Paytech: The blurring of lines between payment systems in an open and digital world

The world of payments has been transforming for some time now and the move towards a cashless society has only been accelerated by the onset of the 2020 COVID-19 crisis.

As an increasing number of people turn to digital payment methods, the need for innovation in this space has rarely been higher. From mobile pay and contactless cards to disruptors such as Klarna which allow for quick and easy instalment-based credit, the number of players in the paytech space is growing exponentially.

As a global center for both financial services and technology, it’s to be expected that the APAC region is in the vanguard of this seismic shift in direction for payments.

Innovations in paytech: Asia focus

The APAC region has seen a burgeoning uptick in mobile and internet penetration rates which, together with rising fintech adoption and huge investments in the sector is causing Asia to emerge as a significant player in the paytech space.

Of the more than $110 billion worth of investment poured into APAC fintech startups in 2019, a sizable portion was diverted into paytech disruptors such as China’s Ant Financial, Indonesia’s Gojek, and Airwallex – a unicorn level fintech founded in Australia and now headquartered in Hong Kong.

Airwallex also recently teamed up with Deutsche Bank for virtual account collections provision and API powered foreign exchange services in Hong Kong and Japan. The company also closed a massive US$160 million Series D round in the same year, which has been earmarked for the launch of more cross-border financial products.

Don’t be mistaken in thinking that only the biggest players are getting attention either. Many smaller payment startups in the region are seeing significant investment. In Thailand, Opn – called Synqa at the time – raised a US$80 million Series C funding round for its online payment platform and blockchain technology services.

The revolution of choice and the acceleration of paytech in Asia

As we’ve seen, significant investment in APAC based paytech disruptors is driving massive transformation in the payment space for both B2C and B2B interactions. Whether it’s a customer purchasing a new pair of shoes, or a massive corporation settling an invoice, paytech is streamlining processes and making life simpler.

So, what comes next? APAC is now gearing up to further accelerate developments in this lucrative and exciting field, according to a 2022 report from ACI Worldwide.

The report tracked real-time payment volumes and growth across 53 countries and includes an economic impact study for the first time, providing a comprehensive view of the economic benefits of real-time payments for consumers, businesses, and the broader economy across 30 countries, including all G20 nations.

APAC was identified as the region most responsible for driving the growth and adoption in the paytech space and predicts that, as initial high growth rates begin to flatten, the region will continue to expand further up the value chain and become a serious player in the global payments market.

“Asia-Pacific remains at the forefront of real-time payments innovation as its real-time base pivots towards larger volume transactions and more sophisticated services for our businesses and consumers,” said Head of Asia-Pacific, ACI Worldwide, Leslie Choo. “The next stage of evolution for the region is to develop linkages to provide a truly pan-regional real-time infrastructure, unlocking much greater economic benefit and opening up the formal financial sector to the region’s vast unbanked and underbanked population.”

This revolution in payments options will provide the population with more options than ever before and empower the unbanked and those of low financial literacy to better engage with payments and become more active players in their own economies. Reducing the size of shadow economies will help create a fairer financial system for all.

“Fintech is not just one topic but a combination of wealthtech, regtech, healthtech and insuretech and its starting to show technology is not centred around the main ecosystem in the platform but into each of the services” - Mohamad Hafidz, Chief Fintech Officer & Head, Air Asia money

Advancements in real-time cross border payments and cyber concerns

Two areas in which paytech has the greatest potential for change is when it comes to cross border payments and cybersecurity. As the world shifts ever closer to a digital reality, the need for more sophisticated solutions in these areas will grow in sympathy.

To answer this call, Singapore and Thailand recently launched the world's first cross border linked real-time payment system which will help the two countries facilitate faster, cheaper, and more secure payments between them.

Image Source: https://www.thailand-business-news.com/banking/83703-singapores-paynow-and-thailands-promptpay-launch-cross-border-payment-system

“This pioneering collaboration between the Monetary Authority of Singapore (MAS) and the Bank of Thailand (BOT) will enable users of the two payment systems — PayNow in Singapore and PromptPay in Thailand — to send money daily from Singapore to Thailand, or vice versa, of up to S$1,000 (US$747) or THB25,000 (US$801), by just using their mobile phone numbers. The funds will be transferred within a matter of minutes,” said a press release announcing the collaboration.

Traditional remittance systems require the recipient’s full name and bank account number and can take significant amounts of time to process with fees often becoming prohibitive. With the integrated system these pain points will be addressed and make it easier to transfer funds between Thailand and Singapore.

When it comes to expanding the integration to other countries, the diversity of ASEAN nations has traditionally made it hard to establish standards for cross border transactions. Until ASEAN has a common and compatible infrastructure in compliance with international standards, it will be nigh impossible to integrated a cross border payment system across the region.

What’s next for Asia in the cashless journey?

As we discussed at the top of this article, COVID-19 has accelerated APAC adoption of cashless payment methods and it seems unlikely this patter will reverse.

However, with a high proportion of people in the region not having access to a bank account, and that population being strongly correlated with those who also have limited access to internet connection and mobile services, infrastructure must be an area of focus for those looking to make paytech innovations available. If paytech is to fulfil its promise that it can bring payments to more people than ever before and increase access to financial services across APAC, this needs to be where the work begins.

Conclusion

Paytech is laying the groundwork for a fairer financial system, so its advocates claim. However, fintech brands must be willing to work with public organizations and other private sector companies to ensure that these innovations can truly have the transformative power they promise. If the goal is to move towards a cashless society, we need to be confident nobody is being left behind due to a lack of access to necessary technology.

To find out how FinTech is evolving in Asia and the challenges and opportunities surrounding this exciting space