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Unpacking payments in APAC.

The Asia-Pacific region is emerging as a payments powerhouse, with unique opportunities and challenges for businesses that know where to look.

The Thredd team

December 08, 2023

The Asia-Pacific region is emerging as a payments powerhouse, with unique opportunities and challenges for businesses that know where to look.

To help make sense of this hugely complex marketplace, and shine a light on the potential opportunities, we spoke to two of our experts in the region – Cecilia Tan, Vice President of APAC Sales, and Damien Gough, Head of APAC.

The Asia-Pacific (APAC) payments landscape is unlike any other. Vastly populated and diverse, with a relatively young and growing consumer base, the region is one of the most important when it comes to the growth in digital payments. According to McKinsey1, 2022 saw global payments revenue of $2.2 trillion. Almost half – $1 trillion – came from APAC, with the region growing at twice the rate of others between 2016-2022.

Accelerated digital growth

As with much of the world, Covid-19 accelerated a push towards cashless payments. While western consumers and many countries across APAC had largely transitioned to using payment cards long before the pandemic, a high number of people in the wider region were – and remain – unbanked, although a significant portion leapfrogged straight into mobile banking as a result. “We’ve seen a huge rise in digital payments across the region in just the last few years,” explains Cecilia Tan, Vice President of APAC Sales at Thredd. “With more retailers and government services such as mass transit now supporting contactless payments, the opportunity for further user adoption and growth is significant.”

And digital payments come in many forms. While digital wallets like Apple Pay and Google Pay are popular the world over, the region also has several local players, such as ShopeePay and GrabPay in Singapore and WeChat Pay and AliPay in China. Another way in which APAC is relatively unique is in the popularity of QR codes as a method of payment. “In more developed countries like Singapore, you’ll see QR codes everywhere,” says Damien Gough, Head of APAC at Thredd.

Other key statistics by market
Country Population Median age Smart phone users 5 of pop. Size of payment market
Australia 25.796 million 37.0 20.6 million 94% $681.7 billion
Hong Kong 7.5 million 44.9 6.98 million 93% $129 billion
Indonesia 274.86 million 29.4 233.49 million 82.84% $51.4 billion
Japan 124.95 million 48.4 86.6 million 69.31% $726.3 billion
Malaysia 33.4 million 29.9 29.55 million 88.48% $62.4 billion
Philippines 113.09 million 24.5 90.86 million 80.34% $45.3 billion
Singapore 5.93 million 41.8 5.57 million 94% $107.3 billion
Thailand 71.56 million 39.3 53.57 million 74.86% $49.4 billion
UK 67.2 million 39.6 60.8 million 90.5% $1.4 trillion
US 336.5 million 37.7 310 million 92% $10.3 trillion

Sources: Statista, GlobalData, UN

Markets in all shapes and sizes 

A large market it may be, but to look at APAC as a single market would be misleading. It is a highly complex region with many countries, each with unique demographics, cultures, and levels of development.  

Navigating the unique characteristics of each market is tricky. “There is no ‘one size fits all’ approach to entering each market.” explains Gough. Yet for businesses looking to enter the APAC region, understanding the nuances of individual markets is critical. 

There are many local regulations that mean operating in one market has significantly different requirements to another. “Regulation in the region is not consistent,” says Gough. “You have different regulatory frameworks, different policies, as well as different levels of capital adequacy and Anti-Money Laundering (AML) requirements.”  

One country where this is apparent is Thailand, says Gough. “They’re very strict on KYC (Know Your Customer) and AML processes. So that’s a challenge for companies entering the market as they can’t necessarily use their existing providers and they may have to go through an onerous process to get approved.”  

Elsewhere things are less structured, but equally complex. “In some markets, business approvals may be less process-driven, but more nuanced,” adds Gough. “It can be less about what you know, but who you know to understand how to move forward rapidly.” 

Taken together, these sometimes wildly differing conditions mean that cross-border payments continue to be a big challenge in some APAC markets. However, this means that cross-border payments are also a big opportunity for payments providers as there is significant demand and few players navigating this space well.  

Hong Kong is a prime candidate for cross-border payment advances, says Tan, due to its proximity to mainland China and traditional role as a gateway to businesses with western markets. “There will be a huge percentage of cross-border payments here, driven mainly by Chinese entities established in Hong Kong,” she says. “They still do a lot of cross-border, import/export trade with Western countries. There is a need for providers who can offer digital payments to facilitate cross border transactions.”  

And as cross-border payments continue to evolve in the region, speed is becoming increasingly important, bringing Real Time Payments (RTP) into focus as another area with huge potential for growth.

Manoeuvring the payments landscape 

As the chart indicates, consumers across the APAC region have a broad range of payments preferences. Governments and companies of all sizes are learning to navigate these preferences while balancing the need to support both domestic and cross-border payments in the region. Adding to this complexity is the growth of RTP programmes. In 2022, there were 195 billion RTP transactions globally2, 49.2 billion of which were in APAC. By 2027, that figure is expected to reach 300 billion – a near sevenfold increase.3  

As with other factors in the region, it’s critical to understand the individual nature of each market to see the opportunities beneath the surface. With RTP for example, creation and adoption of these systems across the region is expected to rise in all countries, but Hong Kong, Malaysia and the Philippines are growing particularly fast (with annual growth of 24%, 20% and 19% respectively) and in Indonesia predicted growth is staggering, rising from 470 million transactions to 9.2 billion by 2027.  

Cross-border collaboration is also growing, explains Gough. "Something that's unique to the region, more so than other regions, is governments are trying to interconnect their domestic payment systems to each other, facilitating real-time payments between countries. Certain pockets of Malaysia, Singapore, Thailand, and other markets are now cooperating with each other to have their RTP systems interconnect.”  

Whether this is good news for payments providers remains open to interpretation, he says. “This unique approach can be either a challenge or an opportunity depending on your role in the payments ecosystem.”  

Further examples include the Hong Kong Monetary Authority, which is developing a scheme with the Central Bank of Thailand (BOT) to allow Hong Kong’s Faster Payment System to work with Thailand’s PromptPay. Elsewhere, the BOT already has an agreement with Malaysia’s Central Bank and Singapore’s Monetary Authority for interoperability for their RTPs. 

Finding a path through 

Providing a winning payments offering in a particular APAC country – or across many – can be accomplished, as demonstrated by Thredd partners such as Nium, BigPay, Paidy, PingPong and LianLian. Many firms are finding ways to creatively navigate the space to provide consumers with payments options that fit their needs. Delivering on this opportunity is clearly a nuanced proposition, requiring knowledge, technology, and vision of the unique characteristics of each country. If you’re interested in tapping into this burgeoning payment market and want to find out more, get in touch to speak with our experts on the ground.

Sources (map): Statista, GlobalData, The Global Economy 
Sources: Statista, Macquarie, GlobalData 

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