Asia Pacific (APAC) is playing a key role in the exciting journey to digitization, especially in the consumer payment space. This dynamic region spans huge distances, with many countries and multiple currencies. Asia Pacific has over 60% of the world’s population and its non-cash payment transactions are growing at over 30% per year, faster than anywhere else in the world.
The scale and pace of economic growth in Asia Pacific is impressive, to the point that we cannot ignore it. China’s two mobile payment giants, Alipay and WeChat Pay, have leapfrogged credit and debit cards, outstripping Western rivals in terms of integration with ecosystems, technology, user-friendliness, number of users, and ubiquity. To put their scale into perspective, each organization handles more payments in a single month than PayPal does in an entire year. Their user networks are expanding fast into other parts of Asia Pacific and beyond.
In addition to digital payments, APAC is taking a leading role in open banking. In fact, anyone who is wondering what future success could look like for open banking initiatives in Europe and the United States should study where India is today. India’s Universal Payment Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India and is already offered by 140 Indian banks in cooperation with the fintech community.
The key to UPI’s rapid adoption is the largescale use of biometrics for identity and transaction authentication, which makes it easier to ensure frictionless but secure bank-to-bank transfers. It is striking that this success in India has been achieved without any need for regulation, but simply the smart use of technology and market forces. Other countries would do well to follow India’s pioneering lead in biometrics for digital ID.
Another important trend in Asia Pacific is that regulations and payments initiatives are converging with the rest of the world, as new standards are being adopted globally, no longer just nationally or regionally. For example, China and India have already adopted the international messaging standard ISO 20022.
This carries richer data than many older payment formats, and therefore makes AML compliance and payment reconciliation easier. It’s interesting to note that it’s only now that other parts of the world, such as Europe and North America, are planning to adopt ISO 20022 for their domestic payments systems and cross-border payments. This migration will be a major global initiative over the next five years to bring the majority of payments systems around the world onto a common standard, with enormous efficiency gains.
In Asia Pacific, there is also widespread adoption of innovative schemes, with Australia and Hong Kong launching open banking and overlay services, based largely on U.K. standards and regulations, albeit with some adaptation to meet local needs. Meanwhile, Singapore regulators are encouraging “organic transition” to open application programming interfaces (APIs) but are preferring not to impose new rules at this stage.
Following closely behind, Japan and South Korea are working on new regulations to apply open banking principles.
This shift toward open banking in Asia Pacific, along with the widespread introduction of real-time payments systems in areas like Singapore, Hong Kong, and Australia, is driving the emergence of an exciting generation of neobanks, operating without any brick-and-mortar branches. This is creating an environment like that in the U.K. in recent years, where so-called challenger banks have been developing innovative propositions for highly segmented target audiences, with a major focus on user experience and data analytics. This growing trend is a good indication of the way in which many countries around the world are closely watching developments in the U.K. payments market and are adopting similar models for their own flavor of digital transformation.
As the U.K. was the first to create a regulatory environment for open banking and was a pioneer in real-time payments more than 10 years ago, Bottomline’s expertise and experience in this exciting journey to digitization is proving invaluable not only in the U.K., but also in other geographies as open banking and APIs become more widely adopted around the world.
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