E-commerce to hit $12.4 billion in NZ by 2025 as buy now pay later use rises

Buy now pay later is expected to make up 17 per cent of all e-commerce transactions by value by 2025. Photo / File

New Zealand's e-commerce is expected to grow by 38 per cent in the next three years to hit US$8.5 billion ($12.4b) with buy now, pay later the fastest area of growth.

The 2022 Global Payments Report by Worldpay from FIS analyses payments data in 40 countries around the world and forecasts its future growth.

It found e-commerce in New Zealand is set to grow at 8 per cent a year with buy now, pay later transactions projected to increase from 10 per cent in 2021 to 17 per cent of all online transactions by value - the highest percentage in the Asia-Pacific region.

Meanwhile the share of online payments using credit cards is expected to decline from 34 per cent to 30 per cent - shrinking but still maintaining their place as the most common form of e-commerce payment.

Credit card usage is also expected to decline for in-person point-of-sale payments, falling from 42 per cent to 36 per cent by 2025 while buy now, pay later is projected to rise to 6 per cent of sales by value - the second highest level behind Sweden.

Mobile wallet payments are expected to grow the fastest for in-person payments with 21 per cent annual growth predicted. Last year payment by mobile wallet made up around 7 per cent of all in-person payments by value.

However in-person cash payments are also expected to continue falling from around 11 per cent to 10 per cent as the use of cash continues to decline.

Phil Pomford, general manager Apac, Worldpay Merchant Solutions at FIS, said it was seeing three trends in the payment space; the continued growth in the use of digital wallets, the rise of buy now, pay later and the fall in cash use.

"The buy now, pay later story is obviously extremely hot in Australia and New Zealand continues to be. We are seeing huge growth there particularly online.

"We are seeing cash declining significantly globally, but in particular we are seeing a huge post-pandemic decline and we are predicting that to continue."

Pomford said that was being driven by the rise of online payments while an increase in contactless payments and digital payments was really starting to see cash decline.

Digital wallet payments include Apple Pay, Samsung Pay and the likes of PayPal. In Asia there is also widespread use of WeChat Pay and Alipay.

He said New Zealand and Australia were at the forefront of the shift towards alternative payment methods. "Australia and New Zealand are leading the way in many places."

But they were lagging the rest of the world currently for payment with digital wallets.

"Globally today wallets are number one, in Australia and New Zealand we are seeing them about number two but we are predicting that will certainly grow in the future."

He said in the Asia-Pacific region digital wallet use was very high due to China and the weight of wallet-use there. "It is an extremely different market. Alipay and WeChat Pay are well over 85-90 per cent of all of the spend that exists in that market, so there's a long way to go for Australia and New Zealand."

Phil Pomford, general manager APAC, Worldpay Merchant Solutions at FIS. Photo / Supplied

Pomford said the one area where New Zealand and Australia stood out as fast adopters was in the buy now, pay later (BNPL) space.

It was forecasting BNPL to grow to 14 per cent of all transactions by value in Australia and 17 per cent in New Zealand for online payments. That compared to only around 5 per cent globally in four or five years and under 2 per cent in Asia.

"Without doubt the growth of buy now, pay later in this region is absolutely outpacing other regions."

Digital wallets

Pomford said there was a huge difference in how different countries treated the use of digital wallets.

But he said the simplicity of using a phone to pay was behind the rise in their use.

"It is that simplicity. For me when I am in a shop or online it is the final end of the transaction you want to get out of there, move on quickly so I think that simplicity that really streamlines the check-out is what we are all looking for."

He said research showed the advanced security - using your own biometrics either through a fingerprint of facial recognition to access the payment service - meant people felt comfortable with the security.

Despite the rise of digital wallet payments, debit and credit cards are still expected to remain the dominant payment method in person.

Pomford said there was an element of habit with that for in-person transactions but online payments were now making up around 41 per cent of spend globally with many businesses embedding wallets in the process.

"When I am trying to make a payment online it is built into the technology of my computer. It is just so simple."

The use of cash is continuing to decline. Photo / File

Cash declining

There are concerns that those who don't have access to technology may be left out of making digital payments in a world where cash is being used less and less.

Pomford said he did not see cash vanishing. "Cash will always have a place in certain segments of society."

"I think what we are seeing is that change, that drive away from cash, technology does offer lower barriers of entry for people - I appreciate there are always some that might not have full access, but technology may end up boosting inclusion in many places."

He said digital wallets were a way of potentially bringing the unbankable into the financial system.

Buy now, pay later

Pomford said the reason why BNPL was so popular in New Zealand and Australia was because the two countries had been extremely early adopters of the payment method.

"The fintech space in Australia and New Zealand has been red-hot in many places but in particularly some of the players that have come out have clearly become globally dominant."

He said both countries had a digital native population - high internet access, high mobile phone usage. "If you look at the younger generation who are typically sitting behind the back of many of these transactions - they are really driving a change."

Pomford said there was also a proliferation of players with pure plays, banks and retailers - everybody is there. "It is just everywhere you look. That coupled with the retail partnerships that are in place - it explains the growth to me and how hot it is."

Buy now, pay later companies are not currently regulated although Australia and New Zealand are looking at whether it needs to be.

Pomford said Australia was leading the way in terms of regulation but so was Singapore.

"It's only natural, you see such huge growth and see such a huge user following. Just given the shape of the model that people are going to look into it."

He said players were welcoming of regulatory moves. "I think it is coming, without a shadow of a doubt. It is only a matter of time."