Why instant is the new normal for payments in Asia
Innovation in payment systems is advancing rapidly; making transactions frictionless and substantially reducing transaction costs for both businesses and consumers.
Asia is at the epicentre of instant payment developments with Unified Payment Interface (UPI) operating in India, PromptPay in Thailand, FAST and PayNow in Singapore. Other markets in the region, such as Malaysia, are also implementing instant payments.
Application programming interface solutions act as a catalyst for adoption of instant payments and collections. This technology enables businesses to integrate banking services (i.e., payments, collections and transaction enquiries) directly into their internal systems and processes to provide an instantaneous end-to-end customer journey.
Now, another wave of change is happening with the roll-out of an instant payment scheme - Faster Payment System (FPS) – in Hong Kong.
FPS IN HONG KONG
FPS transfers may be made across banks and stored-value facility providers (SVFs) in seconds. They can also be made using quick response (QR) codes, email addresses, mobile numbers and FPS IDs. Hong Kong’s FPS went live in September 2018 with 21 banks and nine stored value facilities (SVFs) signed up for the service. Users can transfer money in both Hong Kong dollars and renminbi across different banks or SVFs with funds available almost immediately.
Within three months of being launched, there have been more than two million sign-ups from consumers and businesses combined.
From small and medium-sized businesses to business conglomerates, leveraging instant payments means everyday tasks such as paying bills, vendors or payroll can be performed easier, faster and with greater straight-through-processing. Being able to optimise cash flow also frees working capital for businesses. “The development of instant payments in the region has opened up a whole new set of opportunities because it allows corporates to reimagine business models and their customers' journey,” says Atul Bhuchar, group head of payments at DBS Global Transaction Services.
“B2B and C2C payments were early adopters for instant payments, but with amount-caps for instant payments increasing, business-to-business payments are gaining momentum. For businesses, it’s expanding from ‘just-in-time’ supply chain management to ‘just-in-time’ payables and receivables management.” says Bhuchar.
PAYNOW IN SINGAPORE
Singapore launched its FAST system in 2014, and introduced PayNow Corporate service in August 2018, which allows transfers using a mobile number, national identification number and even a company registration number, as a proxy address for the recipient.
The proxy address and 24/7 capabilities of PayNow Corporate enable businesses to migrate from traditional cheques and cash to electronic payments and collections, reducing both costs and risks.
The Monetary Authority of Singapore (MAS) recently announced plans to open FAST to non-bank players in 2019. The city-state aims to be cheque-free by 2025. According to a KPMG study, commissioned by the MAS, the cost of cash and cheques transactions to the economy stands at 0.52% of GDP.
QR CODE REVOLUTION
Another cornerstone in the innovation space is payment via QR codes. QR codes were developed in Japan in 1994, and they have since been extensively adopted in mainland China. Singapore and Hong Kong leveraged payments using QR codes, especially since September 2018 when Hong Kong unveiled its Common QR Code Standard for Retail Payments, while Singapore launched its QR code standard, SGQR in August 2018.
Given a common QR standard allows inter-operability across different payment services providers, Bhuchar says the introduction of these common standards is timely, as it helps reduce friction for both consumers and merchants.
In comparison with costlier cards settlement fees, QR code payments are more economical and require just a digital (QR) label. “For smaller businesses, collections can take place via payment to a static QR code. For larger enterprises, the QR code may be integrated into their point-of-sale machines, invoices or online payments,” explains Jasmin Ng, group head of cash product management at DBS Global Transaction Services.
Another reason for the rapid acceptance of these instant payment schemes is settlement of receivables takes seconds instead of days, significantly improving cash flow for merchants.
Ryan Chioh, managing director, Far East Flora regards cashflow as the lifeblood of businesses. “PayNow Corporate has helped increase my cash flow so my team and I can be more productive. We can spend less time on administrative processes and accounts receivables, and more time on developing our business and delivering a better customer experience.”
There are also developments occurring with cross-border payments. Last year, SWIFT held talks with banks to discuss development of Asia-Pacific cross-border instant payments, based on SWIFT global payments. DBS is one of 12 pilot banks to have successfully completed the trial of cross-border instant payments from Asian countries into Australia.
Bhuchar believes it is only a matter of time before cross-border instant payments become a reality. “Instant payments are an important building block for businesses that are adopting digital solutions to transform their financial value-chain and to make their customers’ experience seamless, instantaneous and simpler,” Bhuchar adds.
NEW NORMAL FOR BUSINESSES
Early adopters of instant payments in the B2C and C2C space have benefited from this transformation with instantaneous transactions and improved cash flow.
Digital transactions will undoubtedly become the new normal for payments and collections over time, including transactions in the B2B space, for businesses that are moving towards a digital business model to achieve greater efficiency and productivity.