Credit and debit cards are well-established in North America and Europe, but that’s not the case in every global market. Payment card adoption is still comparatively young in some parts of the world, but growing fast.
The Asia-Pacific market, in particular, saw exponential growth in payment card use in the last few years. In China alone, growth was around 50% per year between 2013 and 2017. But, while China remains the dominant national market in that region, we can see even more impressive gains in other economies, making for a truly region-wide opportunity.
Rapid Payments Industry Growth in APAC Region
According to the Nilson Report, we’ll see 642.01 billion global branded credit, debit, and prepaid card transactions in 2025. Their data examines all transactions made using Visa, Mastercard, UnionPay, American Express, Discover/Diners Club, and JCB-branded cards.
Cards issued in the Asia–Pacific region are projected to generate 288.01 billion of those total purchase transactions in 2025. This will account for 44.86% of the worldwide purchase transaction total; double the US figure. And, comparing it to the same region’s total transactions in 2020, we see a 47% overall increase in card usage, significantly outpacing global average growth.
The number of cards issued in the APAC region is growing at an annualized rate of 9.4% per year versus 2020. This just barely edges out Latin America (9% per year), but is much slower than the fastest-growing region, the Middle East and Africa (21.8%). This reflects Asia’s generalized global position as a massively powerful economic region that is stabilized, yet still with plenty of room for further development.
We can see this reflected in the popularity of alternate payment methods. New fintech platforms will represent an increasing number of transactions in the coming years. QR code-based payments, for example, are a popular option, allowing buyers in China to use mobile phones when payment accounts are tied to their UnionPay accounts.
Troubling Trends for Financial Institutions
The prospect of rapid, region-wide growth is good news for institutions. However, there are downsides associated with rapid growth in the digital market. We’re seeing a few troubling payments industry trends develop in regard to fraud and chargebacks in this region:
- New Fraud Vectors: Application fraud, account takeover, and social engineering are fast-growing problems for both consumer and business banks throughout Asia.
- Rapid Technology Adoption: Customers expect a seamless banking experience. This has forced incumbent banks to streamline and digitize both front- and back-end processes, and not always under optimal conditions.
- More Opportunity to Collect Data: We’ve observed technology-driven changes such as more widespread social media use, which helps fraudsters collect personal data to exploit.
- Banks Balancing UX and Security: Institutions cannot add layers and layers of security without compromising the customer experience or increasing costs. It’s a delicate balancing act—one which many institutions are struggling to maintain.
At the same time, legacy institutions are facing direct competition from advanced, digitally-native payment providers. They’re feeling the pressure to compete and to offer faster onboarding, payment, and other banking services through digital means. Unfortunately, this further aggravates the problem of balancing costs, security, and customer experience.
Banks implicitly balance restrictive controls against business growth opportunities in order to generate revenue in a competitive landscape. As that landscape changes quickly, though, it’s harder to develop a long-term strategy.
5 Tips to Address Issues
Banks need to ensure that their fraud management capabilities are secure, and that they’re well-positioned to adapt to future changes in such a dynamic space. This raises the question: what can financial institutions do to address this need?
There are many different approaches requiring closer diagnostic examination. However, these five tips are widely-applicable across most banks:
- Break up organizational silos: Rather than segmenting fraud management, it’s better to take an approach that addresses fraud in a more agile and integrated manner. This will be faster, and also allows for more dynamic use of data.
- Build an integrated technology platform: Develop a common data pool, common transaction monitoring solutions, and an integrated case management solution. This platform would form a foundation to make use of advanced digital tools like machine learning and intelligent robotic process automation.
- Invest in analytic capabilities: Machine learning algorithms can build and calibrate more effective detection scenarios. While we counsel against overreliance on machine learning, it should play a critical role in any well-managed strategy.
- Intelligent automation: Investments in intelligent process automation for fraud case investigations can speed up investigation time by more than 50%. This would reduce operational costs and allow for faster response to clients.
- Empower clients through technology: Digital developments have made direct customer engagement possible by empowering the client to add or disable certain security features. In this way, they can shape their own customer journey and educate themselves on fraud risks.
Have additional questions about building a stronger, more sustainable organization in this dynamic market? Want to learn more about managing institutional fraud risks? Enter your email below and speak with one of our payments industry experts today.