The whole of the Asia Pacific (APAC) region is experiencing an exciting digital payments revolution. The evolution of a digital-first economy and the fervent adoption of real-time payments in the APAC is causing its payments landscape to become increasingly diverse.
There’s no doubt that the COVID crisis has accelerated the worldwide adoption of real-time, or immediate payments (IP). The pandemic has placed a tremendous amount of pressure on consumers and small businesses struggling to generate income amidst the forced shutdown of the economy. The need to access funds immediately is driving businesses and individuals to leverage the latest ways to move funds locally and across borders.
So, let’s now explore how IP trends are evolving in APAC & ANZ.
The future is immediate
Immediate payments systems have been developing worldwide for many years, with more and more locations adopting real-time rails as well as updating and optimising older schemes. Massive innovations like digital overlay services and alternative payment methods are developing almost every month, effectively transforming payments landscapes.
Digital overlay services make many different kinds of alternative payment methods possible from any app on social media, mobile and online banking platforms. The front-end touchpoint for consumers, merchants or corporate customers, a digital overlay service is about connecting IP to a purchasing experience, billing scenario or accounts payable process. Google Pay, WhatsApp Pay, Amazon Pay and Paytm are real-life overlay services.
World commerce is changing so that every sector from governments and central banks, to merchants, billers, fintechs and any other player in the payments ecosystem will benefit from IP in some way. This is already the case in many markets, including most of APAC and Australia.
Let’s take a quick look at some of the key features of IP (sometimes referred to as instant payments, faster payments and real-time payments):
- The beneficiary receives funds immediately.
- Once a payment has left the sender, the transfer cannot be de-authorised.
- Funds are confirmed in real time, meaning that once payment is authorised, the sender’s balance reflects the debit instantly. o Although settlement timing can vary by scheme, it is most often completed within seconds.
- Newer IP systems are often based on ISO 20022, the defacto real-time standard.
Immediate payments in APAC
Many Asian governments including India, Singapore, Malaysia, Thailand, Philippines and China are heavily promoting the use of digital payment to increase financial inclusion and grow their digital ecosystems. Emerging technology is top of mind across APAC, where digital leaders are fiercely competing to optimize their operations and enhance customer experiences. Eight of the top ten countries to embrace mobile payments are in the Asia Pacific region. For example, China has far overtaken most countries in terms of how consumers deal with exchanging money. In 2018 in China, 86% of subscribers used mobile payments in stores.
Singapore’s Fast and Secure Transfers (FAST) was among Asia’s first new wave of instant payment services, and enabled customers within 20 participating banks to send electronic transfers almost instantly within Singapore. Other countries in the APAC region are expecting aggressive future growth in IP.
Cross-border payments in APAC
It was expected that APAC would follow in the footsteps of the EU, and adopt a Single European Payments Area (SEPA) style payment network to help streamline cross-border payments. But the lack of a common currency, and uniform regulations - as well as an inconsistent economic agenda – have hindered the development of a region-wide agreement on cross-border payments. But due to heavy consumer demand, the Monetary Authority of Singapore is in collaboration with the Hong Kong Monetary Authority to link the two jurisdictions, with the view to facilitating cross-border trade.
In April 2020, NCS signed a Memorandum of Understanding (MOU) with the Network for Electronic Transfers (NETS) group to develop a new real-time electronic payment and securities settlement platform for central banks. The collaboration combines NCS’ capabilities in building highly secure, digital and complex government applications and infrastructure, and NETS’ experience as a national payments provider and innovator in cross-border payments.
The partnership also involves the joint development of a next-generation suite of central banking products, that can be customised to the regulatory needs of different financial markets, enabling both companies to expand into South East Asia, Hong Kong and China.
Malaysia’s IP network, even though it’s only around two years old, already boasts a robust infrastructure, supporting banks, P2P and merchant payments. DuitNow, is a solution launched by the national payments network and central infrastructure provider, Payments Network Malaysia in collaboration with ACI Worldwide in 2018.
Thailand’s IP capabilities have experienced a phenomenal growth of 145%. Launched in 2016, their IP system, PromptPay, was initially part of its National e-Payment initiative, designed to deliver government welfare disbursements. The Thai market is a perfect example of the key drivers for explosive IP growth: high levels of mobile wallet adoption (and integration with IP), low usage rates for payment cards and a history of heavy reliance on paper-based payments.
There are a number of factors slowing down the adoption of IP, or indeed cashless transactions in the Philippines, although it is growing. Slow and limited internet services make even the acceptance of card payments and contactless difficult for merchants. Also, EMV technology was only implemented in the Philippines in 2017, while neighbouring countries had it over a decade before.
While Australia’s platform has only been in place since 2018, IP has seen rapid YOY growth of 277%. The New Payments Platform (NPP) was launched in February 2018 by the Reserve Bank of Australia along with 13 members of the financial services industry. Now, 85 banks, credit unions, building societies and fintechs use the platform to offer IP, to allow customers to link personal information to bank accounts and transfer funds using PayID. OSKO is another payments service launched by BPAY, and designed to offer consumers the ability to transfer money from one bank to another in real time. OSKO is not a standalone app, rather it’s designed to work within a financial institution’s app or website, and is currently available throughout 60 banks and financial institutions.
Unlike Australia, IP systems are lower priority in New Zealand, due to their already established and quite quick electronic funds transfer systems. However, the need to provide a more open banking environment with scope for innovation is leading the New Zealand financial services sector to rethink their strategies.
Payment Transaction Monitoring is crucial
With the rapid evolution of cross-border payments, and the universal uptake in IP across APAC, providers are having to contend with worldwide changes and the rapid growth of technologies, and manage increasingly complex and demanding global payments environments/.
Payment transaction monitoring needs to be ahead of the game. IR’s solutions include rapid troubleshooting, comprehensive analytics and reporting, using advanced technology that holds its finger firmly on the pulse of the global payments industry.