In these regions, the digital payments landscape is evolving rapidly. According to the IDC InfoBrief commissioned by 2C2P, “How Asia Buys and Pays 2023: Tapping into Asia’s Regional Commerce Opportunities,” the total digital economy of SEAKJ is poised for a surge, projected to escalate from $501.7 billion in 2022 to an impressive $914.9 billion in 2027E — a remarkable 82% increase over a span of five years.

Stepping into 2024, we're excited about the myriad of possibilities, developments and growth that await us within the dynamic landscape of payments.

In these dynamic times, the unexpected companionship of volatility and uncertainty underscores the critical importance of businesses staying on top of the latest movements in payments to remain competitive. To help you navigate the space, we’ve consolidated insights on the key payment trends to watch in 2024.

In this article, we’ll explore the following:

• Greater cross-border connectivity across Asian markets
• The future of biometric payments
• The global development of CBDCs
• How the open banking framework has levelled the playing field
• Payments in the metaverse
• Fragmentation and consolidation in the global payments landscape

Greater cross-border real-time payment (RTP) connectivity across Asian markets

In a concerted effort to reduce the friction to cross-border payments and accelerate trade in Southeast Asia, governments in the region have been linking up their real-time payment (RTP) networks. To date, four countries — Thailand, Singapore, Malaysia and Indonesia — have connected their RTP rails, greatly expediting payment flows across their borders.

Public sector-led RTP interoperability is underway

Project Nexus, developed by the Bank for International Settlements (BIS) Innovation Hub, presents an innovative approach to regional interoperability, addressing the limitations of bilateral linkages. This model establishes common standards and a singular integration point, offering payment system operators a standardised method to connect domestic Fast Payment Systems (FPS) and facilitate cross-border transactions.

In 2022, the Nexus prototype successfully demonstrated cross-border payments between the Eurosystem’s TIPS, Malaysia’s RPP and Singapore’s FAST systems, proving its viability. Central banks in Indonesia, Malaysia, the Philippines, Singapore and Thailand plan to adopt the Nexus approach, envisioning seamless cross-border payments and a connected global network.

This network will allow smaller businesses to quickly and easily accept payments from other Southeast Asian countries’ local RTP systems at lower costs, representing a significant potential revenue generator. Intra-SEA RTPs also give rise to the possibility of further expanding intra-SEA trade and breaking traditional trade barriers created by the lack of payment tools.

Nevertheless, the current payment landscape is predominantly government-led, akin to India's Unified Payments Interface (UPI) system, where the government facilitated zero Merchant Discount Rate (MDR) and afforded merchants the benefit of low processing fees. Vishwas Patel, Chairman of the Payments Council of India, notes the sustainability of free services, while closed systems may not foster the level of growth desired. Drawing from his experience building the UPI system, he believes that a government-led, low MDR approach for payment instruments proves to be the most effective path.

The success of India’s UPI model, which boasts easy integration, recurring payments and low Merchant Discount Rates (MDR), proved groundbreaking for the region. Gary Yeoh, Chief Commercial Officer at PayNet, noted that India was a role model for Malaysia in their establishment of real-time payment infrastructures like DuitNow, which supercharged their digital economy.

Ivan Mortimer-Schutts, Consultant at the International Finance Corporation (IFC), echoes Patel’s sentiment, highlighting the role of national currencies and payment systems as essential public goods for consumers and businesses to participate in the economy. Governments exercise a key (monopolistic) role in creating currency (including its new digital forms) and the regulation of the infrastructures and service providers around it. But to serve its purposes, governments need to foster a vibrant yet secure ecosystem that harnesses private sector incentives to meet the needs of diverse users of the payment system. This inevitably requires collaborative efforts and governance arrangements that carefully balance the different aims and objectives of policymakers as well as the interests of industry and society, proactively seeking to integrate new forms of money, payment services and institutions.

Private sector accelerating RTP integration

According to the 2023 IDC InfoBrief, mobile wallet transactions in Southeast Asia are expected to outpace credit card transactions by 2027, with only domestic payments ranking higher.

While mobile wallets are increasingly used by Asian consumers, most wallet brands are used exclusively in their home markets. Breaking new ground, Alipay+ is the first in Asia to leverage Alibaba’s vast existing network of assets and partnerships to link up major mobile wallets. These include DANA in Indonesia, Touch ‘n Go in Malaysia, GCash in the Philippines, EZ-Link in Singapore, TrueMoney in Thailand, KakaoPay in South Korea, and more. Outside of China, Alipay+ covers five million merchants in 56 markets and works with over 20 mobile payment partners across Asia, which together serve over 1.4 billion consumer accounts. This connectivity will allow users to pay with their existing mobile wallets when travelling abroad, making it easier to transact for both leisure and business.

Furthermore, Ant Group has officially integrated seven new leading e-wallets and payment apps from Asia into its "Alipay+-in-China" Program (A+China Program). Users of mPay, Hipay, Changi Pay, OCBC, Naver Pay, Toss Pay and TrueMoney can now employ their familiar home e-wallets for seamless mobile payments across Alipay's extensive merchant network in the Chinese mainland. The A+China Program aligns with Alipay+'s strategy of expanding partners and merchant networks and boosting digital operational capabilities for SMEs, with a focus on robust, omnichannel growth.

The future of biometric payments

With rapid digitalisation, today’s consumers expect nothing less than a seamless, secure and fast checkout experience. Abhishek Vats, Head of Acceptance, Asia Pacific at Visa, notes, “We’ve seen how quickly people have moved on from a proprietary card to using their smart watches and phones to pay for public transport in the last few years, embracing the speed, convenience and ease that device-based payments bring. Biometrics payment solutions, which go a step further in removing the need for a physical device to pay, are set to gain traction once the payment experience is intuitive and safe.

A Visa study found that 66% of Southeast Asian consumers were interested in biometric payments, with convenience, novelty and transaction security as top drivers.

With biometrics gaining widespread acceptance, a strategic collaboration between Mastercard and NEC Corporation is poised to revolutionise in-store payments with biometric payment solutions that leverage NEC’s facial recognition technologies and Mastercard’s optimised user experience and payments expertise. Through a signed Memorandum of Understanding that inked the partnership in November 2023, they aim to enhance in-store checkout experiences globally by providing consumers with a seamless, secure and swift payment option. Singapore and Indonesia are set to benign trials next year.

According to Jupiter Research, businesses are expected to authenticate over $3 trillion in payment transactions by 2025. Merchants can look forward to biometric payments bringing about shorter lines, increased security and integration of loyalty programs into the checkout system. This could help to foster more personalised offers and stronger customer relationships.

The global development of CBDCs

Central Bank Digital Currency (CBDC) is a digital currency issued by a central bank. This means that, unlike private digital currencies like bitcoin, CBDCs are backed and overseen by governments, ensuring that their value is stable and that their usage is regulated. With this framework, CBDCs can help to reduce criminal activity such as tax evasion and money laundering. China, for example, reported that a money laundering scam was uncovered with the help of its digital yuan project.

According to the US think tank Atlantic Council’s CBDC tracker, 130 countries, representing 98 per cent of global GDP, are exploring a CBDC. 11 countries have fully launched a digital currency, and 19 of the G20 countries are now in an advanced stage of CBDC development. In 2023, the International Monetary Fund (IMF) launched its Central Bank Digital Currency (CBDC) Virtual Handbook as a reference guide for policymakers and experts at central banks and finance ministries. This signifies the prevalence of this topic on a global scale.

The rise of CBDCs could enable central banks to directly facilitate financial services for the unbanked and underbanked. Furthermore, CBDCs could usher in a new era of programmatic money, paving the way for smarter, more efficient financial systems.

Wutthisart Yingdon, Director of Application Development at 2C2P, notes the potential of the programmability of CBDCs, which could enable payments on condition of specific criteria or events. For example, funds could be released only when certain conditions are met, such as the completion of a service or the delivery of goods.

He also believes that with programmatic money, CBDCs could foster innovation by allowing developers to build decentralised applications and financial services on top of the programmable infrastructure.

CBDCs also hold the potential to enhance interoperability between different financial systems and networks. For instance, CBDCs could facilitate the connection of banks, fintech companies and payment service providers, enabling smooth transfers of funds. Interoperability could also allow CBDCs to seamlessly integrate with existing financial infrastructures, such as payment systems, clearinghouses, or settlement networks. This integration would enhance the efficiency of transactions, making the movement of funds more seamless and secure.

Overall, there is much to explore with CBDCs in terms of how they can elevate the efficiency and security of the financial system. Within the region, the Bank Of Thailand also launched a retail CBDC pilot in 2023, with 2C2P as one of the major supporting partners of the project. That said, whether CBDCs could become mainstream would be a matter of technology readiness, infrastructure and public acceptance. As Jibran Bugvi, Director of Payments, Fintech & Credit Risk at Agoda, puts it, “If customers want it, platforms would need to offer it, but there’s still some time to go; we’ll need to watch how the adoption curve grows.”

Open banking continues to level the playing field

Open banking frameworks are transforming the financial landscape by utilising application programming interfaces (APIs) to facilitate the seamless sharing of customer bank data with third parties. In Asia, this evolution is reshaping collaboration between banks and businesses, fostering innovation within the financial services sector.

The global shift toward open banking is evident in South Korea, where high card penetration and the rapid expansion of mobile wallets, coupled with real-time payment systems (RTPs), are significant. The success in South Korea is attributed to a unique open banking framework, fostering healthy competition among banks and non-banks in the payments industry. In the broader Asia-Pacific region, the approaches to open banking vary between market-led and regulator-led strategies.

Another key success of open banking is the aforementioned success of the UPI model in India, which features a government-driven, open and inclusive approach. Launched in 2016, the UPI allows users of payment service providers like PhonePe or GooglePay to use the National Payments Corporation of India (NPCI) as a switch to connect with banks and transfer money. The government's involvement helped to supercharge micro SMEs, implement digitization initiatives such as EKYC and E-signing and facilitate account aggregation for loans. Despite challenges such as the pandemic, the UPI now handles $1 trillion in transactions annually, representing 47% of the world's real-time payments.

In conclusion, the global trend toward open banking is evident through varied regional implementations and case studies like South Korea and India underscore the transformative potential of open banking frameworks. In 2024, open banking frameworks will continue to level the playing field in the financial services sector, shaping a more collaborative and innovative future.

Payments in the metaverse

In 2023, Piyawit Manpanpanich, Deputy Director of Product at 2C2P, made bold predictions on real-time payment advancements. He explored the potential integration of RTP with Virtual Reality (VR) technology, which can enable a more immersive form of e-commerce or in-store experience. Imagine shopping in a virtual mall and making payments by blinking your eyes. That said, VR technology is still at an early stage and it will take more developments to achieve such a possibility.

To follow up on this prediction, Visa’s 2023 Consumer Payment Attitudes Study highlighted the interest in the metaverse and the strong growth potential of augmented reality (AR) in the retail experience in Southeast Asia. The study also found that most consumers who have tried AR in retail have used it in shopping for fashion, followed by personal electronics and home furnishings.

In Asia, there has been a growing number of companies dabbling in the metaverse. Notably, South Korea, known for its tech-savvy culture and booming entertainment industry, sees gaming companies working with K-Pop stars to give fans a new way to interact with their idols through the metaverse. We’ve also witnessed the emergence of virtual showrooms and virtual malls, such as Taobao’s ‘Metaverse Mall’ for its 618 shopping festival.

As virtual realities continue to develop, financial technologies will play a pivotal role in bringing payment networks into the metaverse experience. According to Mastercard, the intersection of improved hardware, technology and collaboration is essential to make payments in the metaverse a reality.

Fragmentation and consolidation in the global payments landscape

Digital payment methods are evolving rapidly – but is the global payments landscape becoming more fragmented or consolidated?

In Chapter 8 of our 20th-anniversary e-book, “Cracking the Payments Code”, our founder and Group CEO, Aung Kyaw Moe, notes that interoperability is the way forward for the payment industry, making funds transfers easy between different payment rails and systems globally.

He traces back to when geopolitical interests led larger nations to develop their own payments network – Japan built JCB, India built RuPay and China built UnionPay. With their own payment infrastructure, nations can influence the macroeconomic cost of doing business in their country.

Initially, central banks implemented domestic payment switches to facilitate interbank ATM interoperability and other financial settlements, such as point-of-sale (POS) transactions and fund transfers. As these systems evolved, they began incorporating newer technologies such as Quick Response (QR) code payments, as well as payments linked to a resident’s ID or mobile number. As local payment infrastructure matures and begins to extend across borders with cross-border real-time payment linkages, this could result in international card schemes and payment providers facing increasing competition.

Aside from geopolitical interests, the pandemic has also accelerated countries’ digital payments growth, with countries fast-tracking their national switch agenda and developing independent infrastructure, payment networks and card schemes. That said, Aung notes, “While consolidation enhances efficiency and convenience for end users, fragmentation also offers advantages. It will boost competition amongst various payment operators to retain customers by providing enticing incentives like low fees, rewards and improved service efficiency.”

Increasing consolidation in regional and global payments standards

With cross-border payment rails underway across the region, the payments landscape is poised to see increasing consolidation in standards.

Aung highlights the telecom industry as a great example. In the past, different mobile operators used different technology providers to offer mobile network services to the consumer. Fast forward to today, the standard is that we can call one another seamlessly and globally. This was made possible by the industry standards established by organisations such as the GSMA that unifies mobile operators worldwide.

Similarly, common payment standards will emerge as technology evolves. Payments are headed in the same direction in the long run, as international organisations like EMVCo are setting industry standards such as the EMVCo QR Code Specifications that are available to every nation.

About 2C2P

2C2P is a full-suite payments platform helping businesses securely accept payments across online, mobile and offline channels and providing issuing, payout, remittance and digital goods services.

With over 400 payment options ranging from credit cards to mobile wallets and an alternative payments network of more than 600,000 physical locations, 2C2P is the preferred payments platform of tech giants, airlines, online marketplaces, retailers and other global enterprises.

Want to take your business further? Our friendly team is ready to help - talk to us today.