Instant Cross-Border Payments Will Soon Become a Reality in APAC

Instant Cross-Border Payments Will Soon Become a Reality in APAC

by November 30, 2021

Rapid adoption of instant payments and the proliferation of national real-time payment rails are making Asia-Pacific (APAC) a leader in real-time transfers. This, coupled with efforts to make cross-border payments faster and most efficient, are turning the region into a hotspot for real-time cross-border payments, a new report by UK-based fintech firm Finastra says.

Across APAC, 11 nations including China, South Korea, Japan, Singapore, Malaysia and Thailand, have active instant payment infrastructures, and five other initiatives are currently in the works in Vietnam, Indonesia, Myanmar and New Zealand.

Instant payment infrastructures in APAC, Source: Finastra, Sep 2021

Instant payment infrastructures in APAC, Source: Finastra, Sep 2021

Infrastructures such as FAST/PayNow in Singapore and Thailand’s PromptPay are amongst the most developed ones. Today, these are processing big volumes of transactions and are continually seeing strong growth.

PromptPay, for example, handles 9.6 million daily transactions on average and has processed a cumulative value worth 28 trillion baht (US$929 billion), according to Vocalink, a Mastercard company.

In Singapore, PayNow transactions doubled in both volume and monetary value between 2019 and 2020, the Straits Times reported in October. Growth is accelerating this year, with S$20 billion worth of transactions recorded during H1 2021, nearly surpassing 2020’s total of S$20 billion.

Modernizing cross-border payments

At the same time, efforts to make cross-border payments faster and more efficient are mushrooming, paving the way for forthcoming disruption in the trillion-dollar international payments market.

SWIFT, for example, launched its Global Payments Innovation (GPI) initiative in 2017. GPI combines domestic real-time payment networks to deliver cross-border payments almost instantly and without the restrictions of bank operating hours, substantially increasing speed but also transparency and security.

Today, the GPI standard is responsible for over US$300 billion in daily transactions, and more than 4,000 financial institutions have signed up to it.

The Bank for International Settlements (BIS) is also working on its own instant cross-border payment project. Called Project Nexus, the initiative seeks to connect multiple national payment systems into a cross-border platform that could enable international payments to happen as quickly as sending a text message.

Another major cross-border payments initiative in APAC is the Asian Payment Network (APN). APN was established in 2006 by domestic payment infrastructure providers in ASEAN with the support of central banks to establish common standards, guidelines and collaborative regional efforts on domestic and regional modernization efforts. Among other things, it seeks to establish a regional payments area like Europe’s SEPA.

Since the founding of APN, other members have joined the initiative including Cuscal from Australia, UnionPay from China, NTTDATA from Japan, KFTC from South Korea, and Paymark from New Zealand.

Coupled with these initiatives are direct infrastructure linkages and cross-border QR code links initiatives among some ASEAN members.

Opportunities and challenges

These developments are now converging and making APAC a fertile ground for instant cross-border payment development, Finastra says.

Instant cross-border payments could bring an array of benefits for citizens and economies, supporting economic growth, financial inclusion, and international trade. This is particularly relevant today as cross-border e-commerce activities continue to increase in APAC and small and medium-sized enterprises (SMEs) seek to trade more internationally.

SMEs are the backbone of Southeast Asia’s economy, accounting between 89% and 99% of total establishments across ASEAN.

But before instant cross-border payments can become a reality in APAC, several challenges related to APN must be considered, Finastra says.

First, the lack of a single currency within ASEAN like the euro in the European Union (EU) is introducing settlement risks. Also, the lack of an adequate regulatory framework and APAC governance issues are introducing harmonization challenges and fragmentation.

Today, the future of APN is still uncertain, the report says, especially considering the geo-political tensions with China.