Here’s one C that’s not gone viral
Cash is no longer king as consumers, regulators drive emerging Asia’s adoption of digital payments
3 Jul 2020 | Darryl Yu

The rapid take-up of cashless payments could soon eclipse bills and coins as the preferred mode of transaction in Asia with the region’s emerging economies – those in China, India, Malaysia, Thailand, and elsewhere – set to make up the lion’s share of cashless transactions globally by 2022, according to a recent report.

The World Payments Report 2019 also notes that the compound annual growth rate of cashless transactions has grown 27% since 2017.

Many Asian governments, responding to the change in consumer habits when paying and transferring funds, have begun developing or have developed over the past several years domestic payment infrastructures to boost and support real-time payments.

The most notable of these developed payment networks, which enable the real-time transfer of funds between individuals and companies using a single identifier as a reference, are PayNow in Singapore, Unified Payments Interface in India, Faster Payment System in Hong Kong, and PromptPay in Thailand.

“Southeast Asian countries are making significant strides in payments modernization, with nearly every major country in the region having robust domestic real-time payments infrastructure in place,” notes Leslie Choo, managing director, Asia, at payments company ACI Worldwide.

And while these domestic payment infrastructure platforms are a step in the right direction, in that they provide convenience for consumers and businesses and help prevent fraudulent transactions, they need to be taken to the next level. More speciifically, they should also be able to handle cross-border transactions.

Some countries in Southeast Asia, a sub-region cited as ideal for cross-border schemes, have already started to work towards this end. Malaysia and the Philippines are working together on multiple fronts in an attempt to link up domestic payment networks. And the Bank of Thailand and the National Bank of Cambodia recently announced that they would soon launch an interoperable payment QR (quick-response) code that will allow Cambodian tourists to pay for Thai goods via a Cambodian digital bank app.

Nevertheless, while the drive and motivation are there, hurdles to developing a universal cross-border real-time payment system exist. The first hurdle will be overcoming the problem of there not being a set of general governance standards to guide any proposed payment networks in the region.

In the European Union, for example, the 36 countries of the union developed a single euro payment area (SEPA), a payment-integration initiative that harmonizes cashless payments made using the euro as the common currency. In the Association of Southeast Asian Nations (Asean) countries, a version of SEPA will be hard to achieve anytime soon due to their varied currencies and financial policies.

A second hurdle for a potential Southeast Asian payment network involves the lack of interoperability, not only between domestic systems in Asean, but also within domestic payment networks in the same jurisdiction.

In addition to government initiatives, financial networks, such as Swift (the system of the Society for Worldwide Interbank Financial Telecommunications), have looked to enable interoperability. In 2019, under Swift’s global payment innovation initiative, service banks were able to transfer funds cross-border from one domestic real-time payment network to another in under a minute.

And though the real-time payments market in Southeast Asia is currently fragmented, there is a strong drive to forgo cash and move towards digital transactions. With the ongoing Covid-19 pandemic, this sentiment will only grow stronger as individuals and companies seek new ways to transact with less face-to-face interaction.

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