- India: With a historically underbanked population and a strong reliance on cash payments, there is huge potential for real-time payments growth and adoption in the India market. The Indian government has set in motion payments modernization initiatives to increase financial inclusion for the unbanked as well as empower a digital payments transformation by moving to a less cash-reliant economy. Two key initiatives: in 2014, the government issued unique biometric identification numbers to 99 percent of adults, enabling the opening of no minimum balance bank accounts; in 2016, the government demonetized 86 percent of the cash in circulation, and while controversial at the time, it has helped drive the shift to electronic payments and motivated citizens to open bank accounts. Another key trend is that mobile wallet adoption has increased almost three times in the past five years.
These shifts in the real-time payments landscape in India have mostly come as a result of the introduction of the Unified Payments Interface (UPI) platform in 2016 and is seeing India transition to a less cash-dependent society, with the UPI platform now processing over a billion transactions every month. It continues to undergo constant evolution; while the platform initially focused on peer-to-peer (P2P) functionalities, regulators are now promoting merchant-friend features which will likely result in the explosive growth of peer-to-merchant (P2M) transactions. All said, India is well-positioned to be an innovation powerhouse like China in years to come, in terms of immediate payments.
- Singapore: Singaporeans have demonstrated a strong dependence on debit, credit, and charge cards, with an average of 4.5 cards per adult. As I had noted with China, this would typically inhibit real-time payments adoption as there is relatively little motivation to change; however, Singaporeans are also highly open to adopting new technologies, as shown by the fact that mobile wallet usage has more than quadrupled from 2014 to 2019. With the real-time payments integration of mobile wallets in 2017, Singapore has seen rapid real-time payments growth from 2017 to 2020.
Singapore’s government has continually demonstrated a strong interest in fostering international relationships and partnerships, one of which is the ASEAN regional payments scheme I had mentioned earlier. Such cross-border payments initiatives will drive real-time payments growth through the adoption of different payment types, particularly among corporates.
- Thailand: When it comes to the use of payments cards, Thailand is at the opposite end of the spectrum from Singapore and China, with low usage rates of payment cards and a strong reliance on paper-based payments. The Bank of Thailand has also overseen significant efforts to promote financial inclusion and leverage real-time payments capabilities to provide a multitude of benefits to Thai citizens.
Thailand has a very well-planned real-time payments scheme in PromptPay, the national e-payment scheme which aims to transition the country to an increasingly cashless society as part of Thailand’s 4.0 initiative. With PromptPay being connected to all segments, as well as high levels of mobile wallet adoption, we have seen explosive real-time payments growth rates over the last three years and can expect to continue to see further aggressive growth in the next 5 years. One potential opportunity for further real-time payments growth here would be in moving its real-time payments scheme to the ISO 20022 standard, which would add additional real-time payments capabilities and improve interoperability.
- Indonesia: A very promising market in terms of real-time payments. Indonesia is still in the midst of planning for the development of a real-time payments system, BI-FAST, which will be part of Indonesia’s 2025 Payment System Vision. While no firm timeline has yet announced, there are signs that changes – when they do arrive – will be swiftly embraced by consumers and businesses.
The Indonesian government has expressed the need to maintain the balance between innovation, consumer protection, stability and the need to protect national interests as cross-border trade continues to grow. Other promising factors for real-time payments adoption include a continued dependence on paper-based payments, some of the lowest payment card ownership levels globally, and extremely strong mobile wallet adoption. These are all indicators that Indonesians are ready for real-time payments innovation, and that we can expect plenty of business and strategic opportunities in the coming decade from this market.
How could the payments ecosystem keep up with customer expectations in the digital experience economy?
Choo: Banks, financial institutions and other payments players around the world have recognized that customers expect the ability to make secure, real-time payments anywhere in the world, so that they can keep up with the real-time commerce environment.
Consumers are increasingly lacking patience for anything less than immediacy in the digital world – and this includes the customer-facing part of the payments value chain: authentication, authorization, clearing, posting, confirming and providing balance updates. Banks that are behind the curve on real-time payments would attempt to address their part of the value chain (including credit checks, sanctions and AML requirements, settlement, liquidity management and risk management) before the customer-facing portion, leading to an inferior customer experience. An example of this would be in how some banks still do not always show updated balances after an instant payment transaction is conducted.
The payments modernization initiatives – whether led by regulatory bodies or by the financial institutions themselves – including those I’ve highlighted, have gone a long way towards addressing these needs and expectations.
One key area for further growth in Asia would be the adoption of the ISO 20022 standard across the region. Adoption is uneven across the region, with only some countries, such as Singapore, having transitioned so far to the data-rich messaging standard. ISO 20022 would improve payments efficiency and facilitate interoperability between different real-time payments schemes across borders. The breadth and depth of the data also makes the ISO 20022 standard a natural fit for Machine Learning (ML) and Artificial Intelligence (AI), which are built on big data.
Given the complexity involved in migrating to ISO 20022, the key trick to meeting migration deadlines is to work with a partner that can provide ISO 20022 native solutions, delivered with technical expertise and causing minimal disruption. 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.