Credit card use in Singapore is set to fall 24% in less than five years, according to new research from Worldpay, the leader in global payments.
For its Global Payments Report 2016, Worldpay analysed 30 eCommerce markets around the world, including Singapore, China, India, Hong Kong, Taiwan, South Korea, Malaysia and Australia in Asia. In Singapore, Worldpay found that although credit cards are the most popular payment method at the moment, taking a 60% share of the payments market, credit cards are set to collapse by 24 percentage points in 2020.
Phil Pomford, General Manager Asia Pacific, Global eCom at Worldpay, said: “Our projections show that by 2020, credit cards will account for just 36% of the payment market in Singapore, which represents a significant drop in usage. This growing credit-wariness could be symptomatic of a wider political push to help consumers avoid debt. The government’s Total Debt Servicing Ratio (TDSR) rules, implemented in 2013, were designed to ensure that monthly debt payments don’t exceed 60% of the debtor’s monthly income. This public focus on the issue of debt helps explain why credit card use is predicted to fall nearly a quarter in less than five years, while debit card use is expected to rise.”
At the moment, debit cards, cash on delivery and bank transfers each account for 9% of the total payments market in Singapore. However, according to Worldpay’s research, all of these non-credit payment options will double or nearly double by 2020. Debit card use is expected to rise by 9 percentage points to cover 18% of the total payments market by 2020, while cash on delivery and bank transfers will represent 18% and 17% of the market, respectively. E-wallet growth is likely to remain relatively flat, growing from 9% market share in 2016 to 10% share by 2020.
Consumer debt has been a growing topic in Singapore over the past few years, leading the government to create new regulations in order to help borrowers pay down their debts and to prevent further debt from accumulating[1]. Three years ago, the government introduced the TDSR rules to prevent any Singaporean from taking out a loan if the resulting monthly payments would equate to 60% or more of his or her salary. Although those regulations were recently loosened to help people with long-standing loans refinance more flexibly, Worldpay’s recent research still indicates that the government’s programme to increase credit awareness and discourage too much borrowing is resonating with consumers. They are aware of and concerned about rising household debt[2] and now want easier access to non-credit payment options.
Pomford added: “Our research strongly suggests that Singaporeans will start using a wider range of payment methods in the next five years, possibly influenced by the government’s work to reduce consumer debt and encourage Singaporeans to think more carefully before they shop on credit. Therefore, online merchants that want to win the hearts and wallets of shoppers in Singapore must offer a range of traditional and alternative payment methods – from debit cards, to cash on delivery and bank transfers – because credit cards alone just aren’t enough. Companies that sell online can also partner with a knowledgeable payment provider in order to ensure that they continue to offer the right payment experience and keep gaining customers in Singapore’s thriving eCommerce market, which is set to grow by 11% to US$5.8 billion by 2020.”