Asia is considered the most dynamic economic region in the world by the IMF, although the COVID-19 pandemic is causing a downturn projection for south Asia. However, the continent also contains the top three countries for unbanked populations globally (China, India and Pakistan), and a significant proportion of those people rely on cash and cheques, as opposed to electronic fund transfers, cards and other payment methods.
Despite that, and demonstrating the variety in the region, Asia is also home to the top three countries with mobile payment, with China, India and Indonesia ranking in that order. As such, it makes sense that the region would also be leading the corporate payments revolution. Under various monetary authorities, Asia’s real-time clearing systems have been developing rapidly. India has the Immediate Payment Service (IMPS) as well as the Unified Payments Interface (UPI), whilst Malaysia has Real-time Retail Payments Platform (RPP), Thailand has PromptPay, Singapore has Fast And Secure Transfers (FAST), and Hong Kong has Faster Payment System (FPS).
Asia’s rapid progression
For Honnus Cheung, Co-founder of fintech Mojodomo, Asian countries are ahead in certain aspects of digitalisation, owing to the widespread acceptance of technology within the countries as a whole – not just in treasury. “We use mobile phones for everything now. So we prefer to conclude an entire transaction experience by mobile phone, rather than using computers,” she explains. In this sense, the consumer is driving the upgrades to the digital payment experience.
“If you’re a B2C business, it is necessary to have online payment channels or QR codes for scanning payments. Otherwise, you probably can’t do business in Asia – especially China or other countries where they are very mobile-savvy,” she says. Indeed, China’s rapid adoption of mobile payments through the likes of WeChat Pay and Alipay has been largely driven by the lack of card payments in the country – getting a credit card from a Chinese bank is a lengthy process, and there has long been a de facto ban on foreign payment service providers unless they issued co-branded cards with a domestic provider such as UnionPay (however, in February 2019 Mastercard secured Chinese government approval to enter the country’s electronic payment services market). Combined with the explosion of smartphone adoption, this meant that mobile payments were able to leapfrog traditional methods seen in countries such as the UK and US.
The value of real-time payments is obvious in terms of improving the speed of commerce, says Shirish Wadivkar, Global Head, Correspondent Banking Products, Standard Chartered. But he explains that the core change is in the data structure of the faster payment networks. “They carry more data – some boast full ISO 20022 compatibility – and are smarter, with full track and trace capability,” he says. These payment networks are open and allow for integration of third parties, which makes it easier for consumers to pay using aliases such as mobile numbers and national IDs. At the same time, they offer more transparency into payments, and more information on why the payment has happened. “This naturally leads to improving the entire experience between buyers, sellers, and their banks,” Wadivkar says.
Ankur Kanwar, Regional Head, Cash Products, Singapore and ASEAN at Standard Chartered, also notes the rapid development of payment infrastructure in Asia, and believes it’s only going to continue. “More countries will introduce real-time domestic payments, payment by proxy or scan and pay via QR codes in the next few years,” he says.
But as Kanwar notes, the regulation landscape also needs to adapt to facilitate these changes. From a treasury point of view, the region is characterised by a vast number of regulatory differences between countries. This makes cross-border payments more difficult, and Cheung, who was previously CFO at Travelzoo, notes that not every country is equally advanced in Asia. The continent has always been a region where differentiated geographical and sector regulations have added complexity to the work of treasurers.
Standardisation – or lack thereof
For Cheung, one of the main challenges in the payments space in Asia is the lack of standardisation of digital payment formats. “SWIFT makes it easier and is a secure network within financial institutions that has been used for many decades, but it is not real-time and has relatively high transactions fees,” she explains. “There are many fintech companies that can be used for cross-border payments, and there’s actually a mushroom of payment formats that can accept monies electronically across Asian geographies, but this is in turn presenting headaches in reconciliation for treasurers.”
In a May 2019 article, the MIT Technology Review stated that “the entire ecosystem needs to pull together” before real-time transactions can fully materialise in Asia. The region’s multiple currencies can also prove a hurdle. Unlike in Europe, where there are only really three main trading currencies – the euro, the pound sterling and the Swiss franc – Asia’s multiple currencies prove problematic as not all of them are internationally tradeable. Cheung does recognise that in comparison to Latin American currencies, Asian currencies are relatively stable, but adds that fluctuation by 3-5% a day is still normal – or on a monthly basis it can depreciate by 10-20%.
Kanwar agrees that the large differences in Asian currencies can be a challenge and explains that “each market in the region has multiple localised payment options, each with different infrastructure requirements, which makes payments consistency difficult to achieve across the region.” In addition, he says that despite the digitalisation initiatives being undertaken by many corporations, challenges can arise from legacy infrastructures that have limitations on accepting 24/7/365 feeds.
Cheung notes that to some extent, treasurers and banks are very traditional professions, but they are recognising that in order to attract more customers they need to adapt and go digital. “Whatever product you’re launching, be it for corporate banking or consumer banking, you need to consider the digital – and mobile – perspective,” she says. This includes ensuring that the customer experience isn’t exceptional just because the payment journey is smooth, but also because it has good digital accessibility and a high level of security.