Economies are gradually reopening across Southeast Asia and a transition from cash to contactless indicates shifting consumer preferences for digital payments. E-wallets are on the rise with providers such as Maybank’s MAE and GrabPay having seen “double the subscriber numbers and transaction volumes”. Meanwhile, the Singapore government has actively encouraged citizens to opt for digital payment services including mobile QR code systems as a public health strategy. To top it off, the Monetary Authority of Singapore completed phase 5 of Project Ubin with a commercial-grade, blockchain-based payments network with the potential to be rolled out across businesses in the city-state.
Kenneth Bok is the Head of Growth and Strategy at Zilliqa, a high-performance, high-security blockchain platform that looks to enable a more open, equitable financial ecosystem across ASEAN. It is also one of the blockchain platforms consulted during Phase 2 of Project Ubin as well as powering one of the use cases mentioned in MAS’ Phase 5 report and has played a significant role in legitimising blockchain in the local financial sector.
Zilliqa is also the infrastructure provider behind StraitsX, an MAS-accredited stablecoin initiative to enable greater transparency and liquidity across the region’s financial ecosystem. Here Bok explains just how the region is changing.
How have a mix of shifting consumer habits and digital infrastructures catalysed change across Southeast Asia’s payments landscape?
“Across Southeast Asia, the superapp phenomenon is especially prevalent among ride-hailing giants, be it Grab or Gojek, who have gradually become dominant players in the payments landscape. With their ubiquity, consumers engage with their services on a daily basis and often for basic necessities. Within a younger generation, it’s become increasingly more apparent that the platforms that have frequent, diverse touchpoints with consumers truly have the dominant position. That being said, these positions are not without their challenges—there is a trust barrier to overcome with established legacy finance players now offering the same digital financial services.
Within the region, over 70 percent of adults still lack access to basic financial services. Driven by financial inclusion as a goal, the region’s vibrant fintech ecosystem has produced tech-enabled solutions that seek to bolster accessibility to financial services among the underserved. We can see this on an institutional level as well with Cambodia’s Project Bakong or Singapore’s digital banking license offering. Some jurisdictions have especially led the way with forward-thinking infrastructures, such as Fast And Secure Transfers (FAST) across Singapore’s banking ecosystem and the SGQR system. On a regulatory level, this can equally be bolstered with robust, progressive frameworks.”
The innovation trigger: from crisis to contactless, how has COVID-19 prompted irreversible digital shifts payment trends in developing and developed markets across the region?
“Covid-19 has brought to light so many disparities across the global contemporary economic landscape. This inequality, in terms of accessibility to financial services, has been especially pronounced across Southeast Asia. However, the region’s emerging markets are distinguished by a rising digitally-native population with increased mobile connectivity and high smartphone penetration rates which has enabled it to leapfrog digital transformation. Thus, it’s essential to acknowledge that an unmistakable shift towards digital payments was already taking place across the region.
The pandemic has accelerated a sense of urgency to adopt innovative new technologies for reasons beyond speed, security, or cost savings. Instead, this urgency was driven by basic human needs. In Singapore, for example, the government actively encouraged the use of ePayment solutions such as QR code mobile payment systems and similar infrastructures to encourage social distancing. You can see this taking place on a multi-generational level, too, where banking customers over the age of 54 (Baby Boomers) have shown increased confidence in using online banking services during the pandemic.
Be it in developed or developing economies, the fact that people have made small but significant changes to their daily lives and routines is a testament to the widespread utility of digital payments. However, much needs to be done to optimise these infrastructures to make them more efficient without compromising on safety. In my view, we’re likely to expect some trade-offs as markets make the transition to digital payments while looking for approaches that can successfully balance the benefits of emerging technologies and legacy finance alike.”
From QR codes to stablecoins, how will the interplay between legacy finance and the blockchain ecosystem shape the future of Asia’s Open Finance agenda?
“Open architectures enable a more collaborative ecosystem, opening the door for more actors to participate within an open finance ecosystem. As a whole, open banking offers the benefits of choice, enabling more consumers to choose between different banking providers and lowering the cost of switching within an ecosystem. On the other hand, within the blockchain industry which both as a sector and technology are open-source by design—you have the industry-grade cybersecurity offered by cryptography that would be valuable when applied to innovative financial products and tools, while remaining open to innovation.
Yet, the truth remains: banks will still continue to be dominant. It’s simply not easy to replace decades of trust and long-standing client relationships with customers and large corporations, coupled with industry-grade operations and compliance controls. That being said, customer demands are changing. To remain relevant, banks will need to identify key areas such as trade finance and cross-border transfers where blockchain-enabled financial instruments such as stablecoins and central bank digital currencies are showing promise, and partner with best-of-breed fintechs and infrastructure providers to keep up.”
With its top-down approach, what is the significance of MAS’ latest announcement in furthering the acceptance of emerging technologies across Asia’s financial landscape?
“Evidenced by the Payment Services Act—arguably one of the most measurable pieces of legislation addressing the use of digital assets—the MAS is arguably renowned for its progressive, pro-innovation approach to regulation. Across Southeast Asia, it’s certainly a leader and I would argue that other regulators look to it with precedence.
The release of MAS and Temasek’s report in the culmination of the fifth and final phase of Project Ubin is certainly a significant milestone when it comes to institutional explorations into blockchain. If anything, it legitimates the viability of a blockchain-based, multi-currency payments network for commercial use, with clear benefits in terms of speed and cost-efficiency. As the report highlights broader opportunities for cross-industry collaboration, it’s certainly a promising sign that points to the legitimacy and relevance of the technology across a broad range of sectors.”