Customers are demanding real-time payments. Source: Shutterstock

Customers are demanding real-time payments. Source: Shutterstock

How and why Asia needs to accelerate its journey to real-time payments

CONSUMERS today want things now — and technology is helping companies deliver.

In the retail space, companies such as Amazon and Walmart are making same day deliveries seem ordinary.

Restaurants and F&B companies such as Dominos and Burger King are exploring drone and GPS technology solutions because customers don’t want to wait 30 minutes for a meal anymore.

However, come to think about it, despite being intangible, not everyone today can transfer money instantly.

The technology is making quick progress in parts of Asia, but change is primarily being driven by the P2P (person 2 person) category.

Most recently, BancNet, the national clearing switch operator for InstaPay, a real-time retail payments system in the Philippines, announced that it will tap into Mastercard’s expertise to provide InstaPay users with improved services, better data capabilities, and stronger security features.

Further, by leveraging the partnership with Mastercard and its network companies, InstaPay aspires to grow beyond the P2P category and extend InstaPay’s reach to encompass broader government and commercial payments.

To be fair, InstaPay is not the only one facing challenges in moving from P2P to P2B (person 2 business) and B2B (business 2 business). Across Asia, some of the most successful companies are struggling with this challenge on an everyday basis.

Real-time payment leaders in India, Hong Kong, and Malaysia face similar challenges.

While P2P seems to be the most dominant, real-time payments can be applied across all categories: B2B supplier payments; B2C payments such as legal settlements, insurance claims, wages; C2B payments such as hospital bills, utility payments, and point of sale purchases; and domestic P2P and cross border remittances.

In Asia, with traditional banks such as Singapore’s DBS and India’s Kotak Mahindra Bank rushing to launch digital-only banks such as DigiBank and 811, real-time payments can often help drive down costs associated with handling cash and cheques — the two most common types of payments in the region.

“For the use cases of real-time payments to expand and reach their full potential in Asia, the entire ecosystem—of both established financial service players and digital newcomers—must participate in efforts to develop the infrastructure, improve fraud monitoring, and encourage consumer adoption,” Mastercard’s Executive Vice President of Digital & Emerging Partnerships and New Payment Flows, Asia Pacific, Rama Sridhar told Tech Wire Asia.

According to Rama, here are three key steps that must be taken by the financial services ecosystem in Asia in order to accelerate the adoption of real-time payments:

# 1 Encourage standardization

Regulators and policymakers across Asia must promote real-time payments standardization, and coordinated policy efforts must encourage its usage across a wide variety of transactions.

Cost-efficient, standardized infrastructure needs to be developed, ideally on a shared or distributed basis.

# 2 | Promote widespread adoption

Critical use cases and revenue models must be identified for all industry players—but in particular, those adopted by traditional banks—to encourage broader real-time payments adoption by all.

# 3 | Mitigate security risks

Regulators must require the use of intelligence-based analytics tools that identify potential fraud, money laundering, and safety and security risks.

Further, industry participants need to use analytics—informed by large volumes of global data on transaction context and payer demographics and behaviors—to mitigate security risks.

While real-time payments seem like an accelerant to burning issues in the region such as money laundering and bribery, building the right infrastructure to support real-time payments could help mitigate the risks and ensure benefits outweigh any risks.

In a digital-savvy, mobile first Asia, real-time payments have the potential to facilitate financial inclusion and help the flourishing e-commerce and platform-driven economies.

If implemented correctly, with the right checks and balances in place, it could provide the fillip that the region needs to reap the benefits offered by a young demographic rapidly climbing the socio-economic ladder and living in an age with constant connectivity.