Singapore and Thailand pioneered the world’s first linkage of real-time payment systems on April 29, 2021. This game-changing launch will provide for faster and cheaper cross-border transfers between the two countries and throws down the gauntlet to other fintech startups in Southeast Asia to follow suit.
Through participating banks, users of PayNow in Singapore and PromptPay in Thailand can now send up to S$1,000 ($747 USD) or THB 25,000 ($801 USD) daily through their mobile devices, using only their phone numbers for transfers. This collaboration is a monumental step for fintech trends in the ASEAN region, serving as a blueprint for future payment networks.
Thune’s expert answers if fintech is the future of Southeast Asia
However, for the area to fully realise financial connectivity, it will have to overcome the obstacles currently hindering them from facilitating multi-national transfers across its member states.
We take a closer look at this progression in fintech.
A blueprint for the future
Birthed from an extensive collaboration between the Monetary Authority of Singapore and the Bank of Thailand, this linked payment system has created a blueprint for the fintech sector while solving the many issues of traditional transnational money transfers.
In the past, traditional transfer platforms possessed several drawbacks affecting their setups, including slow transition speeds, high processing fees, and complex information fields. With this new integrated system, users no longer need to provide their full bank details and name and can complete transfers within minutes. Platforms are also more upfront and transparent about their fees, displaying the now-affordable rates prior to transaction confirmation. .
Formed under the ASEAN Payment Connectivity plan, this collaboration is only the first leg of a seamless cross-border payment system. By 2025, the region seeks to create a fully harmonised remittance infrastructure between its members. As digital fintech platforms continue to grow, spurred on by the pandemic, ASEAN countries are prompted to speed up their national digital financial implementation and adoption programmes in tandem.
The obstacles in their paths
As Southeast Asia gears up to fulfil its 5-year ASEAN Connectivity Plan, it must strategise to overcome the challenges that stand in its way and set a standard for this new network. Because the region is so decentralised and diverse in terms of economies and currencies, it creates difficulties in fostering financial integration across borders.
ASEAN countries do not share the same currency, which can cause issues with accessibility and ease of transfer due to the hurdles exchange rates erect. They also lack a vital prerequisite to developing a connected financial system: data integration. For different information systems to integrate and exchange on a multi-nation scale, countries need a compatible infrastructure compliant with international standards. The ease of doing business index also indicates the differences spread widely across the members, making some countries more conducive to business operations than others.
To achieve these standards, ASEAN will have to work harder to create a common framework amongst its members.
As of now, the region’s digital payment systems remain mostly decentralised, with several sectors operating their share of fintech solutions. Ride-hailing apps like Gojek and Grab offer digital payments for logistics, delivery, transportation services, and more. Banks and fintech startups in Southeast Asia are also innovating and developing tech to support their digital financial services.
Southeast Asia should also plan for transfer delays between borders. The U.S. and U.K. payment system is a prime example of this effect. According to a PYMNTS report, users in the U.S. had to wait an average of 3 days more than the U.K to receive payments. Issues such as this may be a challenge that ASEAN member states will have to tackle in the future as well.
Southeast Asia’s fintech industry was booming during the pandemic
Supporting the region post-pandemic recovery
With many of the region’s populations remaining underbanked, the introduction of real-time payment systems will help digital payment providers access the 290 million who are currently lacking financial services. By facilitating connectivity and greater cash flow, this linkage can support the stimulation of regional economies for post-pandemic recovery and beyond.
As the digital payment sector continues to evolve rapidly, these innovations can solve many issues brought on by the COVID-19 pandemic. Providers can create new financial models, including microloans, which can serve SMEs searching for post-pandemic aid and help them approach a wider consumer base.
A milestone for the ever-changing fintech trends, this collaboration serves as a significant advancement for fintech startups in Southeast Asia, the global financial technology sector and its future endeavours. Soon, more ASEAN members will share the ability to facilitate faster and inexpensive transfers cross-border. These real-time payment systems will also play a beneficial role in bolstering the economy post-pandemic through innovation and accessible SME lending. With this blueprint set in place, Southeast Asia can achieve seamless connectivity between its communities, and this innovation will only continue to aid the region’s ascent into full financial integration.