Local Payment Methods: How Checkout via eWallets Work in an International Payment Gateway

The world we inhabit is rapidly changing, evolving into a digitalised economy where cross-border transactions are becoming the norm. One of the key trends that is contributing to this global transformation is the high penetration rate of digital payments, which is recorded at 89% worldwide by McKinsey and projected to exceed a transactional volume of 49 billion this year¹. Making up a significant portion of these digital payments are mobile contactless transactions with Latin America currently slated to be the fastest growing market in this aspect². Quickly catching up is the Asia-Pacific, with Southeast Asia in particular showing promising dynamism and growth³. The common factor among these burgeoning markets is the emergence of digital wallets, or eWallets, as a major local payment method. In Southeast Asia alone, the eWallet payments market was worth over USD 22 billion in 2019 and is expected to blow past the USD 114 billion by 2025, an astounding 500% leap in value³.

So, what are eWallets then, and how do they work with regards to payments?

What is an eWallet?

eWallets are an abbreviation of the term, ‘electronic wallet’. They are also known as digital wallets. An eWallet is a financial transaction application that runs on mobile devices, typically functioning as a means to store your payment information and passwords⁴. They are commonly used to store a user’s bank account information, credit card, or debit card to then enable the user’s mobile device to pay for purchases⁴. One could also store other cards and important user information such as gift cards, coupons, identification cards, and tickets depending on the eWallet used⁴.

How do eWallets work?

A payment made with an eWallet usually takes the form of one of the following ways:

• Online redirect: Payments can be made to an online checkout that would redirect users to their eWallet service provider to confirm their transaction.
• QR Codes: Payments done via QR codes are done by either using the device’s camera to scan the merchant’s QR code to initiate payment, or generating a QR code on the user’s device for the merchant to scan.
• Near-field Communication (NFC): Being a technology that facilitates informational transfer between two smart devices in close proximity via electromagnetic signals, payments done using this method require the user’s device and the merchant’s device to be within 4cm from each other to initiate the transaction.
• Magnetic Secure Transaction (MST): This method is similar to that used by magnetic card readers. In lieu of swiping a card through a slot on a point-of-sale (POS), the user’s device generates an encrypted field that the POS can read.

Whichever method is needed to conduct the transaction depends on the merchant’s offerings and the user’s personal preferences.

Why eWallets are popular in certain markets

As mentioned earlier, mobile contactless transactions, especially in the form of eWallet payments, have mushroomed and thrived in Southeast Asia. Singapore, Malaysia, and Thailand in particular currently see near-widespread adoption of eWallets as a preferred local payment method with eWallets such as AliPay, Boost Wallet, TnG eWallet, LINEPay, and TrueMoney becoming more commonly accepted⁵.

The reasons for its overwhelming popularity is as follows:

• Convenient: Users no longer need to spend precious seconds fumbling through login procedures as their funds and cards stored in their eWallets enable users to immediately make payments on the spot.
• Secure: With two-factor authentication and biometric verification becoming more commonplace as smart devices evolve, eWallets are now one of the most secure payment methods available⁶. Authorising payments involves a verification process via unique passcode/PIN, facial recognition, or fingerprint scanning, and each transaction generates a unique one-time code thereby further reducing security risks.
• Fast: Utilising either online redirect, QR code, NFC, or MST payments, checkouts are contactless and expedient.
• Get Rewards for Purchases: Most eWallets nowadays have a personalised reward system for users with every purchase milestone they accomplish depending on the eWallet.

How do eWallet Payments work?

As mentioned in the previous section, one of the reasons for eWallet payments’ popularity is its convenience. To illustrate the ease of conducting eWallet payments, here is a simple list detailing how an eWallet payment normally goes through in an offline transaction:

1. Upon checkout, the buyer is presented with either a QR code or the merchant’s device for NFC and MST payments.
2. The buyer either scans the QR code or brings their device within sufficient proximity of the merchant’s own.
3. The buyer confirms their payment on the eWallet via 2FA or biometric verification and the payment is pushed to the payment gateway before it is released to the seller.
4. The buyer would then receive a notification from the eWallet provider that they have made a purchase with their wallet’s funds.
   

In an online setting however, the steps are similar to other digital payment methods.

1. The buyer chooses to use their eWallet of choice upon checkout from a merchant’s website.
2. The buyer then goes through verification, be it from a one-time PIN or biometric verification depending on the eWallet provider’s service availability.
3. Upon confirmation, the payment is pushed to the seller’s payment gateway and the buyer receives a payment confirmation from the eWallet provider.
   

Now that you are more knowledgeable about eWallet payments, deciding on which payment gateway that best suits your business needs should be easier. Still undecided? Give Tazapay a try. With more than 80 localised markets to choose from, expand your digital business horizons today. Contact us to learn more.

Sources

1. Consumer trends in digital payments | McKinsey & Company
2. Mobile wallet use projected to surge | Payments Dive
3. Mobile Contactless Payment Transaction Volumes to Grow by 92% (juniperresearch.com)
4. Digital Wallet Explained: Types With Examples and How It Works (investopedia.com)
5. Payments 2025 and beyond: Evolution to revolution (pwc.com)
6. How Payment Trends Are Set to Evolve Across Asia in 2023 | Fintech Singapore (fintechnews.sg)