Inclusive Club Feature: How the pandemic changes international payments?

After the COVID-19 pandemic, mobile payments in European and American countries picked up their pace in upgrading and iteration.

In mid-May, Stripe, a Silicon Valley-based digital payment company completed a new round of financing of $600 million; its estimated market value jumped to $95 billion, indicating a strong interest of the primary market in aggregate payment in the United States.

Cathie Wood, the founder of the Ark Fund, pointed out in a recent interview that digital wallets and genomics are the two biggest disruptive technologies after electrical vehicles.

People in Europe and the United States may not see the change, but it is coming. Even in the United States, where mobile payment is lagging behind most developed countries, e-wallets almost caught up with the credit card for online e-commerce transactions in the “pandemic-stricken” year. Moreover, the trend seems to be irreversible. It is unlikely that credit cards and cash will continue to dominate in the post-pandemic era.


1. What has the pandemic affected?

It changed the way people live.

In 2019, the global e-commerce revenue saw a growth rate of 20.2%, which was incredible. Therefore, in early 2020, it was predicted that the growth rate was expected to drop to 16.5%.

Then, the COVID-19 struck suddenly. The global e-commerce revenue in 2020 bucked the trend and rose at a rate of 27.6%, totaling $4 trillion, despite the global economic downturn and contracted retail sales. Furthermore, according to Digital Commerce 360 data, U.S. online consumption totaled $861.12 billion in 2020, up by 44.0% year-on-year, almost three times the growth rate in 2019 (15.1%), which is quite amazing.

Since the way we buy has changed, so does the way we pay. According to the Global Payments Report released by Fidelity National Information Services (FIS), in 2020, the share of electronic/mobile wallets and credit cards in global e-commerce payment reached 44.5% and 22.8% respectively, compared with 36% and 23% in 2018. Given the increase in the scale of e-commerce transactions, the growth in the transaction volume of electronic/mobile wallets is even more amazing.

In terms of offline point-of-sale (POS) payments, electronic/mobile wallets accounted for 25.7%, exceeding credit cards (22.4%), debit cards (22.3%), and cash (20.5%). In 2018, cash was the most used payment in offline POS, accounting for 31%; debit cards accounted for 29%, credit cards, 20%, electronic wallets, 16%.

In fact, 2020 witnessed a sharp decline in global cash transactions. The Global Payments Report shows cash transactions in North America were down by 21.9%, Europe, 33.6%, Latin America, 34.7%, and the Asia-Pacific region, 36.6 %. Globally, cash payment has fallen to an all-time low, occupying only 5.4% of POS transactions in Canada, 4.5% in Norway, 11.9% in the United States, and less than 10% in markets such as Australia, Hong Kong (China), and Sweden.


2. Fragmented electronic payment market

Mobile wallets have taken away most of the share of cash payment at the POS. However, unlike China where Alipay and WeChat have already taken the lion’s share of the mobile payments market, other countries still face fragmented markets.

In addition to global brands like PayPal, Google Pay, Apple Pay, many countries have produced their own mobile payments brands, such as Paytm in India, OVO and GoPay in Indonesia, Gcash in the Philippines. Some countries adopt a “buy now, pay later” payment mode, such as Afterpay in Australia, iDeal in the Netherlands, and Klarna in Sweden. Some regions have transnational payment apps, such as Grab, OVO, and Gojek together with Alipay and WeChat in Southeast Asia. Sweden-based Klarna has made a presence in the U.S. Market.

M&A is on the way. In 2019, FIS, an American fintech service provider, acquired Worldpay, a rival acquiring service provider, with $35 billion, which was the largest M&A case in the international payment industry. In the same year, after the failed acquisition of MoneyGram, an American money transfer company, Ant Financial turned to Europe and snapped up WorldFirst, a British cross-border payments company, for $700 million. In 2020, European payments giant Worldline took over its rival Ingenico for $8.6 billion. In June 2020, according to Bloomberg, Indonesian leading payment companies OVO and DANA agreed in principle to merge to beat their common rival—Singapore-based GrabPay.

Apart from capital M&A, API-based payment aggregation is also popular. Cases include the above-mentioned Stripe, the Netherlands-based Ayden, Braintree (acquired by PayPal), and Japan-based NETSTARS. Taking Stripe as an example, it supports ACH credit transfer, ACH debit transfer, Alipay, Android Pay, Apple Pay, Bancontact, Bitcoin, bank card (Visa, MasterCard, American Express, Discover, Diners Club, JCB, etc.), Giropay, iDEAL, SEPA, SOFORT, WeChat payment and other popular payments in the world.

What is more, these payment aggregators, including Stripe, Square, Braintree, are shifting to integrated service providers to businesses. Just as Stripe’s slogan goes, “Our mission is to increase the GDP of the internet”, it aims to build infrastructure for the Internet and supports enterprises, especially micro, small and medium-sized enterprises (MSMEs), in incorporation, account opening, contracting, invoicing, order management, personnel management, microfinance, among other things. It is like a combination of Alipay+Ding Ding, only boasting a greater advantage in international expansion.

(The writer is a senior financial reporter)