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Turning Impetus into Action: Real-Time Payments in ASEAN

However, to better understand the drive for payments modernization and innovations in ASEAN, it is necessary to understand the context – both in terms of global trends such as real-time payments, and regional developments stemming from institutions such as the ASEAN Economic Community.


Responding to the real-time imperative

The emergence of domestic real-time payments schemes is creating a patchwork of capabilities, with schemes around the world at varying levels of maturity. Nowhere is this truer than in Southeast Asia, where some early adopters are looking to modernize systems and add overlay services, while other countries are yet to move beyond a rough roadmap.

This disparity – both technical and economic – across ASEAN member states might make consensus difficult, but the ASEAN Economic Community’s 2025 Blueprint for financial integration reveals the drive for greater financial inclusion and interoperability between member states.

Instant payment capabilities are seen as a key driver in payments modernization in the region, serving as the first step towards digital transformation across consumer and corporate services. There is also the prospect of ASEAN member states realizing the potential of cross-border, multi-currency real-time payments, with Malaysia’s PayNet exploring cross-border connectivity to neighbouring Singapore and Thailand.


ASEAN Economic Community lends impetus to real-time development

Founded in 1967, the Association of Southeast Asian Nations (ASEAN) originally consisted of Indonesia, Malaysia, the Philippines, Singapore, and Thailand, later joined by Brunei, Vietnam, Laos, Myanmar, and Cambodia. It is a hugely diverse region in terms of culture, religion, and economic prosperity; resulting in highly divergent capabilities in financial infrastructure.

As part of an ambitious 10-year economic program, under the banner ‘ASEAN 2025: Forging Ahead Together,’ member states are engaged in the modernization and integration of their financial infrastructures (including payment systems) that will set the stage for a pan-regional real-time payment ecosystem.

A memorandum of understanding (MoU) was signed in November 2017 between several major regional payment systems operators who are members of the Asian Payment Network (APN). These are Payments Network Malaysia (PayNet), ITMX Thailand, National Payment Corporation of Vietnam (NAPAS), Network for Electronic Transfers (NETS) in Singapore, and Rintis of Indonesia. The parties to the MoU have reached a broad consensus to use ISO 20022 messaging standards as a first step toward regional real-time payments connectivity.

However, moving from broad consensus to action plan is easier said than done, as ASEAN lacks the kind of overarching regulatory framework that exists in other pan-regional financial markets – such as the European Union. Lacking regulatory mandates, for example PSD2, that have opened Europe to greater competition and innovation, ASEAN 2025 must rely upon building consensus amongst member states to shift towards interoperability.


Turning impetus into action

Malaysia will become the next country in the ASEAN region to implement instant payments, with its Real-time Retail Payments Platform (RPP) going live in 2018. RPP is being developed by Payments Network Malaysia (PayNet), the national financial market infrastructure provider, which is in active discussion with counterparts in Thailand and Singapore to link national payments networks. The result would be the world’s first cross-border, multicurrency real-time payments network.

PayNet’s RPP is a strategic initiative aimed at driving innovation in electronic payments and bring the benefits of real-time payments to all participants in the payments ecosystem; banks, payment institutions, businesses, consumers and the government. 2018 will see the launch of Instant Credits, Request-to-Pay for eCommerce and person-to-person (P2P) Payments with Proxy Address Resolution. This will allow payments to be addressed seamlessly by mobile numbers, National Registration Identity Card (NRIC) numbers, or business registration numbers.

Through PayNet’s drive to innovate and improve electronic payments in Malaysia, it will also be well situated to play a key role in the development of a regional real-time payments network, which – in time – could connect with other real-time payment systems around the globe. If Malaysia, Singapore and Thailand were successful in linking real-time payment networks, the benefits would quickly become clear to other ASEAN members, and help make the ASEAN 2025 plan a reality.


ASEAN financial institutions are increasing investment in payments

All of this is driving financial institutions across ASEAN member states to increase investment in payments, though the picture is more diverse if looking at country-level data, especially when it comes to the benefits that increased investment is aimed at securing. The “2018 ASEAN Payments Insight Survey,” conducted by ACI Worldwide and Ovum, also shows that investment in payment systems is split between hygiene factors and innovation. Because of different countries being at different stages of development, the road to real-time will not be a linear one, however deeper understanding of trends in the region will help financial institutions to prepare and respond to the ongoing evolution of banking.


Download a complimentary copy of the report, “2018 ASEAN Payments Insight Survey: Real-Time Payments Modernization and Innovation,” from ACI Worldwide and Ovum.

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.