COMMENTARY: INTEROPERABILITY Maybank’s Kalyani Nair and Eli Shoshani, from technology provider Bottomline, reveal how Asia’s approach to standardisation and interoperability is turning the tide for customer payments experience in the region The adoption of a common standard, ISO 20022, for payments messaging across the world’s financial markets is seen as a watershed moment in the digital transformation of payments ecosystems. As multiple deadlines to comply approach, many minds are now becoming focussed on migrating to a protocol designed to make all types of transaction – domestic and cross-border – more open, efficient, faster, safer and ‘always on‘. The use of ISO 20022, characterised by a data-rich messaging format, is also a key piece in the puzzle of ensuring international interoperability in a fast-moving world, where demands and expectations grow ever greater. Nowhere is that more so than in Asia, a region with a huge cross-border payment flow, many regulatory frameworks, and around 50 currencies in regular use. So, what will these changes mean on the ground, for both payment service providers (PSPs) and their customers there? Kalyani Nair, who is head of virtual banking and payments at Malaysia’s largest bank, Maybank, and Eli Shoshani, who heads up operations in Asia-Pacific for payments provider Bottomline, are both very familiar with a region that makes the largest global contribution to payments. Standing at US$900billion in 2019, it equates to nearly half of the world’s total
payments, according to McKinsey’s November 2020 report The Future Of Payments In Asia. It highlights the efforts being made in the region to create a seamless, borderless payments ecosystem driven by digital innovation. Indeed, Nair notes that some ASEAN (Association of South East Asian Nations) countries, like Cambodia and the Philippines, ‘leapfrogged’ into mobile phone banking, bypassing the normal forerunner phase of using personal computers for internet banking. As such, mobile technology remains hugely important as a means of payment, with increasing use of mobile wallets and a dramatic acceleration in the use of QR code payments, which, for Maybank alone, have grown more than 100 per cent year-on-year. All in all, it marks a significant shift for a region where, historically, cash has been king. Meanwhile, Southeast Asia (SEA) is fast emerging as the centre of real-time, cross-border payments growth, with the use of ISO 20022 and QR codes critical components of that. As a backdrop to that, SEA’s internet economy is forecast to triple in size by 2025, to reach US$300billion, making it one of the fastest-growing digital economies globally. Public and private organisations here drive innovation. For instance, the Monetary Authority of Singapore (MAS) and the Bank of Thailand (BOT) have just announced a
global first by linking two national real-time retail payment schemes: Singapore’s PayNow and Thailand’s PromptPay (see page 68). Meanwhile, in Malaysia, a Real-time Retail Payment platform (RPP) has been developed to modernise the country’s payments infrastructure, creating an integrated ecosystem to drive digital adoption. DuitNow, an instant credit transfer service allowing users to transfer funds based on a mobile number or national ID, was the first RPP payment service to go live on the platform, in early 2019. Adoption of ISO 20022, from the outset, has been credited as pivotal in driving innovation and transaction volumes over the platform, including credit transfer, DuitNow’s QR code payments, and a range of digital overlay services. RPP, which is operated by PayNet, also benefits from standard connectivity between participants and the central hub, aiding seamless integration and onboarding as well as ongoing compliance. “Things have changed dramatically,” Nair remarks. “If you look at the ASEAN market, about 38 per cent of the population is very young; the mobile/smartphone penetration is very high; and governments are pushing digital – you have different agencies in each country that are actively encouraging people to go cashless. “In Malaysia, the government was actually putting money into consumers’ mobile
A panacea for Asia’s payments challenge? 40
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