The Asian payments landscape is transforming dramatically. The emergence of faster, real-time payments is changing how and how fast money moves in several key markets, and helping to change consumer and business expectations across the whole region. While the majority of payments in Asia are still made using cash, the most common methods of providing electronic payments are, at least for now, via multiday ACH payments and small-scale card-based networks or platforms.
Countries that have already launched or are developing instant or real-time payments are at the forefront of global payments renovation, including Philippines (Instapay), Singapore (FAST), South Korea (EBS), Thailand (PromptPay) and Malaysia (with the upcoming eRENTAS). These instant payment schemes go beyond simply providing a cash replacement.
Asian payments are at a tipping point, caused by greater customer demand for instant domestic and regional payments, increasing demand from regulators for financial inclusion, and a growing expectation for frictionless trade payments – all accelerated by the presence of successful disrupters in the market.
Regulators are looking at how instant payment schemes can be linked to facilitate the free movement of goods and services across the region. With the schemes based on the latest technology and standards (ISO20222), it seems linking them would be a relatively straightforward process. Yet, challenges remain when it comes to solving complex settlement, risk, finality, foreign exchange (FX), governance and regulatory reporting requirements. Outside of governmental initiatives and proof of concepts, limited progress has, so far, been made on cross-country connectivity at the scheme level. Undoubtedly, it will happen. It's just a question of time.
Cross-border transfers have already been improved through initiatives such as SWIFT gpi (a global cross-border payments initiative), bringing the advantage of track-and-trace capability and real-time funding rules to the existing bilateral correspondent networks. Going one step further, some more progressive banks with branches across the region are deploying a single, agile payment services solution to drive their businesses, which allows them to gain full control of the entire money movement experience.
Meanwhile, Asia's most successful digital payment disrupters, such as Alipay and Paym, are targeting the large unbanked population with a complete payment and messaging service, providing a frictionless customer experience with only a small element being the actual funds movement.
Asian payments are at a tipping point, caused by greater customer demand for instant domestic and regional payments, increasing demand from regulators for financial inclusion, and a growing expectation for frictionless trade payments – all accelerated by the presence of successful disrupters in the market. Banks have to decide if, and how, they want to compete in the payments business – and now is the time to make key strategic decisions. Banks that fail to keep pace may struggle.
To stay competitive and provide a more engaging customer experience, banks need a payments strategy that can support all the front-end channels required by today's digitally demanding customers, combined with instant payments and cash management. A payments platform or hub forms the central core, providing hardened services to the customer touchpoints, which allows the front-end channel interactions to be quickly tailored to reflect the market and the latest interaction models. In combination with machine learning systems, payment platforms can also detect fraudulent activity and automatically apply any regulatory updates. So, a payments platform future-proofs a bank's payments business while improving efficiency and effectiveness and vendors such as Fiserv have shown that this can now be successfully achieved in months, not years.
Payments are one part of every financial transaction and have traditionally been the lifeblood of banks globally. However, with these accelerating changes, challenges and opportunities, there are key choices for banks to make. For those choosing to compete in payments, investing in a payments platform or hub that provides the flexibility to increase the range of services covered from a simple point solution to a full multipayments platform would be a smart choice.
In Asia, the adoption of payment platforms has been limited to date. With the need to compete in an increasingly challenging but growing market, the more progressive banks are now positioning for future growth by making these investment choices, looking to a more holistic approach to payments and process innovation.