CROSSBORDER Power in networks: But making payments work across APAC will require collaboration
JOINING THE DOTS South East Asia is a diverse region in every respect: economically, politically, socially… and digitally. What it really needs is a pan-regional payment system, but what are the chances of that? Well, quite good, according to Eli Shoshani, Head of APAC at Bottomline, and Medhy Souidi, Head of FinTech, StartupXchange and Customer Development at DBS With innovation hubs, most notably the rival fintech cities of Singapore and Hong Kong, already firmly established, South East Asia is fertile ground for banking 2.0. The market here is a rapidly evolving, if still fragmented, one. And the financial power centres are coming under increased pressure from third parties such as Thailand and Malaysia, desirous of a more active role in a region where local, regional and global banks already rub shoulders with fintech and blend status readily. Where many of them meet is in the payments space – highlighted in McKinsey’s November 2020 report The Future Of Payments In Asia. It noted that the region already has the largest contribution to global payments revenue, generating more than $900billion in 2019 alone – or nearly half the global total. While the COVID-19 pandemic may have caused a temporary reset – McKinsey forecast a one to eight per cent payment revenues hit in 2020 – longer term fundamentals for the region bode well, with expectations of a ‘fairly rapid’ return to mid-to-high single digit annual growth and forecast annual revenues of $1trillionplus by 2022/2023, the report said.
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However, the post-COVID payments landscape will likely look very different – McKinsey identifying ‘five Cs’ indicative of change. Firstly, crossborder links, including more bilateral payment systems and possibly the emergence of a pan regional one – the million-dollar question being who will provide it. Then, consolidation, given there probably isn't room for the sheer number of digital payment providers that have emerged. Contactless consumers are demanding an increasing focus on wallets and QR codes. Connected commerce – as competition drives down the cost of payments, providers, especially banks, need to find a way to monetise them, which goes beyond transaction fees. And, finally, cashless economies, as Asia leads the world league table in transactions that don’t rely on paper and coins. For all these to progress, requires both an enabling payments infrastructure and forward-thinking regulatory environment – both of which Hong Kong and Singapore have worked hard to put in place, says Medhy Souidi, head of fintech, the StartupXchange and customer development at Singapore bank DBS, based in Hong Kong. He observes: “In Hong Kong and Singapore, we have highly efficient, diversified, and
inclusive payment ecosystems right now, with fast payment solutions. So in Hong Kong, (under the Faster Payments System), you can pay in the blink of an eye, anytime, anywhere.” As in Singapore, the aim is to drive the ecosystem to ‘something more digital, seamless, and also without friction ’for companies and customers’. In February this year, the Monetary Authority of Singapore gave major licensed non-bank financial institutions direct access to its domestic real-time payment system FAST (Fast and Secure Transfers) for the first time, as well as the overlaid PayNow central addressing service. That means consumers will be able to make real-time funds transfers between their bank accounts and e-wallets, instead of using cards for top up, and to push cash between e-wallets, which was not previously possible. Staying competitive means pursuing innovation and collaboration like this, says Souidi. “So, for example, the HKMA (Hong Kong Monetary Authority) has pushed many banks to collaborate through different, interesting processes, such as data exchange between banks and the local market. We have also a blockchain platform named eTradeConnect, connecting banks www.fintechf.com
