QR-based payment systems are now widely used and integrated across Asean, with each country adopting its own system.
E-WALLETS have been around for more than 25 years, ever since Coca-Cola introduced its SMS-based vending machine payments in 1997 and emergence of PayPal in 1998.
In Malaysia, cash was king, until the unthinkable happened—a pandemic that stopped the world in its tracks for two years. Within that timeframe, Covid-19 caused not only a major shift in how people lived but their attitudes as well.
According to a survey done by PwC Malaysia in September 2021, during the Covid-19 pandemic lockdown, it charted that the average transactional frequency done on e-wallets almost doubled as compared to May 2018, with weekly transaction values increasing more than three-fold.
In fact, the Visa Consumer Payment Attitudes Study 2024 showed a surge in e-wallet adoption across the region in 4Q2023, with 79% of respondents reporting they use this payment method, outpacing cash (77%), debit and credit cards (70%) and Internet banking (70%).
Furthermore, the region’s digital economy made good progress last year. The 2024 e-Conomy SEA report showed a 15% increase year-on-year (YoY) of US$263bil for gross merchandise value, a revenue of US$89bil—a 14% increase YoY, and profits of up to US$11bil—a 24% increase year YoY.
However, even with such glowing reports, there is still the disconnect between the high digital transactions and still trails behind the more developed international countries when it comes to providing basic financial services.
An article in Asian Banking & Finance stated that in countries, such as the Philippines, Vietnam and Indonesia, more than half of their population were still unbanked or underbanked.
Even so, a Bain & Co report remained positive that those who are underbanked are the target market. Although they do not have full access to traditional financial services, their predilection for technology, as shown with the high smartphone penetration within the region, could be the answer.
Technology enabled business models would most likely bethe best way to serve this segment, which creates new market opportunities. The report stated that this segment is the biggest potential and the true growth engine in digital financial services.
Consumer tech platforms are ideally positioned to capture a larger share of the underbanked segment due to their extensive, growing, and engaged customer base. These platforms can enhance customer lifetime value by offering a more comprehensive range of consumer services.
But the potential of these transactions need not be confined within the countries they operate in. Thanks to the Regional Payment Connectivity (RCP), which was initiated by the central banks of Indonesia, Malaysia, Philippines, Singapore and Thailand in 2022, cross-border transactions allow payments to be made in local currencies. It also cuts down the costs and time of performing that transaction in the conventional way.
This solves the long-standing problem of having to rely on multiple banking intermediaries and the use of the US dollar. It also makes the transaction more affordable as it skips intermediary fees and long processing times to clear the payments. It also bypasses the regulatory differences that would have hampered the development of a unified payment system and the limited interoperability between different banking systems.
According to a Juniper Research report, such connections allow e-wallet transactions for cross-border payments, with tourism and remittances being the major consumer drivers. From a business standpoint, the benefits of instant payments are less apparent. The report noted that challenges still persist, which include fluctuating exchange rates and regulatory discrepancies between jurisdictions.
In a blog post, ASEAN+3 Macroeconomic Research Office mentioned the rising importance of using Quick Response (QR) payments. Popular during the pandemic, this form of payment gained widespread appeal, even over the near field communication (NFC) system and has integrated into the systems of participating central banks to standardise national payment systems.
Asean countries that have embedded this form including Cambodia’s KHQR, Indonesia’s QRIS, Lao PDR’s Lao QR, Malaysia’s DuitNow, the Philippines’s QR Ph, Singapore’s PayNow, Thailand’s PromptPay and Vietnam’s VietQR. Even Japan is reported to consider integrating its QR payment system into RPC, with full implementation by the end of 2025.
Locally, Bank Negara Malaysia (BNM) launched the Interoperable Credit Transfer Framework in 2019, which allows significant progress in the nation’s efforts to migrate to e-payments and reduce the usage of cash.
The framework establishes a shared payment infrastructure that connects bank and non-bank accounts while managing the resultant risks.
As Tan Sri Dr Zeti Aziz said in her keynote address during the Eminent Persons’ Dialogue, entitled Asean Financial Integration in a Multipolar World on Apr 9, more than 20 years ago, the pivotal decision was made for Asean economies to come together and pursue regional financial integration.
She said the drive for enhanced regional financial integration was aimed at enabling the efficient channeling of funds within the region for reinvestment. It was anticipated that this would lead to more stable financial flows, helping to counteract destabilising financial movements.
“Being high savings economies, it would also facilitate some part of our domestic savings to be reinvested in the region. Additionally, it would also support the development of domestic financial markets, enhance the overall resilience of regional financial systems and contribute towards the financing of growth and development in the region,” she said.
The Asean region may not be ready for a single unified currency like the European Union, but the economic interdependence between each state can be realised with the cross-border transactions afforded by linked e-payment systems
