This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.
Ever since credit cards first became readily available in the 20th century, consumer spending has been driven by borrowing. Today, plastic cards continue to dominate consumer credit in many places, but across the globe and particularly in Asia Pacific, the traditional instalment plan is taking a new form for the digital generation.
Asia Pacific has long been a region dominated by cash and populated by consumers who don't have bank accounts. Because Asia is also one of the most dynamic ecommerce markets in the world, consumers and merchants look to alternative payment methods to buy and sell online - from local credit cards, to cash-on-delivery, to mobile payments. In China, for example, e-wallets like Alipay account for 58 percent of e-commerce purchases.
With 63 percent of e-transactions in Asia Pacific set to be via non-card methods by 2019, it's no surprise that the rise of instalment plans in this region has been driven by alternative payment providers. In 2014, Alipay launched a line of credit known as Huabei offering loans and instalment payment options on Alibaba shopping platforms Tmall and Taobao. Last year on November 11 - also known as Single's Day and the biggest shopping occasion in China - over 60 million payments were made using Huabei. E-commerce giant JD.com also launched Single's Day promotions of its credit and instalment service Baitiao and garnered an eight fold increase in users.
In its latest Global Payments Report, Worldpay found that Alternative Payment Methods (APMs) are also gaining traction beyond Asia Pacific. The Report found that across the world, APMs inched past card payments for the first time ever in 2015, gaining 51 percent of global market share. This gap is set to widen in 2016 and beyond, as buying power across Asia Pacific continues to grow and more consumers worldwide opt for the convenience of "e" payment options over cash or plastic cards.
Shoppers today have grown up in a hyper-connected world, with a wealth of information and services at their fingertips. According to comScore's Global Mobile Report, more than 90 percent of millennials own a smart phone, and there's little doubt that mobile devices are becoming this generation's favourite shopping tool. Visa's 2015 Regional eCommerce Monitor Survey even showed a 22 percent year-on-year growth in mobile shopping across 13 markets in Asia Pacific. As young people enter the workforce and begin to purchase big-ticket items, they will appreciate flexible payment options from their payment providers and merchants alike.
It is this demographic that has driven the rise of Klarna, one of today's leading providers of pay-by-instalment. Klarna quickly realised that today's digital consumers are highly sensitive to how quickly and easily they can make payments, and that it needed to help merchants deliver on these expectations with a user-friendly interface and a smooth, speedy checkout process. The company has now reached more than 45 million users and continues to expand across Europe and the US.