The payments industry is undergoing a massive shift globally, and for some time now Southeast Asia has been emerging as a significant regional player pushing innovation and adoption in this lucrative fintech space. Payments in Southeast Asia is evolving at an unprecedented pace, with a tremendous amount of energy at all levels of the ecosystem.
Payments represent the most well-funded segment within fintech, not just in Southeast Asia but globally. Payment startups raised US$32 billion in 2021 alone, with 52 payments startups unlocking unicorn status in the same year – showcasing a flourishing industry while other sectors are pulling back.
It truly appears as though digital payments have reached a defining point of their maturity cycle in Southeast Asia. Is a ‘golden era’ of payments truly upon the region?
Fintech News Singapore spoke with leading luminaries from ShopeePay Malaysia, payments tech specialists Nuvei, JCB International, and the Bank of International Settlements (BIS) to discusses how the digital payments industry in Southeast Asia is poised to take center stage and transform the way we imagine payments today.
Southeast Asia at the epicenter of payments innovation
The digital payments gross transaction value (GTV) in Southeast Asia is predicted to exceed US$1 trillion by 2025. Southeast Asia is on the forefront of driving usage of various innovative payment modes, including QR-code-based instant payments and mobile e-wallets.
Alain Yee, Head of ShopeePay Malaysia
“What we see in Southeast Asia, it’s one of the fastest-growing mobile wallet regions in the world,” commented Alain Yee, the head of ShopeePay Malaysia. He added that consumers and merchants are an interdependent part of the ecosystem, fueling regional growth, and that relationship has only strengthened since 2020.
“Consumer e-wallet usage surged by 45% compared to pre-COVID times”, according to Alain. “Transaction values are expected to double by 2025, so it’s very encouraging.”
Continuous evolution of the customer digital journey
The region offers numerous opportunities for payment and service providers as merchants seek to modernize their payment ecosystems to cater to evolving consumer needs. Canada-headquartered Nuvei recently set up shop in Singapore and Hong Kong with the goal of tackling those needs in the Asia Pacific region. Nuvei just opened its first Australian office to further this expansion.
Praful Morar, Nuvei’s Global Expansion Officer, relocated from the UK to realise the tech provider’s promise in the region. Bringing in talent, infrastructure and a focus on supporting and onboarding customers in their local timezones shows Nuvei’s commitment to developing in Southeast Asia.
Praful Morar, Global Expansion Officer, Nuvei
“We localise, regionalise, and internationalise the particular payments,” Praful explained. “And we provide a whole set of payment tools, which in addition to cards, we have in excess of 586 alternative payment methods” that merchants can offer with a single integration.
The increasing popularity of e-commerce among Asia’s digital generation is a significant catalyst of the digital payments revolution. In Southeast Asia, e-commerce transactions have seen high double-digit growth in the last three years, buoyed by the explosion in the digital payment space.
Hiroko Michishita, Managing Director of JCB International Asia Pacific Pte. Ltd., says the Japanese multinational credit card company has observed “the continuous evolution of the customer’s digital journey”.
“Omnichannel payments, and more recently, BNPL (‘buy now, pay later’), virtual cards, and cards-as-a-service are important trends in the market. Our e-commerce digital transactions have seen high double-digit growth in its share of total card transactions in the last three years. It was driven by growth in the digital payments space and JCB’s expanding card base in the ASEAN region,” where Nuvei is an essential partner in managing local acquiring.
Hiroko Michishita, Managing Director, JCB International Asia Pacific Pte. Ltd.
Southeast Asia Pioneering Cross-Border Payments Space
The cross-border payment space is another area where regional innovation is thriving. Central banks in ASEAN are exploring ways to make cross-border payments more efficient, transparent, and cheaper.
From traditional payments rails to DLT-based solutions, the region is looking for ways to improve cross-border payments. The Bank for International Settlements (BIS) is an organization owned by 63 central banks around the world and has been at the center of these experiments, namely Project Nexus and Project Dunbar.
“Project Nexus is focused on interlinking instant payment systems, so it’s got a retail focus, and it’s more near-term in terms of the timelines or potential impact it could have, say within the next two-to-five years,” said Andrew McCormack, the Head of the BIS Innovation Hub Centre in Singapore.
Project Nexus is inspired by PayNow, the bilateral payments network between Thailand and Singapore launched in 2021, where two or more interlinked payment systems will talk to each other to resolve customer identities and payments despite being on different platforms.
Andrew McCormack, Head, BIS Innovation Hub Singapore Centre
Meanwhile, Project Dunbar is a project led by the BIS Innovation Hub in partnership with the Reserve Bank of Australia, the Central Bank of Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank to design and develop a multi-CBDC platform.
“Project Dunbar is focused on Central Bank Digital Currencies (CBDCs), and it’s focused at the wholesale level not the retail level, and it’s more of a medium- to long-term strategic vision if you will – so kind of five-to-ten years plus out.”
The BIS was instrumental in bringing together central banks and creating frameworks to begin exploring frontier cross-border payments innovations like CBDCs, while Southeast Asian countries like Singapore and Thailand have been acting as effective case studies for how interlinked bilateral payment systems might operate.
With payments shaping up to be the epicenter of innovations this decade for both entrepreneurs and payments professionals, there is no region more exciting to be in than Southeast Asia, where the digital payments industry is growing at an exponential rate.
The payments industry in Southeast Asia is undergoing a renaissance, and as the payments industry continues to evolve rapidly, fundamental shifts in the way we understand payments will have to be reimagined.
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