Real-time payments now as popular as cash in Southeast Asia

Real-time payments are now as popular as cash as a payment method for consumers in Southeast Asia, underscoring the urgent need for payments modernization across the region and heralding the emergence of a regional cross-border, real-time payments ecosystem.

Three out of five consumers (61%) in Indonesia, Malaysia, Thailand and Singapore prefer real-time payments as a favoured way to pay in 2021, level with cash (61%) and higher than other payment categories, including digital wallets requiring cash or card top-ups (56%) and credit cards (30%), according to a new report by payment solutions provider ACI Worldwide and markets researcher YouGov.

The study was conducted in April 2021 on a nationally representative basis across Indonesia (2,000 consumers), Thailand (2,000), Singapore (1,000), and Malaysia (1,000).

The shift towards real-time payments has been dramatically accelerated by changing payment necessities and preferences caused by the Covid-19 pandemic. Almost a third (30%) of consumers in Southeast Asia have reduced usage of traditional payment methods such as cash, credit cards and debit cards since the onset of Covid-19. As a result, over half (53%) are now using real-time payments more frequently than they were prior to the pandemic.

Due to rapid technological change, consumers now expect mobile-first and real-time experiences, but payments have often lagged. The development of real-time payment systems enables consumers, merchants and financial institutions to pay friends and customers, settle bills, and transfer money instantaneously. While cash has always represented an “immediate” mode of payment, the advent of real-time payment rails brings this concept into the digital age with faster settlement periods, notifications and consolidated reporting.

Payment networks

In Malaysia, real-time payments network boasts a robust infrastructure and numerous supporting banks, payment service providers and merchants. DuitNow, which enables users to transfer funds instantly with a mobile number, national ID card number or other proxy options, was launched in 2018 by Payments Network Malaysia (PayNet), powered by ACI Worldwide.

Singapore is also well on its way to becoming an established market for real-time payments. Its primary real-time payments scheme, PayNow, is a peer-to-peer (P2P) instant fund transfer service built on the FAST infrastructure that allows users to transfer funds from one bank account to another using various proxy options such as a mobile number or national ID card number. The service has expanded to allow for immediate business-to-consumer (B2C) transfers and business-to-business (B2B) real-time payments.

In Thailand, the central bank launched its real-time payments system PromptPay in 2016 as part of its National e-Payment initiative. First designed to deliver government welfare disbursements, it has expanded rapidly among consumers and businesses.

Indonesia is in the developmental stage of launching its real-time payments system but has all the hallmarks of a country that could see rapid adoption of real-time payments. Bank Indonesia is planning to roll out its BI-FAST real-time system as part of the country’s 2025 Payment System Vision, which will act as an infrastructure for faster interbank transfers and card-based payments.

Cross-border shopping

“This fundamental shift in consumer demand and payment expectations sets forth a challenge for Southeast Asia’s banks, financial institutions and merchants,” says Leslie Choo, managing director for Asia at ACI Worldwide. “These organizations can ill-afford to put their modernization projects on hold, despite the challenges caused by Covid-19. On the contrary, they can drive growth by joining the region’s emerging real-time payments ecosystem, which will improve their ability to innovate and transform while reducing the cost of infrastructure and operations.”

The report also reveals how consumers across the region expect the benefits of using real-time payments in their domestic markets to extend across borders once they begin to travel internationally again, as well as when they do cross-border shopping. For future international travel, consumers have elevated expectations for the transparency, safety and convenience of their payments when compared to their travel experiences pre-Covid.

More than half (54%) of consumers in Southeast Asia who have travelled internationally in the past expect their usage of real-time payments to increase when they next travel, the survey finds.

Also, 70% say the ability to use their preferred payment methods while travelling will be more important now. As a result, a quarter (26%) expect their usage of traditional payment methods such as cash to reduce when they next travel. Three quarters (75%) say payment safety and fraud prevention are more important now, while more than two-thirds (67%) say transparency of interchange rates is now of greater importance.

While the number of consumers in the region who are making international e-commerce purchases has increased over the past year, consumers are looking for further guarantees about payments to encourage them to do so more in the future. Almost a quarter (23%) of consumers are shopping more at merchants based in other countries in the region since the start of the pandemic, while a similar number (22%) are shopping more in stores outside of Southeast Asia.

The most popular factors that encourage these shoppers to purchase products and services more regularly from international sellers are:

• Reassurance that payment and personal data are safely transmitted, secured and stored by international sellers (36%);
• Ability to pay with preferred domestic payment method (25%); and
• Having a wider range of payment options than is available at present (21%).

“A focus on payments modernization is vital for financial institutions that want to ride the wave of the region’s biggest and most transformative payments trend – the emergence of a cross-border, real-time payments ecosystem,” Choo notes. “Unencumbered by legacy payment systems that can impede innovation in mature markets, countries in Southeast Asia can leverage robust domestic central payment infrastructures as the foundations for cross-border real-time payments, which will be a catalyst for growth and trade in the coming years.”