The cashless journey has only just begun

IT is no exaggeration to say that the Asia-Pacific has an unrivalled pedigree in cashless payments. The rate of adoption is faster than anywhere else in the world, and this is especially true in emerging Asia where non-cash payments are growing at 22 per cent. But the region's more developed economies have also been quick to embrace new ways of paying. For example, in Australia, contactless now accounts for two-thirds of credit and debit card point-of-sales payments.

Digital wallets that allow users to pay for goods and services within a smartphone app have tended to dominate the discussion of cashless payments in Asia, and particularly China. But the types and methods of cashless payments vary widely market by market and there's no single leader, with QR codes, near-field technology for bank transfers, and pre-paid cards all gaining traction.

The region's governments have been quick to recognise the need to support and advance these new ways of paying, and in response are creating cutting-edge solutions to meet growing demand. Perhaps one of the most striking examples of government-driven innovation comes from India where the government has set-up the Unified Payments Interface (UPI). The platform allows consumers to use a single smartphone application to make payments through any bank that joins, including non-traditional financial institutions such as Indian digital wallet provider Paytm. Since launching in April 2016, UPI has signed up 97 banks and has processed INR270 billion (S$5.4 billion) worth of transactions.

In Singapore, cashless payments took a major step forward in 2017 with the introduction of PayNow - a national real-time payment platform. PayNow allows individuals to send payments to each other, across participating banks in Singapore, with just a mobile phone or identity card number. Since its launch, more than 1 million Singapore residents have used PayNow, and over S$900 million has been transferred via the platform.

More ways to pay

Singapore will be implementing a standardised QR code, SG QR, later this year. The government-led initiative requires all service providers, including e-wallet providers, to adopt SG QR for scan-and-pay services. This brings significant convenience to merchants, who would now only need to have one QR code to accept payments across all platforms.

Coupled with the launch of PayNow Corporate in August 2018, which enables businesses to send and receive payments, soon every department store, neighbourhood shop, or charity soliciting for donations, can accept scan-and-pay e-payment.

But for all the advances, the region has a long way to go before it can truly be called cashless. Though it can be hard to tell from some of the fevered commentary around digital, cash is still the predominant method of paying for goods in most Asia-Pacific countries, with 55 per cent of personal spending processed by cash and cheque. Even in China, this figure is 47 per cent.

Moreover the lack of uniformity in the types of cashless payments across Asia - it may be easy to pay by QR code in China but you would be hard put to find the same option in Australia - underscores how much of the growth until now has been limited to domestic customer bases.

The deployment of cashless technology in Asia still faces the challenge of working across multiple countries and adhering to local regulations, and while the growth in digital wallets in Asia has been phenomenal, only a handful are able to provide users with services in more than one Asian country, let alone on an international basis.

But far from being a reason for pessimism, the region's high cash use shows that the most exciting developments in digital payments are still ahead of us.

New solutions are coming online all the time. Recently, HSBC became the first foreign bank in China to offer customers the ability to pay overseas tuition fees via smartphone. Upcoming innovations include financial institutions delivering credit cards directly to a customer's digital wallet once approval has been given, with no need to wait for a card to arrive in the post.

Being in the most dynamic region in the world for digital payments can also be a source of opportunity. Companies and service providers with a strong foothold in the Asia-Pacific are perfectly positioned to export their technology and capture a global lead, as the challenges of developing systems that can work across borders and currencies are solved.

Gathering steam

Governments and regulatory authorities are taking action to speed up the transition to a cashless society. Indonesia, for example, wants to achieve US$130 billion in e-commerce transactions by 2020. Meanwhile, the Australian government has proposed a cap of AU$10,000 (US$7,500) on cash payments for goods or services from July 2019.

And the Indian government's decision in November 2016 to reissue 86 per cent of the cash in circulation at the time has encouraged many consumers to consider digital payment options.

Asia-Pacific may have just begun its journey to a cashless society, but given the scale of the future opportunity, the best is yet to come.