The Digital Payment Industry Is Still a Very Diverse Landscape

by PaymentsJournal 0

Asian businessman with digital app

The Japanese ecommerce giant Rakuten recently invested $20 million dollars in Azimo, the UK-based digital money transfer service, a competitor of MoneyGram or Western Union. Visa, Mastercard and Amex announced in April they planned to merge their rival online checkout systems in order to, presumably, challenge PayPal.

These giants in the making in the digital payments industry are all positioning themselves and waging a war for dominance of this growing space. So many industries have faced this fate: Uber dominates the ride-sharing space, Dropbox the file sharing space.

Will the payments landscape become dominated by one or two companies, or will there be enough space for a variety of providers?

The apparent dominance of Visa, Mastercard and PayPal

Visa and Mastercard still visibly dominate the payment landscape. In the US, Visa and Mastercard account for almost half of online payments and when looking at payments for software purchases, it is a staggering 73% of payments. While this number is lower in Europe, both card providers account for more than half the payments for software purchases in the old continent: 58% in the UK, 61% in France and 55% in Italy (stats also for online software purchases).

However, PayPal is a close second, as it accounts for 14% of payments in the US, 38% of UK payments, 38% in France and a surprising 41% in Italy. PayPal has even managed to overtake Visa and Mastercard in Germany where it represents 58% of payments!

Both solutions answer very different needs, and while PayPal is often viewed as the more modern solution, Visa and Mastercard have recently made tremendous efforts to remain a relevant solution in the digital age: “shiny new button” to unify payment options, contactless debit and credit cards.

While AMEX is behind Visa, Mastercard and PayPal as the three fight over the lion’s share of the market, AMEX managed to carve itself a solid and stable share of the market.

Local Payment methods remain popular

Despite the apparent hegemony of these global giants, some countries inside Europe and out, like the Netherlands and China, have very strong attachment to local companies and payment methods.

A lot of countries are still very attached to local means of payment. This is why, despite the rise of cross-border digital payments goliaths, local solutions are faring well.

Each country has online payment solutions grown locally, seizing an important share of national markets and resisted the intensifying international competition very well.

Recent 2Checkout research on software purchases shows local payments held their share of the market from 2017 to 2018:

  • France: Carte Bancaire: 12%
  • Netherlands: iDEAL: 43% / Direct Debit: 7%
  • China: AliPay: 42% / WeChat Pay: 3.5% / UnionPay: 2.5%
  • Japan: Konbini: 5.5%
  • Brazil: Local credit card with instalments: 28% / Boleto Bancario: 12%
  • Russia: Qiwi wallet: 3% / WebMoney: 2%

Dealing with a fragmented payments landscape

While would-be payment giants are making a lot of noise and waging a war for the domination of the market, businesses need to understand the online payment landscape will remain fragmented and dynamic. With local payments solutions holding their own against global giants and new technologies keeping the payments market very enterprising.

There are still a lot of new entrants to the market using new technologies to offer more secure, easier to use, and increasingly advantageous payment solutions.

Cryptocurrencies may look interesting, however, a recent study shows that more than 60% of online merchants have no plans to implement cryptocurrencies, while other 16% are only potentially looking to implement these, but certainly beyond 2018 given shopper low adoption, risk and pricing fluctuation.

Mobile payment methods are set to revolutionise the landscape even further. With mobile banking set to replace online banking by 2023, paying with a smartphone will become common practice. Mobile payments app will become another source of diversity that small businesses will have to adapt to, as the landscape continues to evolve and offer new ways for customers to pay.

The road ahead for the payments industry

There is no doubt the payments industry is evolving at a very fast pace, and giants are beginning to appear from every corner of the world. However, varying speeds of adoption of digital and the resistance of local payment methods show that global giants still need to contend with local preferences and strive to understand local markets and newer technologies.

New, emerging payment methods are bringing new possibilities for consumers to pay online and new challenges for businesses seeking to accept as many means of payment as possible. Small businesses looking to extend their reach and to exploit the full possibilities of e-commerce will therefore need to seek out a payment platform that takes into account the diversities of the payments landscape.

About the Author

Adriana iordan, VP of Product Management at 2Checkout