August 13, 2019
The worldwide adoption of ‘fast payments’ or ‘real-time payment’ systems started to draw attention in the early 2000s due to its value proposition of quicker and continuous service availability for low-value transactions. A real-time payment system is defined as an instantaneous, irrevocable, and continuously available system that can facilitate higher volumes of transactions at a fraction of the cost for the end user.
South Korea’s electronic banking system was the first one to launch fast payments in 2001, followed by Chinese Taipei, Iceland, Malaysia, and South Africa over the next five years. None of these are major/developed economies. The UK became the first advanced economy to launch faster payment systems in 2008.
Two of the largest countries in the world – China (IBPS) and India (IMPS) adopted real-time payment systems in 2010, and the number of countries has continued to grow since then. One should not be confused by Japan’s Zengin system that was (launched in 1973) originally an RTGS system but has evolved its functionality over six generations of advancements and now aims for a truly real-time system.
Things are changing, and the APAC region is steadily but surely headed the real-time way when it comes to payments. According to Gautam Aggarwal, CTO (Asia-Pacific) at Mastercard, “Some countries in Asia, particularly India, Thailand, and Singapore, are already leveraging the potential of real-time payment systems to drive greater digitization of their economies and their own government payments. This includes benefits, gig-economy payroll, bill-pay, and cash conversion, at the lower pyramid of consumer payments.”
Against this backdrop, it would be interesting to take a look at the real-time payment systems and infrastructure in the three countries: Singapore, Thailand, and India.
FAST (Fast and Secure Transfers), launched in March 2014, is the foundation for Singapore’s national real-time payment scheme; it ensures a strong regulatory framework to provide a secure and safe payment environment.
The initial launch of FAST-enabled immediate payments between different participating banks before the introduction of PayNow in 2017 brought real-time payments to consumers with peer-to-peer funds transfer based on mobile numbers. The very next year, PayNow Corporate went on to expand real-time payments’ reach even further, enabling payments between consumers and businesses.
The emergence of SGQR (a standardized QR code that relies on the FAST infrastructure) will add further impetus to real-time payments, as the unified QR code scheme aims to address the fragmented (27 as of 2019) e-payment schemes in Singapore.
Singapore’s real-time payment infrastructure has reached a more mature stage than other schemes in the region – some of which are very much in their infancy – but this maturity stage can be a hindrance as well as a help. There isn’t sufficient interoperability owing to limited ownership and governance of the infrastructure. Add to this an inconsistent user experience, and one finds the reasons for electronic payments adoption remaining stunted.
Action by the Singapore government in the form of the Direct FAST industry working group should help to address some of the shortcomings by developing business and technical requirements for non-banks to connect directly to FAST. Open accessibility will open doors to FinTechs to adopt scan-and-pay services, bringing greater convenience to e-wallet users.
Speaking of reducing reliance on cash, the emergence of PayNow, which is based on cell-phone/ID card numbers, was an important milestone. Despite that, consumer behavior isn’t very easily influenced; owing to this, the adoption of digital payments remains limited. Having said that, real-time payments are anticipated to continue making progress in Singapore this year with SGQR as a driver.
Notwithstanding the ‘card revolution’ that has taken place over the past couple of decades, Thailand remains a cash-driven society for the most part. Consider this: a whopping ~87% of the country’s citizens do not have a credit card. Going even further, approximately 30% of Thai citizens remain unbanked. The result? Reliance on cash for most – if not all – transactions. Having said that, Thailand’s payments landscape has drastically changed over the past five years, with consumers having more alternative ways to pay for their purchases than they previously did.
From contactless payments to mobile wallets and QR codes, the way Thailand spends its money is indeed evolving. Just two years before, Thailand’s main interbank payments provider National ITMX worked with Vocalink (a Mastercard company) to launch PromptPay in 2017, which is a real-time payments system for Thai consumers.
PromptPay became a part of Thailand’s national e-payment scheme, which is a project intended to help move Thailand towards a less cash-dependant society. The scheme, in turn, is a part of the country’s ‘Thailand 4.0’ initiative, which is aimed at creating a value-based economy driven by innovation, technology, and creativity. How it works is quite interesting: the system ties ID numbers and/or mobile phone numbers with bank accounts, allowing transferees can use these as an alternative to bank account numbers. Transfers are free up to 5,000 baht; transfers of 5,001–30,000 baht cost 2 baht; transfers of 30,001–100,000 cost 5 baht; and transfers of more than 100,000 baht are charged no more than 10 baht.
From the time of its launch in 2017, PromptPay has seen about 97 million transactions, which comes to around 370 billion baht in transfers across 37 million savings accounts. According to the Bangkok Post, 25 million of those accounts were opened with ID numbers, and the rest, with mobile phone numbers. Now, with smartphone penetration estimated to increase to 43% by 2022 in the country, Thailand’s financial landscape is set to evolve rapidly and witness progress – thanks to real-time payments.
In addition, QR code payments are becoming increasingly common among larger brands. Notably, the Thai state-owned petroleum company PTT introduced this payment method at its retail stores, including Café Amazon, Daddy Dough, Hua Seng Hong Dim Sum, and FIT Auto. Even the Mall Group has installed smart self-checkout kiosks for cashless payments at Gourmet Market and Food Hall outlets (including QR code payment and LINE Pay). In addition, there are around 2,200 ‘Jiffy’ convenience stores that offer QR code support for payments. Speaking of QR code usage, the Bank of Thailand has empowered consumers to use a single QR code for payments through local bank networks. With the emergence of standardized QR code, customers will not have to scan different codes while making payments through different banks. The merchants benefit from this too as they’d have to display just a single QR code for customers’ payments.
In 2010, India launched its first real-time payment systems ‘IMPS’ and introduced UPI in 2016. IMPS is the fastest-growing immediate payment system in the world. The daily transaction volume of IMPS grew from about two million per day in 2017 to approximately 2.8 million per day in 2018. Despite the fact that more than half of India’s population remains offline, its RTP scheme processed nearly three million faster payments transactions each day in 2018, up from two million a day in 2017.
In 2018, India’s IMPS recorded over 1.5 billion transactions at a YoY growth of 52%. For the period of 2013–2017, IMPS was one of the fastest-growing real-time payments systems with a CAGR of 185%. For the same period, the value of IMPS transactions grew at a CAGR of 203% through to $137 billion in 2017. UPI recorded 790% in YoY growth in 2017–2018 and clocked over 3.7 billion transactions in 2018.
Based on our analysis by exploring the variances between the local systems, the following insights were gleaned:
As is evident, while many successful RTPs solutions have flourished, there remains a lack of a uniformly comprehensive infrastructure in the region. At the end of the day, the differences in the RTP systems in the three countries – Singapore, Thailand, and India – remain quite noticeable.