Real-time banking for a digital-first ASEAN

A wave of new financial technologies is enabling companies, large and small, to deliver swift, seamless user experiences to customers and treasury teams.

A silver lining of the past 18 months has been the rapid pace at which both consumers and businesses have transitioned to a digital-first world.

Across the top-six economies of ASEAN, in 2020 alone 40 million consumers joined the region’s online community1, accessing essential services – including financial services – from smartphones, desktops or laptops. Of the 580 million people living in Indonesia, Malaysia, Philippines, Thailand, Singapore and Vietnam, 400 million are now digital customers2.

The convergence of finance and technology has since become the norm. At a recent Standard Chartered webinar, titled “Digitalising for growth”, financial technology professionals outlined key developments transforming banking and finance across ASEAN, and described how companies of all sizes can benefit.

Embedded and decentralised

Two trends are notably shaping the future of finance. The first, embedded finance, is the provision of financial services through non-financial platforms, products or channels. Several of the region’s ride-hailing apps and social platforms epitomise this trend, offering payment processing, loans, insurance products and more with the click of a button.

“The technology and sophistication of non-financial services companies have improved tremendously,” explained Yong Sheng Le, Deputy Director, FinTech and Innovation Group at the Monetary Authority of Singapore (MAS). Such companies, with proprietary access to customers and rich insights to these customers’ contextual data, can work closely with banks through the use of application programming interfaces (APIs), to provide highly customised digital financial products to customers. “Banks no longer have to own the entire value chain. They just have to own the part they are most sophisticated in, and their core competencies.”

Decentralised finance, the second trend, is reinventing the role of financial intermediaries. Traditionally, third-party organisations facilitated transactions between buyers and sellers; yet today, this function is increasingly being automated through blockchain technology and the use of smart contracts. Not only do these technologies bring greater time and cost efficiencies, they also enable greater transparency for both entities.

Decentralised finance will eventually lead to the Internet of Value, Yong noted, where users can transfer value in the form of digital assets, money and securities as easily, cheaply and securely as standard, non-sensitive data is transferred today.

Faster payments

While real-time payments have been in use across ASEAN for several years, the past year or so has accelerated their adoption. In Malaysia, for instance, national payments network PayNet experienced exponential demand from both businesses and consumers during 2020. “As the COVID-19 pandemic gave rise to new digital businesses, we saw millions of Malaysians go digital for their e-commerce, entertainment and educational needs,” recalled Khairuan Abdul Rahman, Director, Retail Payment Services, PayNet Malaysia.

He cited PayNet’s DuitNow QR3, which enables users to make immediate payments to merchants by scanning a QR code, as an example. Launched in 2019, there are now more than 700,000 business touchpoints nationally. And, he added, use of PayNet’s e-commerce solution FPX, which facilitates real-time customer debiting and merchant crediting4, doubled in 2020.

Unfortunately, use of digital payments still lags behind cash. During 2020, an estimated 77 per cent of transactions in emerging markets were made with cash5. In ASEAN, persuading consumers and small and medium-sized enterprises to switch to digital payments won’t be easy for a wide range of reasons, including habitual and cultural preferences, cautioned Judy Bei, Global Head of Payments, Mobile Money and e-Commerce at Standard Chartered. However, greater educational support and the availability of alternative solutions from banks could spur further adoption. As might the proliferation of omnichannel payments – integrated and consistent payment experiences across multiple touchpoints – and ‘buy now, pay later’ solutions.

“It’s important to provide solutions that are low-cost, high-tech and easy-to-use,” asserted Sean S Hesh, Group CEO of GHL Systems.

‘Data on demand’

Real-time services are making their way into treasury too, thanks to open banking. At its core, explained François-Dominique Doll, Executive Director, Global Treasury Advisory Services at Deloitte, open banking is about passing control of bank data to customers, who can open their data to third-party entities in search of cheaper, more efficient and immediate access to banking services and information. Through the use of APIs, fintechs and other financiers can access this data securely, and offer alternative products. Initially a retail-orientated initiative, open banking is gaining in popularity among businesses.

“There are two types of open banking,” said Peter Klein, Chief Technology Officer, FinLync. “One is open, public and regulated – and available to all. Then there are premium APIs, which are very much open but behind closed doors.” The first typically comprise turnkey solutions that can be used by any number of customers, while the second usually involve customisation.

Connecting bank accounts and other information to a company’s enterprise resource planning or treasury management systems, the range of services that can be accessed in real time continues to widen. Initially, customers favoured real-time payments and balance enquiries, and tracking the status of cross-border transfers. Now, customers use APIs to manage their account signatories, know their pooling structures, access new lines of credit, and more.

Beyond treasury

Across ASEAN, open banking programmes have been rolled out at varying speeds. Singapore led the way with the Finance-as-a-Service: API Playbook, jointly launched by MAS and the Association of Banks in Singapore6. More recently, Malaysia published its Policy Document on Publishing Open Data using Open API7. Indonesia and Thailand are in the early stages of their respective open banking journeys. Other markets are yet to start.

Equally, realising the potential of the Internet of Value will be challenging in the short term, given regulatory frameworks for digital assets across the region are both nascent and highly fragmented.

“The benefits of open banking extend beyond treasury. Corporates can use APIs individually or in combination to connect financial flows to various departments — whether they be sales, service, credit or aspects of the physical supply chain, to drive productivity or create new business value,” said Byron Gardiner, Executive Director, Structured Solutions and Advisory at Standard Chartered. “Take as an example the ability to receive a real-time credit notification at the moment cash is received in your account, and then instantly triggering the replenishment of a distributor’s credit line thus enabling new purchases or goods shipment to occur. You can begin to imagine a wide variety of use cases where APIs will drive efficiency and value across an organisation.”

1 https://economysea.withgoogle.com/

2 https://economysea.withgoogle.com/

3 https://www.duitnow.my/DuitNow-QR/index.html

4 https://paynet.my/business-fpx.html

5 https://www.mckinsey.com/

6 https://www.mas.gov.sg/-/media/MAS/Smart-Financial-Centre/API/ABSMASAPIPlaybook.pdf

7 https://www.bnm.gov.my/-/policy-document-on-publishing-open-data-using-open-api-1

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