Richard Humphreys |
A new whitepaper published by Temenos titled ‘Is APAC’s Desire to Lead Global Innovation in Digital Payments Working?’ has outlined the top seven trends that are impacting the future of payments in Asia Pacific (APAC). These are:
1. Taking the lead from Millennials and Gen Z
Gen Z, or those born from the mid-1990s to early 2000s, is a generation that is likely to ditch the leather wallet for the mobile wallet and embrace fintech. For example, China’s 69% adoption of fintech is more than double the global average. Up to 70% of China Gen Z’s will buy products directly from social media. They also gravitate towards mobile banking apps with 69% using them daily or weekly.
2. The ‘we want it now’ era
The digital economy has given rise to the expectation that decision-making should be able to be done on-the-go. Merchants are looking at real-time payments to enhance their cash flow management as well as to reduce fraud. Meanwhile, consumers expect everything in realtime; paying bills or friends should not be more than a few touches or swipes away.
3. The unbanked and underbanked
There is still a lot of opportunity for net-new customers for digital payments in APAC. However, Tech Research Asia (TRA) contends that many bank-led initiatives towards reaching the unbanked are likely hampered by legacy operating models and complex operating priorities. Banks need to figure out how best they can change their business models to develop the unbanked potential profitably, and at scale. With the right infrastructure and a focus on customer centric solutions, mobile banking can be a transformative tool for a bank’s balance sheet.
4. Open banking and APIs enable collaboration
Open APIs will provide avenues for banks to tap into new monetisation avenues and reach customers faster. At the same time, Open APIs will provide new payment service providers to tap into the lucrative payment industry. With collaboration, comes value. APIs and open banking will enable payment players to deliver more value to consumers beyond the mechanics of making a payment.
5. Mobile payments
Mobile wallets are looking to replace (or complement) your current wallet by storing all your payment information and/or preloaded money. Meanwhile, wearables trends point to three salient points. First, wearables will become “invisible” to us. Second, wearables will be able to collect, store, display, and transmit data. Last, wearables will become commonplace. For the payment service provider, this is an opportunity to innovate.
6. Cryptocurrencies and blockchain
Bitcoin is the poster child of what have come to be known as cryptocurrencies and is more of a commodity that is speculated on heavily by both individual and institutional buyers. Blockchain, meanwhile, is the underlying technology of Bitcoin – a distributed ledger technology (DLT) that requires cryptography, peer-to-peer networks and applications. Where TRA sees blockchain having an impact on payments is in 1) providing a transparent and shared ledger of all transactions that can be searched and validated, and 2) in smart contracts, where payments for a good or service is processed automatically once certain criteria are met and validated by the network.
7. Artificial Intelligence
Machine learning and AI benefit banks and consumers in four broad areas, namely: 1) Enhancing customer experience, 2) Collating and analysing customer behaviours, 3) Fraud detection and anomaly analysis, and 4) Improving efficiencies and reducing operational costs. It’s not without effort though for many systems will have to be rebuilt (or at least refurbished) from the grounds up. Robots and algorithms will need to have access to the hundreds of business processing rules at the bank. This will be required so that entire business processes can be end-to-end automated and handle all relevant requests and responses to all parties. To achieve this, banks need to scale back reliance on legacy core banking systems and implement a modern IT platform.