Cross border payment systems in ASEAN gather steam

Photo:Nicolas Lannuzel

Fast and transparent cross-border payment systems will change the habits of businesses and consumers. Digital payment providers should seize the opportunity to expand their market reach.

By Joelyn Chan

In the past, cross-border payments were associated with long processing times and hidden costs. When customers made payments, their bank, the beneficiary’s bank and often two additional correspondent banks handled the transaction. If the payment is was made via a non-bank payment service provider, the cross-border payment could involve six parties or more.

With technological enhancements and increased interoperability between banks, ‘real-time’ cross-border payments are rapidly becoming a reality in ASEAN.

Swift has integrated with Singapore’s domestic payment service, slashing cross-border payment times

In July 2019, banking co-operative Swift announced the successful trial of its instant cross border payment service. SWIFT gpi instant connected to Singapore’s Fast and Secure transfers network (Fast) to send cross-border message transfers in just 13 seconds. The trial’s success confirms the scalability of SWIFT gpi instant, and the imminent arrival of a pan-ASEAN, cross-border instant payments service.

In an interview with ASEAN Today, Sharon Toh, Head of the ASEAN region for SWIFT in Asia Pacific, highlighted the challenges ASEAN faces in regional cross-border payments.  “Amongst these are external dependencies for payment intermediation, a large underserved and under-engaged corporate segment, and slow financial infrastructure,” she said.

She added: “To realise ASEAN’s full economic potential, the region needs to be digitally ready and cooperation amongst its member states and the harmonisation of payments is necessary for this to happen.”

ASEAN nations’ willingness to collaborate serves as a catalyst for the development of cross-border payments systems

When ASEAN nations cooperate with one another, they increase the interoperability of payment platforms and bring working practices into alignment. These shared practices streamline the payments process and will be of central importance as innovation drives growth in national payment landscapes.

Additionally, ASEAN continues to develop its payments policy framework, which guides cross-border real-time retail payments. In April 2019, Thailand and seven other ASEAN nations came together to showcase cross-border payment services using a range of modern technologies.

Singapore and Thailand are at the forefront of cross-border payment systems. The Thailand-Singapore payment system is expected to go live in the first half of 2020. Singaporeans will be able to use their PayNow platform to send money instantly to Thailand’s PromptPay users and vice versa. Such cross-nation linkages will reduce the level of fragmentation in the payment scene, and standardise efficient working practices.

Instant cross-border payment systems will unlock remittance and tourism markets

According to a report by SWIFT and Mckinsey, cross-border payment flow is increasing by 6% annually.

There is much to gain if digital payment providers successfully expand their reach into the remittance payment market. Justo Ortiz, chairman of UnionBank complained at the high cost of current remittance services, which is typically around 5% to 10% the value of the payment. Cumulative fees from the various intermediary players keep costs high.

Digital payment providers would strike gold if they can offer users a streamlined, transparent and simple solution to address remittance woes.

Alternatively, digital payment providers can bank on the rising number of smart tourists to propel their growth forward. Payment Technology Company Liquid Group is focusing on cross-border QR payments. Soon, tourists from Hong Kong and Indonesia will be able to use their preferred local payment apps to make purchases at participating merchants abroad.

As Liquid Group enters into more strategic partnerships, more travellers will stand to benefit. Holidaymakers can bring their phone, and conveniently leave their credit cards and cash at home.

Cross-border payments can be as seamless and convenient as domestic ones, and there are untapped opportunities for the innovative. With SWIFT’s successful trial and the recent MOU signings, ASEAN appears to be on the cusp of a digital payment revolution. Collaboration will be the spark to ignite it.