Asia Leapfrogs to Digital Payments
One of the biggest changes to payments practice is in real-time settlement. While countries such as the UK and Sweden, respectively with Faster Payments and Swish, have moved to real-time settlement for all amounts, many countries in other regions as well as some markets in Asia have adopted real-time gross settlement (RTGS) systems primarily for very large transactions.
Today, however, real-time settlement is reaching down to cover a far broader swathe of payment amounts across Asia. Singapore, for example, recently confirmed plans to launch its Fast and Secure Transfers (FAST) system in mid-2014, with services that will enable businesses and consumers to send any amount and have it settled within 15 seconds. The city state has announced real-time settlement for Chinese yuan (CNY) as well. Down under in Australia, the financial services industry is committed to implementing the New Payments Platform (NPP), which is expected to provide real-time payment as well as more information-rich transactions, by 2016.
While RTGS in India, launched a decade ago in 2004, is currently used for payments above 200,000 rupees (INR) – equivalent to US$3,250 – with funds settling within 60 seconds, the number of batches per day for the NEFT system used for smaller amounts has increased to 12. Even Myanmar has plans to introduce RTGS, according to its Central Bank director of payments, Khin Sandar.
In some of the markets where cheques are used, such as Singapore and Malaysia, cheque truncation systems (CTS) have been in place for more than a decade and are now finally being extended to other markets. In India, perhaps one of the last major countries to make the shift and where nearly 30% of payments are still made with cheques, the Reserve Bank of India (RBI) implemented a CTS in 2013. This enables cheques to be cleared on the next day and the RBI expects all cheques to go through the system by the end of 2014.
Behind many of those payments are invoices. While markets such Singapore and Nepal have been at the forefront of change by requiring electronic invoices for business-to-government (B2G) transactions and encouraging them for other transactions, major markets such as China that until recently were laggards are changing as well.
Last year, China introduced new regulations for an online invoice system in what the State Administration of Taxation said was a bid to strengthen management of invoices, prevent tax evasion and formalise online invoicing tools. Meanwhile, the Hong Kong Monetary Authority (HKMA) is working with 23 banks to develop its first electronic bill presentment and payment (EBPP) platform, which will enable Hong Kong residents to receive, pay and schedule bill payments online. The Authority plans to roll out EBPP by the end of 2014.
Another convert to the cause is Vietnam; at the start of the year the Tax Office announced plans to roll out nationwide e-invoicing to at least half of all companies in the country within three to five years and to the remainder within 10 years. While a few laggard markets such as Japan still have yet to join in, the shift towards e-invoicing is clearly underway in an increasing number of markets region-wide
Next stop mobile
The next leapfrog for Asia is, of course, mobile payments, where volumes are increasing for corporate and retail payments alike. As an example, Citibank alone reported that it processed more than US$115bn in corporate mobile payments globally last year. Throughout Asia, corporates are signing up to mobile for payments. They range from Indonesian insurance companies enabling consumer mobile payments to Australian companies encouraging usage of mobile by staff on business trips, with many corporates enabling mobile payments by their distributors region-wide.
Central Bank of Myanmar deputy governor, Set Aung
last October that mobile payments is among the key areas where the country can leapfrog in corporate payments, solutions such as Myanmar Mobile Money Service, launched at the end of 2013, have begun enabling mobile salary disbursements and merchant payments.
While the shifts to digital payments will take more time in some markets, a transformation towards faster and more efficient digital invoices and payments that leapfrog from older to leading-edge technology is clearly underway in an increasing number of Asian markets. As corporates make changes to take advantage of the shifts, such as standardising on the ISO 20022 format or installing software for electronic invoices and mobile payments, their efficiency will clearly grow. The benefits of the shift are enormous and stand to put a number of markets in Asia at the forefront of payments technology globally.