SMEs embrace flexible payments as consumers seek digital options

ANALYSIS: FINANCIAL SERVICES SMEs embrace flexible payments as consumers seek digital options

This is accompanied by the rise of biometric authentication to safeguard accounts.

Emerging digital payments are increasingly in demand as a force in the payments “A key notable consumer trend is biometrics – because consumers want to make payment fuss-free, and as to pay in installments,” Khan said. As for concerns about bad loans arising from BNPL, Khan said that sector—and even small and medium enterprises (SMEs) are forgoing the cold hard cash in favour of e-wallets and fast, flexible payment options in order to accommodate their cashstrapped customers.

Mastercard’s New Payments Index 2021 found that over nine in 10 (94%) people in Asia Pacific (APAC) were considering using at least one emerging payment method such as cryptocurrency, biometrics, contactless, or QR code last year.

“We’re seeing higher interest and adoption of flexible payments options amongst merchants, especially amongst SMEs,” Safdar Khan, Division President, Southeast Asia for Mastercard, told Hong Kong Business. He added that SMEs are especially showing enthusiasm for Buy Now Pay Later (BNPL) products.

Even prior to the pandemic, consumers have already been seeking alternative payment methods in large part thanks to the rise of online shopping. In Southeast Asia, IDC predicts that e-commerce spending will more than double by 2025 to reach US$179.8b. Of this, 91% will be paid via digital payments.

“As more businesses moved online, consumers explored new ways to shop and pay. [And] as governments continue to drive cashless agendas involving both public and private sectors to ensure that a switch to a cashless society is as smooth and gradual as it needs to be, businesses that can provide multiple ways to shop and pay will be able to successfully meet new demands and challenges,” Khan added.

Just smile and wave

The rise of online payment options is also pushing up interest amongst consumers on safeguarding their online accounts, but without friction. This has given rise to a new security feature trend: biometrics. convenient as unlocking their phone,” Khan noted. Indeed, Mastercard’s survey found that over six in 10 or 62% of respondents from Asia Pacific said they would feel safer using biometrics to verify a purchase than entering a pin code. Almost the same percentage of Asia Pacific consumer respondents (64%) indicated excitement about the potential of biometric verification as a payment method. Stores are embedding new biometric verification options in their payment terminals. For example, Mastercard is piloting its Biometric Checkout Program, which allows shoppers to pay with just a smile or a wave of their hand. “No more fumbling for their phone or digging through their bags for their wallet,” Khan said, adding that “merchants also stand to benefit from faster transaction times and shorter queue lines to greater hygiene and heightened security.” Whilst Mastercard’s biometric checkout program is only available in Brazil for now, with more APAC consumers clamouring for biometric payment options, Khan floated plans to roll-out the service in Asia and the Middle East in the near future.

Installments

Amongst flexible payment methods, installments are once again on the rise, driven by consumers still tightening their boots during the pandemic and the emergence of fast, digital installment services—with BNPL at the forefront. “Many [consumers] have adopted BNPLas a payment method, including for everyday small purchases. Our research shows that 43% of consumers in the Asia Pacific are willing to increase spending by 15% if they were companies—and in particular, Mastercard, which is one of the first in the APAC region to debut a BNPL solution in the market—have designed ways to ensure that users can repay Safdar Khan their installments. “Unlike traditional Buy Now, Pay Later payment method, a bank’s cardholder is drawing down on existing credit limit, with no additional credit. This means Mastercard Installments allows consumers to enjoy the flexibility of managing their finances and yet not spend beyond their means,” Khan said.

A trinity of challenges

SMEs in Asia still notedly struggle to adopt their consumers’ digital needs. Khan summed up their key problems: reliance on cash; outdated payment options; and lack of access to credit. SMEs continue to conduct their business operations in cash, and some may have adapted to digital payments, but are using outdated payment No more technologies, Khan observed. This fumbling for largely results from higher costs their phone or associated with upgrading payments digging through technologies, something SMEs do their bags for not want to take on due to limited their wallet resources, Khan said. As more businesses moved online, consumers explored new ways to shop and pay