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The digital financial services landscape in APAC is in an accelerated upward spiral. Spurred by COVID-19, Asian markets, especially within Southeast Asia, have embraced digitalization at a break-neck pace.
Digital and P2P payment propositions specifically have witnessed supercharged traction across the Asian region. China, for instance, reported $120 billion worth of mobile transactions in 2020. This represents a staggering number compared to the $300 billion of digital transactions across the entire African continent.
But this isn’t new. China has always been a market leader within the fintech space. What’s evolved in APAC is that developing markets are maturing to occupy significant positions across the financial technology ecosystem.
In 2020, Indonesia’s fintech sector raised a record $329 million, with a whopping $158 million garnered by the payments sector. With an increase of 864% from 2019, real-time payments revenue in Malaysia peaked at $5.5 billion in 2020. This is an impressive number which, however, pales in front of the $8.6 billion of digital payments in Vietnam.
For banks, regulators, and financial institutions, these developments raise a critical question; why should we care? The question is well-founded, and the answer lies in assessing the evolution of social banking and Peer-2-Peer (P2P) payments in developing APAC markets.
Before the pandemic, Peer-2-Peer (P2P) payments witnessed significant traction in Singapore because of its Peer-2-Peer (P2P) payments network, PayNow. In 2020, PayNow witnessed turbocharged traction with an increase of 1.6 million users and a 220% surge in transaction value.
Within Indonesia, e-transaction rose by 39% compared to 2019, totaling an impressive $13.95 billion. India also followed suit as P2P transactions surged past a record $13.5 billion in March of 2021.
However, the growth in the P2P space isn't just confined to the pandemic. There is a significant shift in consumer behavior, cemented by COVID-19, creating novel challenges, and presenting unprecedented opportunities for financial institutions
Aware of the growing social and P2P payments preference, market-leading stakeholders within APAC are moving rapidly to roll out P2P products and services to capture market share.
In 2021, Malaysia’s apex bank BNM agreed to issue 5 digital banking licenses by Q1 of 2022 as part of their strategic roadmap to offer seamless P2P solutions. With over 20.4% of the world’s migrant labor force in the APAC region, maturing Asian markets are also capitalizing on the demands of their indigenous labor force, and expanding their Total Addressable Market(TAM) beyond tech-savvy millennial and Gen-Z consumers.
In 2021, Malaysia’s apex bank BNM made a strategic decision to issue five digital banking licenses by Q1 of 2022. This move is aims to provide seamless peer-to-peer solutions and align with their roadmap. The APAC region, which houses over 20.4% of the world’s migrant labor force, is witnessing maturing markets that understand the needs of their indigenous labor force. This understanding has driven them to expand their Total Addressable Market (TAM) beyond tech-savvy millennial and Gen-Z consumers.
Singapore’s PayNow and Thailand’s PromptPay synergized to provide customers a first-of-its-kind cross-border P2P payments proposition; a critical pull factor for the migrant workers in both countries. In Vietnam, payments giants Visa and Moneygram have also inked a deal to offer customers real-time P2P payment propositions. They further emphasizing the urgency associated with capturing market share within this sector.
What’s even more alarming is the opportunity cost and potential loss of revenue because of inadequate digital and P2P capabilities. Over the next decade, there’s a projected closure of 11,000 bank branches across Southeast Asia. The staggering number is encouraged by the projected increase of 111 million digital-native banking customers over the same period.
Final Thoughts
For banks and financial institutions, it’s either they rapidly roll out P2P payments products and services that match consumer demand, or witness this surging potential customer base being captured by smaller, niche competitors within the market.
At its core, what’s critical for banks and financial institutions to remember is this: P2P payments are poised for rapid growth, providing stakeholders with unparalleled opportunities. The turnkey is to be fast and to be first so market-leaders can diversify their channel adoption, increase user retention, and ultimately maximize the value-capture from their customers.
Tagged:
- apac, p2p payments
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Samier Khan, Managing Director APAC
A Business Leader with deep expertise in business management strengthened by intellectual curiosity and grounded in real-world technical experience, providing the foundation for next-generation ideas, development, and implementation.
