The payment space in South East Asia is a hotbed for innovation with many players vying for a piece of the action, we’re seeing many exciting things happening in this space from interoperable QR payments to central bank-backed digital currencies.
To get a sense of where the industry is headed, we sat down with industry captains and experts to get their sense of where the industry is headed.
We were joined by Ooi Huey Tyng, Managing Director, GrabPay, Venkatesh Saha, Head, APAC and Middle East Expansion TransferWise, Henri Arslanian, Global Crypto Leader, PwC and Simon Keates Head of Global Strategy, Payment Security, Thales.
We’d also like to take the opportunity to thank our sponsor Thales CPL for helping make this webinar possible. Thales CPL specialises in helping organisation with data security, encryption strategy, creating trusted access to cloud and meeting compliance mandates.
How COVID-19 shifted payment behaviours
COVID-19 has acted as a catalyst for digitalization, helping accelerate adoption of digital payments across Southeast Asia, according to industry participants.
Singapore ride-hailing giant Grab has witnessed “tremendous adoption” of its digital wallet service, GrabPay, with “double-digit growth” in transactions within the first few weeks of social distancing, Ooi Huey Tyng, managing director of GrabPay Singapore, Malaysia and the Philippines, said earlier this month during a panel discussion held virtually.
“This trend is here to stay as 75% of consumers in APAC (Asia Pacific) said they will continue to use contactless payments methods even after the pandemic,” Ooi said, adding that her company had fully “embraced this new normal.”
“Cashless penetration has gone up across the region with about 70% of our users. In Singapore, cashless penetration has gone to over 90% of our user base. We are seeing more gawkers going online, going cashless, and GrabPay is currently the most used e-wallet in terms of transaction value in gawkers … in Singapore.”
The rise of central bank digital currencies
For Henri Arslanian, global crypto leader at PwC, COVID-19 and the restrictions put in place to limit the transmission of the virus, have undeniably pushed people away from cash, and one development he is particularly excited about is central bank digital currency (CBDC).
“Central banks have realized over the past couple of years that there are a lot of benefits from cryptocurrencies that they can use themselves as well, from better policy monitoring, better traceability, etc.,” Arslanian said during the panel discussion. “Libra catapulted this to the top of the agenda, and today, 80% of central banks are doing some kind of research on this topic.”
In June 2019, Facebook unveiled Libra, a cryptocurrency project that seeks to develop and offer a “new global payment system that meets the daily financial needs of billions of people,” according to the project’s white paper.
Despite having faced intense scrutiny from regulators, the project has also raised awareness of distributed ledger technology (DLT) and pushed regulators to dig deeper into the potential risks and opportunities affiliated with digital currencies.
Arslanian said that over the last couple of months, there have been “groundbreaking developments” in the field of CBDC, citing the Bank of England and the Dutch Central Bank, which both recently released reports on CBDC, as well as the proposed US digital dollar project, unveiled in May by a group helmed by former US Commodity Futures Trading Commission (CFTC) chairman Chris Giancarlo, Gattaca Horizons CEO and former CFTC chief innovation officer Daniel Gorfine, Accenture’s senior managing director David Treat, and Pure Storage CEO Charles Giancarlo.
But all eyes are now on China, Arslanian said, noting that Beijing started piloting its CBDC project in April.
“This is going to be the first G10 country that is going to experiment, a real-life pilot of a CBDC,” he said. “This is really exciting. Not only for the future of payments, not only for the future of money, but also for the future of our society.”
eKYC is key for a digital revolution
But for Venkatesh Saha, head of APAC and Middle East expansion at TransferWise, before Asia can take full advantage of the fintech revolution and become truly cashless, one challenge must be addressed, and that’s digital know-your-customer (eKYC).
“There is no point in going cashless if you still expect businesses to show up to the bank branches with a bunch of documents,” Saha said during the panel discussion. “We need to make sure that across the region there is a proper regulatory framework that allows for eKYC.”
Though a number of improvements have occurred in this regard over the last years across Southeast Asia, there is still a long way to go, he said.
Keeping payment and data security front of mind
Another issue that’s often overlooked, according to Simon Keates, head of global strategy of payment security at Thales, is the new security and fraud risks arising from these emerging payments methods.
“As we move to new payments methods, we need to make sure that security is kept front of mind,” Keates said, adding that regulators will have a key role to play here and will be responsible for setting proper rules to safeguard consumers.
“We need some regulations related to security as we move to new payments methods … We need to do this holistically across all segments, across all the digitalization journey … Whatever we’re doing, we are the focus of attack, because there is money involved.
“We need to think about the lessons we’ve learnt within the traditional payments world over the past 30 years … There’s been a lot of mistakes and there’s been a ton of fraud within credit card payments, but we’ve taken great step in mitigating those risks in terms of introducing regulations.”
Data is the critical asset to protect here, Keates said, whether we’re dealing with cryptocurrencies or traditional chip cards. And as our world moves towards greater digitalization by the day, protecting this data will become companies’ and governments’ number one priority.
“There will always be data and that will always be the focus of the attack. Not only do we need to protect the [infrastructure] for making the payments, the rails that payments rely on … The data behind the scene needs to be [protected and] encrypted as well as,” Keates concluded.
The full webinar can be viewed here
