The Asia-Pacific payments market is sometimes seen as slower than that of the West. Despite this, the region is changing rapidly, with new developments in areas such as mobile payments and workers’ remittances. Richard Davies discusses how institutions in Asia-Pacific are innovating in high-speed payments.


Bar chart showing mobile payment users by world regionIn the West, speed is king. With the rising popularity of instant communication methods like email, twitter and SMS, consumers – be they retail or corporate – are increasingly demanding that their banking services are delivered in an equally expedient manner. Asia-Pacific, however, with its all too often siloed financial infrastructure, is often viewed as slow and less advanced.

But if you take a view from the ground you can see that there is much to be learnt from recent movements in Asian payments.

In Australia, the bank-owned payments service company BPAY is developing its Me And My Bank Online (Mambo) project. This will allow consumers in the country to both more easily make speedy online micropayments, and also establish a portable payments identity that can be moved from bank to bank.

Development of Mambo is well underway, and has sparked a surge in the creation of high-speed consumer micropayment offerings – a similar service is already being developed by PayPal, which doubled its Asia-Pacific staff numbers last year.

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In New Zealand, financial institutions have been modernising their high-speed payments infrastructure. ANZ, New Zealand’s largest bank, implemented a new payments system a few months ago, allowing it to have a centralised hub for processing high volumes of micropayments expediently.

The bank then launched its GoMoney application for smartphones – allowing consumers to send money to each other using their mobile phone number. The app was downloaded over 30,000 times on its release day.


Emerging markets, developing trends

The success of mobile payment applications is an indicator of the popularity of mobile in Asia-Pacific, with the region leading the way in mobile uptake by many metrics.

Mobile payments are not just driven by those in developed countries. Due to their increasingly low cost and the wide reach of mobile networks, mobile phones have become a primary banking tool in emerging markets.

In many ways, rural populations in less advanced Asia-Pacific countries such as Vietnam and the Philippines have leapfrogged the traditional regional branch-based step of banking and moved directly from a cash-based financial system to using high-technology solutions.

According to analyst house Gartner, the number of mobile payment users in APAC continues to grow rapidly, moving from 42m in 2009 to 63m in 2010 – resulting in the region accounting for 58% of all global mobile payments users.

This banking platform expansion brings with it a raft of new opportunities for financial institutions looking to offer micropayments solutions, especially when it comes to workers’ remittances. Currently, remittances are passed through key corridors, most often via costly wire transfer agencies.

While many institutions have operations in the relevant countries, they are often siloed, and so transferring money through them is not always possible. Institutions who wish to tap into this market would do well to implement a single payments solution for all of their various regional operations, and use this to offer mobile payments services to remittance customers.

It is also important to keep the relative speed of these payments in mind. In order to create a competitive offering, institutions would not need to offer instant payments and make the relatively large infrastructure investment that would entail.

Being able to offer a low-cost mobile solution that can offer fast transfers would massively boost convenience for those who currently travel miles, having to spend nights away from home, to pick up a payment.

This rapid growth in the demand for high speed mobile banking solutions has caught some Asian banks, still using legacy systems and processes, unawares. This is compounded by increasing numbers of emigrants in the region requiring international transfer services.

According to the World Bank, while global remittance volumes overall dropped significantly since 2008, those in Asia-Pacific grew during the financial crisis, and are predicted to increase from $173bn in 2010 to $191bn in 2012.


Payments volume explodes

Meanwhile, payments volumes across the region are exploding – with India predicting a rise in high-value, real-time gross settlement payments from 700,000 to 5m a day over the next 10 years.

Those who are upgrading are also being challenged by the duality of the Asian payments market.

Even when putting in place a modern payments system, banks still are required to support legacy instruments such as cheques, which are still widely used in the region particularly by corporates.

The challenge for both banks and vendors at this stage is to update systems in such a way that enables banks to deal with the both existing paper-based processes and new 21st century requirements.

Ultimately, viewing the challenges and opportunities in high speed Asia-Pacific micropayments through local eyes and realising the wild variations present in the region is vital.

Richard Davies is Logica’s Asia-Pacific director