Alternative Payments (Second edition)

Source: WorldPay

When the UK's leading payment provider produces a report on alternative payment methods, it’s worth spending time reflecting on their predictions for trends and growth. They see a future where cards are left behind as e-wallets gain dominance in a mobile-centric marketplace that will still be governed by local diversity.

Introduction

eCommerce is growing rapidly with global online transactions rising by 16% in 2013.

The value of alternative payment (i.e. non-debit/credit card) methods was up 21% in 2013, with turnover value up 44% compared with 2012. More than 300 alternative payment schemes operate around the world, so you need to understand which payment types to offer.

Alternative payments by type

Bank transfers online (real-time). Offer payment with immediate authorisation via the customer’s bank. Settlement is usually next day. Banks are moving toward quicker payments.

Direct Debits - These are limited mainly to low-value or recurring transactions.

E-wallets  (e.g. PayPal) - These are the fastest growing payment type around the world. They’re easy to use and increasingly popular for buying digital goods and video games. Mobile payments fall into two categories – direct carrier billing and mobile wallets.

Cash on delivery - Couriers collect payments when they deliver goods. This method is becoming less popular.

Global payment trends

Europe accounted for 34% of the global eCommerce market in 2012, with a turnover of US $579 billion: 41% of transactions were made using alternative payment methods, of which e-wallets were the most popular.

In 2012 North America was the leading business-to-consumer eCommerce market with a 36% share and turnover of US $625 billion.

Asia Pacific has shown the fastest growth in the eCommerce market, with a turnover of US $461 billion in 2012 (27% global share).

The Middle East and Africa had a 1% share of the global eCommerce market, of which the majority of transactions were cash payments.

Global e-transaction payment mix

In 2012 the global split of card/alternative payments was:-

United States/Canada                 71-29                      

Europe                                       59-41

Latin America                             47-53

Africa/Middle East                       34-66  

Asia/Pacific                                 37-63

Trends and drivers

Leading alternative payment methods have grown on average by 35% in recent years. While growth is spread across all payment types, e-wallets are undoubtedly the leader. In China e-wallets account for the largest proportion of the eCommerce market at 44%.

Of the e-wallet providers, Alipay and PayPal dominate. Alipay is the market leader in China with 30%, with Tenpay next at 13.3%. Card providers recognise the growth opportunity for e-wallets and are developing them for their own brands. For example, Visa has just launched V.me.

Growth in mobile payments

Smartphones now number more than 1.4 billion around the world, with an average yearly growth of 44%. The prolific growth in new technology is rapidly accelerating the adoption of mobile payments. As mobile devices develop, specialised payment systems are emerging – from independents and established players, who have invested heavily to develop user-friendly applications.

Conclusion

There is an ongoing growth in alternative payment methods. By 2017 alternative schemes will overtake card payments for products and services purchased, accounting for 59% of all transactions. In particular there is an anticipated significant growth in e-wallets, together with an emergence of specialised mobile payment systems. Cash on delivery is set to decline.

Most importantly there will always be global diversity. It’s essential to work with a payment provider who has specialist knowledge.

To read the full report click here - Alternative Payments