Long before we learnt about the coronavirus, digital money had already been gaining currency with consumers, small businesses and large institutions in recent years as it facilitates transactions in a fast-changing world driven by the forces of globalisation, urbanisation and digitisation.
Closer to home, the adoption of digital payments has been particularly rapid in ASEAN due to the region’s young and highly-connected population. In the 2019 Citi and Imperial College’s Digital Money Index, which tracks 84 countries and their digital money readiness, we saw five out of six ASEAN countries move up the ranks in the five years between 2014 and 2019. Reflecting this trend, Southeast Asia’s Internet economy has more than tripled in size over the last four years, according to the e-Conomy Southeast Asia 2019 report by Google, Temasek Holdings and Bain.
Recognising the opportunity presented by the propensity of the population to adopt digital payments, and their evident role in driving financial inclusion, governments in ASEAN have been fast transforming their payments systems. Indeed, seven of the grouping’s 10 countries have already rolled out sophisticated real-time instant payments systems, in addition to upgrading their core payment infrastructure.
For instance, the Singapore government introduced PayNow in 2017, a platform that allows customers of participating banks to perform instant peer-to-peer transfers with each other simply by entering a mobile or personal identification number. A year later, an enhancement to the platform, PayNow Corporate, was introduced to allow businesses and government agencies to pay and receive funds instantaneously using a Unique Entity Number (UEN).
Across the causeway, the Malaysian government announced in its latest Budget that it will provide all eligible Malaysians with a one-off RM 30 incentive to speed up the adoption of e-wallet usage in the country. Financial Process Exchange (FPX), the country’s new 24/7 real time payments platforms, has already clocked 174.2 million transactions in 2019 alone.
Not far behind, PromptPay in Thailand has 49.4 million registered users, which is approximately 70 per cent of its population as of January 2020. Similarly, we are seeing rapid progress in Indonesia (ATM Prima), Philippines (Instapay) and Vietnam (NAPAS).
These developments are just part of an ongoing evolution of the real-time payments landscape in ASEAN that will see more advanced features being introduced to enhance the payments experience. This will drive a proliferation of use cases, which will in turn, drive even more usage, creating a virtuous cycle. One such feature is a Request-to-Pay function that gives companies an easy way to collect from consumers and businesses, and is already available in two countries, Thailand and Malaysia.
Meanwhile, the tokenisation and the use of a standardised QR code that have been adopted by many countries across their payment systems create a user-friendly environment for consumers, such as eliminating the need to share your bank account details with others.
Making cross-border payments seamless, convenient and fast
One increasingly important application for real-time payments is in enabling cross-border transactions. With the growth of ecommerce and the interconnected digital ecosystem, the demand for cross-border instant payments is expected to increase.
However, for cross-border payments to realise its full potential, it will have to interact seamlessly with domestic real-time payment systems across ASEAN. Interoperability between these platforms will create a fully digital, seamless and convenient payment experience for consumers.
Progress has already been made on this front. As governments and financial regulators in the region launch their domestic real-time payment infrastructure, they are also connecting these systems with each other. For instance, Thailand and Singapore are already expanding the connectivity between their two countries.
As more countries in ASEAN connect their systems, we can imagine a scenario in the next few years where a tourist from Malaysia can pay seamlessly in Thailand or Singapore using his or her own home country’s mobile payment application. Before that happens on a large scale, however, differences in settlement practices and foreign exchange regulations will need to be worked out between the countries.
Payment solutions for the 21 st century
One of Citi’s key client segment seeking such solutions are digitally-native companies whose immediate priority is to reach as many customers as possible in the quickest possible time. Such enterprises require a partner that can provide them with access to a seamless network that has connectivity everywhere.
Companies in the dynamic Telehealth Services sector, for instance, require instant payments and collection services to enable their patients to make real-time payments after their remote consultation services are over.
Elsewhere, ecommerce platforms that sell across borders are using Citi’s multicurrency pricing solution to provide a more localised experience for their customers when they pay. Buyers are also able to see prices in their preferred currency, with no surprises in the eventual charge. Importantly, the platforms are able to manage the FX risk of the ecommerce firm, thus improving margins and
The demand for instant payments is indeed growing exponentially. We are also seeing clients in traditional industries looking to leverage such tools as they transform their business models in response to changing consumer behaviours. For example, as more consumer companies adopt “Direct to Consumer” strategies, which their existing supply chains and payment options cannot support, they are
offering new digital payment options, such as instant payments, to increase sales.
Furthermore, insurance companies seeking to enhance their customers’ experience are using digital channels to automate low-value claim processes and help their policyholders make an insurance claim at a much faster rate, as well as receive their claims disbursements via real-time payments.
Citi recently worked with AXA to streamline its collections from policyholders by setting up the Dynamic PayNow QR Solution with Push Credit Notification API as part of an end-to-end instant collection solution. Policyholders who purchase insurance products through their online portal can now opt to pay seamlessly via PayNow FAST for their insurance premiums, using the dynamic PayNow QR code.
Today, Citi’s solution allows AXA to collect and receive funds instantly from customers at any time of the day, and at even lower cost than other channels. Most of these instant payments schemes cost less than other payment options and are often are much cheaper than the use of cash or even checks.
A payment solution comes of age, however, only when it can be completed seamlessly as part of the commercial transaction, without anyone having to think about it as a separate step requiring effort. For that to be achieved, more work needs to be done by businesses, financial institutions, governments and payment system operators. First, create a robust and scalable settlement system with online
monitoring and fallback options which help banks manage settlement risk. Second, add layers of sophisticated features which help both consumers and businesses solve problems – this will lead to a multiplier effect in adoption. And third, have more coordinated incentives and outreach programs for consumers to create a pull factor in the market – banks and financial institutions are likely to invest more in their solutions if they see their customers asking for more.
And if we do this right, they will.
The writer is head of Citi's Treasury and Trade Solutions (TTS) business in Singapore and ASEAN.