The coronavirus has pushed businesses and consumers alike to technologically adapt their behaviors to safely navigate the pandemic. Contactless payments via online or mobile tools have emerged as a hygienic means to conduct retail and e-commerce with 29% of U.S. consumers utilizing “tap” payments, according to the Consumer Technology Association (CTA)® Future of Consumer Behavior Amid COVID-19 report.

However, this use of mobile payments domestically pales in comparison to the global landscape, particularly within emerging markets, where adoption rates have surged alongside the rise of smartphone ownership and increasing internet access.

In China, Digital Payments Are Standard

Prior to the pandemic, China already boasted an 86% mobile payments penetration rate, the highest in the world. At the center of the digital payment revolution in China lies the use of QR codes or two-dimensional bar codes, which have become the norm for the purchase of items in major department stores and street stands alike.

Pioneering China’s path to QR code primacy, China’s two dominant digital payment platforms — WeChat Pay, owned by Tencent, and AliPay, created by CTA member Alibaba Group and now operated by Ant Group — developed their own native app bar codes in the early 2010s. Subsequently, the two tech giants now operate in a $7.6 trillion online payments market in China alone, which accounts for half of all global digital payments.

India, a Digital Payments Growth Machine

India has also seen rapid growth in its digital payments market. In 2016, the National Payments Corporation of India developed a real-time payment system called the Unified Payments Interface (UPI) as part of a government push for demonetization. This platform allows for instant fund transferring between two bank accounts on a mobile platform, unlocking a greater level of efficiency and transparency in the digital money ecosystem.

Fast forward to 2020, UPI has propelled India to match China on growth. Furthermore, the pandemic has only accelerated adoption of real-time digital payments in the Indian economy.

In the early stages of the pandemic, India saw 42% of users utilize digital payment platforms multiple times. Paytm, an Alibaba-backed Indian fintech startup, has rode the wave of increased digital payments, amassing more than 150 million users who use their app to connect to the UPI payments platform.

PwC estimates that India will account for 2.2% of global e-payments by 2023 as it claws a greater amount of international market share.

Providing Access to Latin America’s Unbanked

During its launch, Argentinian e-commerce giant MercadoLibre hit a snag where a cash-dominant economy paired with a largely unbanked population prevented most consumers from making purchases online.

To resolve this, the company launched its own payments technology arm, MercadoPago, which allowed virtual wallets in lieu of traditional banks. By 2012, 9 years after being rolled out across Argentina, Brazil, Mexico, Colombia, Venezuela, and Chile, one-third of purchases on the platform were being conducted entirely via the MercadoPage system.

Amid COVID-19, MercadoPago has seen its total transactions double, with e-commerce purchases from the main MercadoLibre platform accounting for just 35% of payments as Latin Americans increasingly incorporate digital payments into other portions of their daily lives.

Latin America is expected to see a compound annual growth rate of 17.3% in digital payment transactions from 2020 through 2024, when total transaction volume will reach approximately $204 billion, according to projections from Statista.

The African Blueprint for Digital Payments Growth

While Latin America has demonstrated the role that digital payments solutions can play in connecting unbanked and underbanked consumers to the modern economy, Kenya forged the blueprint for this democratization of payments access in Africa.

In 2007, a public-private partnership between Vodafone and Kenya’s Safaricom launched M-Pesa initially as a micro-loaning service, but pivoted to digital payments based on customer research. After just a decade in operation, M-Pesa has shifted Kenya from a country where 80% of transactions were cash in 2007 to a country where digital tools accounted for 80% of payments in 2017.

Other African countries like Nigeria and Morocco, led by domestic firms like Interswitch and Hightech Payments Systems, respectively, have also emerged to leapfrog traditional financial institutions for consumer financial access.

In fact, the digital payments market has matured faster in Africa than in Europe. For example, Nigeria has seen digital payment transactions grow from 66 million to 2 billion from 2008 to 2018, while France’s transactions only grew from 33 million to 61.5 million in the same period, according to data from Statista.

The United States digital payments market has significant room to run based on its low adoption rate to this global phenomenon, which has a projected $12.4 trillion global market value by 2025, according to PwC. Subsequently, CTA closely tracks digital payments companies in support of multiple thematic stock indexes as a part of CTA’s decade-long partnership with the Nasdaq.

Ultimately, the innovative digital payments landscape, especially in emerging markets, represents a significant area of growth in the years to come.

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This article is the third in CTA Research’s Industry Intelligence series on Digital Money, examining the current state of fintech and diving deeper into the innovations and trends of this sector.