With digital payments on the rise, ISO 20022 compliance priority for SEA

QR code payment used at Geylang Apam Pulau Pinang stall at Geylang Serai Market and Food Centre on Sept 21, 2018.
Having QR codes in place for digital payments is just a first step. Having analysed data in recent months, Facebook and Bain & Company expect that 70% of all consumers in Southeast Asia are likely to have gone online by the end of the year.   This is a mammoth shift with significant implications for businesses, going beyond consumer goods companies.
JUNE 22, 2020 - 12:39 PM

The COVID-19 pandemic has brought about seismic shifts in the ways that businesses operate, as well as how we as individuals work and play. This has also affected how we think about the payments and financial services we use every day – we are seeing the use of cash and checks on the decline, with more countries actively encouraging contactless payments, for example via mobile banking, to complete their everyday transactions while reducing contact with shared devices.

Retailers and merchants that previously preferred cash now prefer the use of cards and digital payments, while consumers are increasingly shopping online and making digital transactions. Even after the initial crisis subsides, we are likely to see many merchants continuing to prefer electronic payments. Real-time and digital payments (such as through mobile wallets) are potentially cheaper and faster to process compared to cards, depending on interchange fees and settlement times. 

Governments are taking notice as well – the Singapore government, for example, has announced additional incentives for F&B businesses and retailers to support digital payments. But there are a number of payments modernisation initiatives around the region that pre-date COVID-19 too, such as the early 2019 launch of Real-time Retail Payment Platform (RPP) by PayNet in Malaysia.

However, there is still plenty of scope for financial institutions to enhance intra-regional trade and businesses activity, in terms of cost and efficiency. Case in point: the adoption of ISO 20022, which has become the global standard for high-value payments and real-time payments when it comes to cross-border transactions. While the various Southeast Asia (SEA) countries differ in their regulatory approaches to adoption, there is certainly some urgency involved – financial institutions that aren’t ready to migrate to ISO 20022 may find themselves excluded from payments networks and regional interoperability, which consumers are increasingly expecting. 

Why regulatory bodies globally are pushing for ISO 20022 migration

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With thousands of data fields, the ISO 20022 messaging architecture is significantly more data-rich than previous standards. Allowing additional information to be attached to payment messages improves payments efficiency and creates a common and level playing field, facilitating interoperability between different real-time payments schemes across borders. This will open the door to consolidation of systems and associated cost reductions, but also the creation of new services that bridge previously disparate payment systems. 

Along with ISO 20022 message standardisation, the breadth and depth of the data also make machine learning (ML) and artificial intelligence (AI) a natural fit as predictive models can be developed to run millions of fraud checks in the span of a few seconds, swiftly and automatically identifying legitimate transactions. The combined benefits of speed, accuracy and efficiency of ISO 20022 messages will result in a better overall customer experience, which is key in setting these financial institutions apart from their peers.

Adoption rates differ across SEA

To ensure that their organisations are ready to capture relevant ISO 20022-related strategic opportunities, as well as be ready to join any regional payments network, it is important for business leaders to understand the nuances to each country. Financial institutions and banks – not to mention regulators – across SEA will need to understand the various regional movements and ensure that their adoption of ISO 20022 does not fall behind.

Opportunities for collaboration should remain open. Here are a few key country-level insights from ACI Worldwide’s recent Prime Time for Real Time report: 


Thailand’s market is something of a “perfect storm” for real-time payments adoption — as evidenced by the speed at which Thai consumers have taken to real-time payments usage through digital overlay services such as PromptPay, which leverages an alias database to enable P2P, P2C and C2B payments via email, phone or ID number. This is a successful first-wave result for the Thai government’s Financial Services Master Plan for payments modernisation. Thailand can also drive real-time payments further by moving its scheme to the ISO 20022 messaging format, as this will provide more capabilities and improve interoperability. All of which is essential to continuing the upward trajectory of transaction volumes. 


The centrally-driven mandate approach to making all banks ISO 20022-compliant on a unified connector or gateway was instrumental in driving up transaction volumes from day one. This accelerated time to revenue compared to other payment schemes, which have experienced a longer time to “ramp up,” was made possible through collaboration with ACI on the right solution to quickly onboard the participants. Malaysia is also in the process of adding a consent management platform for debits, credit transfer capabilities, eKYC digital ID compatibility and real-time debit capabilities. As well as cross-border payments with SEA payments schemes such as PromptPay and NETS, enabling accessibility to the above through APIs. There is still plenty of growth yet to materialise in Malaysia.


Singapore has already seen impressive real-time payments growth, but there are certainly factors that might drive this further. Historically, a lack of central bank mandate has kept PayNow membership to a limited group, and understandably this has impacted on transaction volumes. Lack of mandate can also lead to inconsistency in availability of services across the banks and financial institutions, which inhibits the development of a rich ecosystem of fintechs and integrated services – this still needs to be addressed.

Making the migration easier

No matter where in SEA the financial institution operates, compliance with various deadlines from regulatory bodies needs to be balanced against the need to map out an organisation’s own smooth, controlled and low-risk timeline for migration. Integration into non-ISO systems and the canonical orchestration of messages to provide a pathway to full real-time operations are also key aspects of a comprehensive migration journey. 

Done right, the process of ISO 20022 migration can also be transformed into a business opportunity, creating a more agile payments environment and helping banks compete more effectively – over the next decade and beyond.


The writer is head of Southeast Asia at ACI Worldwide