From 2012 to 2017, traditional cash and cards’ market share in digital commerce dropped from 60 percent to 49 percent globally, according to research from McKinsey. In their stead are growing alternative payment methods, like digital wallets, that are becoming the payment method of choice for many consumers.
Payments services are bucking the trend of slowing banking revenue growth. They now account for more than 35 percent of global financial services revenue.
Alternative payment methods in the U.S.
Americans love their cash and cards. They still have a strong affinity for these types of payment methods, choosing to use them 69 percent of the time. However, PayPal is prying consumers away with products like Venmo and PayPal Credit, and startups Klarna and Arm’s deferred e-invoice solutions over strong alternatives to credit cards, with similar APRs.
Alternative payment methods are expected to grow from 31 percent in 2018 to 47 percent by 2022 in the US.
Western European payments methods like iDEAL and Klarna, a buy-now-pay-later solution, have successfully mainstreamed their services. Most banks allow their customers to pay by bank transfer in just a few clicks.
Use of APMs in Asia is the highest anywhere in the world. In 2018, consumers in Asia preferred to use APM 63 percent of the time, according to McKinsey research. In two years, those numbers are forecasted to go up to 71 percent. The market is dominated by Alipay and WeChat Pay, two giant ecommerce players in the region. These companies, in turn, are investing in new payment players in regions around APAC.