2023 Digital Banking Trends in Asia Pacific

Core banking 13-Dec, 2022

Digital payments have been a part of our lives for quite some time now and it was only during COVID-19 that they became a part of our daily transactions eliminating the hassle of carrying cash.

  • With the increasing acceptance of e-wallets, QR codes and mobile money among consumers and businesses, the Asia-Pacific digital payment market continues to prosper.
  • Global cashless payment volumes are expected to reach almost 1.9 trillion transactions by 2025, according to PwC. Out of this, the Asia Pacific region will be accounting for 1.03 trillion transactions which is 109% up from 94 billion transactions in 2020.

Certain regions in the Asia Pacific, such as Vietnam are witnessing a push for digital payments through the support of the regulatory authorities.

  • Last year, the government authorities in  Vietnam sanctioned a plan to develop a more technologically sound cashless payment system during the 2021-2025 timeline.
  • Further, to facilitate cashless payments in public services, the National Payment Corporation of Vietnam (NAPAS) has established a payment infrastructure between 45 localities and 15 ministries, departments, and agencies.

Now, let’s take a look at some of the key trends that are going to shape the landscape of the digital banking system in Asia pacific.

Digital Currencies

  • With COVID-19 increasing the demand for digital payments, regulatory banks in the Asia Pacific region are eyeing the introduction of digital tokens that are called central bank digital currencies (CBDCs) and have the same value as their paper counterpart.
  • A Japanese FinTech firm, Soramitsu along with the Japanese Ministry of Economic Trade and Industry are conducting an assessment of the feasibility of introducing CBDCs throughout Asia Pacific regions like Fiji, Philippines and Vietnam.
  • While China has become the world’s first major economy to pilot its digital currency e-Yuan/e-CNY amid the pandemic in 2022, the State Bank of Vietnam is planning to implement a pilot project for cryptocurrencies.
  • Also, the Reserve Bank of India (RBI) is all set to roll out its digital currency e-rupee which will be released for both interbank settlements and retail purchases.

Cross-border Payments

  • The increasing demand among consumers for low-cost instant payments is making regulators constantly innovate solutions pertaining to cross-border payments.
  • Southeast Asia's regulators are creating cross-border links, inking bilateral and multilateral agreements to facilitate cross-border payment infrastructure.
  • One such kind of agreement includes a memorandum of understanding (MoU) between Southeast Asian payments system operators NETS, PayNet, Thailand’s National ITMX (ITMX), Vietnam’s NAPAS and Indonesia’s PT Rintis Sejahtera (Rintis,
  • All these operators are a part of the Asian Payment Network (APN) which is looking at including more and more nations across the Asia Pacific.
  • Further, FinTechs are tying up with infrastructure builders to envision their goals of cross-border payments. September 2022 saw one such instance where the Vietnamese e-commerce platform - Buy2Sell collaborated with Mastercard to provide multiple payment methods through a single connection.
  • Similarly, Tinkoff which is one of the world’s largest digital banks used Finastra Fusion Essence Cloud core banking solution to accelerate its expansion into the Philippine market.

Rise of Neobanks

  • A Neobank is an online-only banking platform that operates without a physical presence and the Asia Pacific region is home to approximately 68 neobanks, a number which is increasingly growing.
  • India is leading the list with 14 neobanks, followed by Hong Kong with 12 and China with four claiming to have a customer base of 220 million.
  • Similarly, super apps are entering the space of neobanking.
  • In Vietnam, where there is no separate licensing regime, digital banks are either partnering with or operating as units within licensed incumbent banks.
  • MoMo, a popular digital wallet in Vietnam with over 23 million active users has taken this very route by buying a 49% stake in Credit Viet Securities to facilitate this feature. Other followers of the pattern in the region include Timo and TNEX.

Buy Now, Pay Later (BNPL)

  • BNPL system has been welcomed with open arms by consumers in Asia Pacific.
  • According to Mastercard New Payments Index (NPI) in August 2022, 50% of consumers in the region are increasingly becoming comfortable using BNPL because of the low/no interest feature in times of emergency payments.
  • In Vietnam, consumer finance company Home Credit is planning to invest US$8.35 million to develop its own BNPL service.
  • Other players in the Asia Pacific region that are integrating the BNPL feature in their services include India’s Pine Labs ($7 billion valuation), Japan’s Paidy (acquired by Paypal for $2.7 billion), Australia’s Afterpay (acquired by Square for $29 billion), Indonesia’s Akulaku ($1 billion) and Singapore’s Atome ($2 billion valuation).
  • In spite of high consumer demand, BNPL firms are typically operating on losses and as per a research conducted in Aprl 2022, BNPL players in the region will be incurring a loss of US$5.2 billion by 2025.

In a market that is growing rapidly, banks and FinTech companies require an infrastructural solution that can cater to all of their payment hub needs including cross-border payments, digital currencies, and innovative new solutions through API-enabled architecture.

With a deep understanding of the foundational requirements for a FinTech to thrive, we, at Coreium, aim to assist financial services firms with top-notch technological solutions to foster exponential business growth. Email info@coreium.io or call +60 166173975 today to get consulted by our experts on innovative fintech solutions and customized services.

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