There is no doubt, COVID has led to a profound shift in Asia’s payments landscape, transforming long-accepted payment behaviours, almost overnight. As social distancing became a basic part of life, contactless payments, and their real-time nature, provided a simple and immediate solution for the multiple payment issues faced by consumers.

The outcome of this generational leap in behaviour is that customers no longer accept a fragmented payment experience. Instead, they expect, and demand, an integrated experience, one that is consistent across channels, whether paying online or in-store, and consistent across form factors, whether smartphone, tablet, watch, or whatever else.

Consumers now view digital and real-time payments as a viable alternative to physical fiat currency. It seems cash now has a real competitor.

The shift to digital gathers momentum

COVID accelerated digital payments adoption in Asia, with a sharp rise in contactless payments, particularly those leveraging real-time rails (infrastructure). The pandemic also introduced millions of new users to cashless payments and expanded the spending habits of current users. This forced users to confront their fears, misunderstandings, or confusion regarding digital payments and made “digital” the accepted global currency of choice. As dependence on digital payments increases, it’s hard to see consumers revert to their traditional mindsets or behaviours.

This surge in adoption also forced businesses to increase their own digitisation efforts – to keep up with new sophisticated, consumer demands and preferences. Traditional players were motivated to digitise to stay current and relevant, while new entrants embraced real-time tech to leapfrog incumbents and establish much sought-after innovation. This value add is likely to spur even greater growth.

Digital and real-time payments are also widely acknowledged to have significantly reduced the cash flow issues that plagued industry following the COVID outbreak—the ability to pay suppliers, staff, logistics and utilities digitally, reduced the cashflow constraints of many businesses and highlighted the gross inefficiencies and costs associated with cash.

Individually, these factors would all generate growth for real-time and digital payments; however, combined, they are almost certain to ensure that high growth and adoption continue unabated.

Explosion of form factors and frictionless payment experiences:

We saw the payment acceptance infrastructure evolve post-pandemic, and it will continue to lead payment innovation with a surge in new payment modes. Form factors, or payment methods, will rapidly evolve.

Traditional smartphones and cards will remain the primary payment methods for now, but others such as wearables, IoT and smart home devices will all accelerate adoption and expand real-time and digital adoption while continuing to chip away at cash’s receding influence.

Meanwhile, new services like ‘Request to Pay’ (R2P) will emerge as key differentiators. With Asia and the U.S. already live, and other regions preparing to launch similar initiatives in 2022, expect corporate and government collections to increasingly move to R2P.

Keeping it simple:

Digitalisation is also forcing many banks and other financial institutions to rationalise their communication protocols to better navigate and communicate between varying regional standards.

Financial institutions are well known for their legacy infrastructure that often limits internal and external interoperability. Those limitations also extend to digital and real-time payments. In fact, financial institutions were previously required to split and manage their corporate and retail payment systems separately.

Several current legacy data standards also limit tracking capabilities, which can pose major reconciliation and traceability challenges.

ISO 20022 will help. ISO 20022 is an international standard for electronic data exchange between financial institutions. It began with low value payments (cards, wallets, QR pay etc.) before incorporating high-value, real-time payments (cash management, Swift, etc).

This ability to combine or converge low and high-value real-time payment data makes it ideal for financial services as it dramatically reduces duplication and complexity while improving governance and efficiency.

Ultimately, ISO 20022’s flexibility means any new real-time payment infrastructure won’t require a new data standard, but simply be combined with current systems, significantly improving time to market, effectiveness, interoperability and governance.

Capitalising on cross border

Despite the market opportunity and a high interest in regional payment scheme integration, cross-border payments have proved elusive in Asia.

Currently, real-time payments are restricted to domestic schemes and a small but growing number of bilateral agreements between close neighbours. But there are increasing moves to change this as Southeast Asia central banks continue to explore interoperability between their domestic schemes to extend and expand regional linkages within ASEAN and the greater Asia Pacific.

While ASEAN still does not possess an integrated regional payments framework between members like the EU, numerous bilateral arrangements have organically led to greater integration, creating a form of regionalisation by stealth rather than by design.  

As more ambitious bilateral agreements, such as the upcoming Singapore / India (mid 2022) initiative emerge, real-time cross border payments will surge and with it, Asia’s economies.

The race to real time

It is clear the deficiencies and inefficiencies of cash are increasingly exposed for even its most ardent supporters and the momentum is now clearly with digital payments.

There is huge impetus and appetite from all parties for more integrated real-time payment services—consumers demand the accessibility, immediacy and simplicity. Financial institutions and merchants eye the market and value-added services opportunities, and the regulators see real-time payments as the ideal mechanism to help drive their digital economy ambitions.

With so many aligned stakeholders, the future of Asia’s commerce, and consumerism, is now clearly heading toward digital and real-time payments.

Find out more about consumer real-time payment preferences, and about how financial institutions and merchants in Southeast Asia can become real-time-ready, in the full report: Real-Time Goes Mainstream

Senior Vice President, Managing Director - Asia Pacific

Leslie Choo is Senior Vice President, Managing Director - Asia Pacific for ACI Worldwide . Based in Singapore, Leslie is responsible for ACI’s Asia Pacific (APAC) strategy, go to market execution, and core and new business opportunities. A long-term industry veteran, he has over 25 years’ experience in financial services, having led several transformation projects in the multi-channel and payments space across APAC including real-time payment and card modernization, national central infrastructure implementation, enterprise technology, corporate cash management, trade finance, retail and digital banking, and e-Commerce. Prior to ACI, Leslie held several senior roles with industry software leaders and has extensive experience in the financial software industry and banking transformation.