The payments promise in ASEAN: how to unlock it?

Right across the Southeast Asia region, we’re seeing financial institutions prioritize large-scale transformation of their payments capabilities. The principal driver of change for these incumbents? The prospect of capturing a slice of the massive growth forecast for payments. Digital payments are surging in ASEAN, having exceeded US$707 billion in 2021 and projected to reach US$1,169 billion by 2025.

Now, with recent Accenture research pointing to an upsurge in disruption ahead, banks are seeking to put in place the capabilities they will need to counter increasingly strong competition from disruptors, both e-commerce giants and nimble fintechs.

We’re seeing venture capital firms and payments disruptors positioning themselves for new growth, with the sector already attracting a strong inward flow of investment. Payments-focused fintechs attracted 32% of total fintech funding in 2020. And funding allocated to payments fintechs grew 63% between 2018 and 2020, compared to a 20% rise in overall fintech funding over the same period.[1]

Change everywhere in a surging marketplace

There are multiple reasons why we’re seeing so much action among incumbents, and so much action now. Changes in consumer behavior and breakthroughs in digital innovation have proved to be enormously powerful forces.

Disruption is now the norm. Nine in 10 payments providers in our research agreed that the level of disruption in this market will continue to increase in the next three years, adding to the huge changes we’ve seen since the pandemic first hit the region in 2020.

One example? Globally, the proportion of online purchases made by formerly infrequent e-commerce users for products like food, fashion, and luxury goods has increased by almost 350% since the start of the outbreak.[2]

And these changes in consumer behavior are set to remain, even as the world strives to regain some degree of normal social and commercial interaction. A total of 2.7 trillion transactions, worth US$48 trillion, are expected to shift from cash to cards, interbank payments, and alternative payments instruments in the next decade, representing a $300 billion opportunity for payments providers.[3]

In this new world, consumers demand contactless and digital payments – and we’ve seen fintechs move fast to enable them with e-wallets, seamlessly incorporating payments into people’s lives via smartphones, smartwatches and so on.

A new, interconnected regulatory landscape

The shifting regulatory landscape is also igniting rapid change. The hard deadline of November 2025 for the introduction of ISO 20022, reinventing how payments messages are exchanged across the SWIFT community, is a case in point.

By creating a common language for payments worldwide, with higher-quality data flowing through the global system, ISO 20022 is set to have a massive impact. Recognizing this, banks aren’t just rewiring their payments capabilities to take advantage. They’re rethinking their entire payments strategies.

At a regional level, we’re seeing progressive initiatives from regulators in many countries, all of them designed to make real-time payments easier for end-customers and/or people outside the banked ecosystem.

Just one example is the agreement by the central banks of many Southeast Asian countries to interlink their real-time QR-code-enabled payment systems. The goal? To allow for instant, low-cost, low-value cross-border payments to all participating countries. This will facilitate international real-time payments by both consumers and businesses, and support the growth of intra-region trade.

Making plans for the future

It’s an incredibly vibrant landscape. Asia Pacific is now positioned as a dominant force in digital banking, with 20% of approximately 250 digital banks worldwide based in the region.

Against this backdrop, we continue to have active discussions and engagements with multiple banks to look at the future of payments and understand where they’re best placed to play and win from now on. With new developments coming thick and fast, that can be challenging.

From the rise of cryptocurrencies to central bank digital currencies (CBDCs), it can be hard to predict how banks’ technical architectures will have to change. The good news? As they contemplate what the future holds, banks can learn from a number of initiatives that are charting a way forward.

One of these is Project Dunbar, a collaboration between the Bank for International Settlements (BIS) Innovation Hub Centre in Singapore and a number of central banks across the region. They are exploring how a common platform for multiple CBDCs could enable cheaper, faster and safer cross-border payments.

Learning from the leaders

In the face of new fintech competition and fast-changing customer demands, some leaders have been outgrowing the overall market over the past three years in terms of transaction numbers. So what’s the secret of their success?

Our research shows that they’re all winning with formulae that combine the same core capabilities: compelling customer value propositions supported by new ecosystem partnerships, agile operating models and a flexible tech stack.

For a case study of this winning formula in action, take the example of one leading Southeast Asian bank – one of the first in the region to place a big bet on an API developer platform built on a banking-as-a-service model.

The bank has also committed itself fully to a customer-first culture and is actively pursuing innovative ecosystem partnerships. The net effect? Less than 10 years since beginning its digital journey, the bank has transformed itself into an agile API-powered player that can rapidly bring new payments value propositions to market.

It’s an example that highlights three key approaches payments players can use separately (or in combination) to craft compelling value propositions for growing revenue and market share in payments:

• Take friction out of the process: unify disjointed payments systems and channels into an integrated commerce experience.
• Push the purpose lever: deliver payments services that advance the customer’s financial well-being, the good of society and environmental sustainability.
• Go beyond the payment: real-time and cross-border payments are table-stakes nowadays. Agile leaders are exploring new partnerships to support exciting opportunities across displacement of cash and new payments options like request to pay, account-to-account (A2A) transfers, digital currencies, and buy now, pay later.

A new world of payments opportunity

The explosion of innovation we’re seeing in payments is unprecedented, thanks to an array of powerful developments from 5G and contactless payments to tap-to-pay technologies, and including faster, cheaper access to high-quality data in ever greater volumes.

For incumbents that can learn from leaders and take advantage of these new developments, there’s an outstanding opportunity to create new, stand-out value propositions that deepen existing relationships built on a strong foundation of trust. But with disruptors making inroads every day, there’s no time to waste.

I’d love to hear your thoughts, so please get in touch.

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Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.

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[1] Accenture Research analysis on CB insights data

[2] https://newsroom.accenture.com/news/covid-19-has-sparked-a-new-wave-of-innovation-across-consumer-industries-according-to-accenture-research.htm

[3] https://www.accenture.com/sg-en/insights/banking/payments-digital-disruption-opportunity