China leads the world in Digital Payments

China, the world’s first country to use paper money, may soon become the world’s first country to not have paper money in the future. As technology continues to innovate the way we do things, the payment structure and form around the world is rapidly changing as well. Today in China, there is a younger generation that only knows about digital payments. Such is the innovation in this country it has the highest adoption rate on digital payments in the world.

Speaking to the delegates of the Visa Security Summit 2019 in Shanghai China, Chris Clark, Regional President Asia Pacific, Visa pointed out how digital payments in China are potentially proof how the rest of the world will be like in the future.
According to Chris, digital commerce sets China apart from the rest of the world. China spends an approximately 3.14 hours on mobile internet daily which is the same as the global average. ¾ of the consumers make a purchase with their phone in the past month, the second in the world behind Thailand and two times US’s penetration. 9 out of 10 consumers used mobile payments in the past month which is the highest in the world and 72% of F2F payments volume is mobile, which is 46 times the global average.

Chris explained the four payment revolutions that have shaped the way the industry is today

“Asia Pacific has a huge cash opportunity. Only 45% of the region uses electronic payments. There is still the balance 55%, which is worth around US$6.1 Trillion. We still have a long way to go.”

Chris explained the four payment revolutions that have shaped the way the industry is today. What started from analogue methods of payments with the introduction of the usage of payment cards moved to electric with magnetic and chip cards in the last 20 to 30 years ago. Then came the digital payment revolution, whereby we saw the usage of tokenisation and enhanced data. In the near future, Chris pointed out that emerging techs will shape payment methods.

“So what is the fourth payment revolution going to look like? Data is going to enhance the usability of payment for all participants. Each data will create more data, and the cycle continues. The future will see lesser emphasise on transactions but focus more on movements of commerce.”

In other words, digital payments will utilise data to move beyond transactions. Analytics in payments will measure what people spend on and their habits, creating a more automated, interactive and personalised experienced across all channels and devices.

But with the trend of digital payments growing, the security around digital payments becomes a concern as well. Fraud has always been the biggest concern when it comes to any form of payment and continues to be a reason why organisations are taking cybersecurity issues seriously.

An estimated 3, 353, 172, 798 individuals had data compromised in 2018, which is almost half of the world’s population. It is estimated that fraud led to 1.75 trillion in economic losses in the Asia Pacific, which equalisation to 7% of Asia’s GDP.

Visa, which operates in over 200 countries worldwide know how important this matter is. But they also feel that cybersecurity is an issue that one cannot tackle by themselves.

“Criminals are just as smart or smarter than we are. We try to prevent, but they are also one step ahead. They are applying advance tech and social tech like phishing emails.”

Interestingly, Chris points out that while data is going to be the biggest asset for businesses in the future, it will also be a liability to security. If used correctly, data can give full innovation. And this is what Chris said is what cybercriminals want as well. So, there are two sides to the data debate — the promise of data and the problem associated with that.

There are benefits of Big Data, which provide new business opportunities. Big companies are aware and made full use of this. But with so much potential in data, what is holding up data revolution?

According to Chris, there are three main reasons for this:

1)      Technical and business reasons – the terabytes of data are currently unstructured. It takes a huge effort to come up with a format that is usable and sharable. No one has figured how to price the data to exchange it efficiently.
2)      Broken Consumer Trust – privacy and security issues and breaches continue to be a concern for consumers. Governments are aware of this and are serious about protecting consumer privacy
3)      Leader in Asia on data privacy rules – China. The government in China is building a framework around data privacy. The check how businesses use and collect data. Also, with user requested deletion of data being implemented, they are firm on enforcement.

With 25 billion devices expected to be connected by 2021, Chris said that there should be an environment that nurtures innovation and puts consumers. The core components of the payment ecosystem are data, people and infrastructure. And people are the primary target now, especially individuals through phishing attacks.

“We are on the cusp of the fourth payments revolution — the future of payments is going to be complex. Security challenges are going to be multi-faceted with Innovation is coming from everywhere. Organisations need to have an open standards-based approach. Only then can be consistency in security.”

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