As the COVID-19 pandemic swept across the globe, history seemingly repeated itself as familiar public health strategies were gradually implemented from one jurisdiction to the next. From recommendations of social distancing to lockdowns, such measures have disrupted even the most benign day-to-day activities, prompting small but meaningful changes in how we work, live, pay and play.
From QR code payments to mobile wallets, the appeal of cashless payment methods has increasingly been institutionalized even in Southeast Asian markets where cash has historically reigned as king. The move is promising, considering that over 70% of adults still lack access to basic financial services in the region. With the goal of attaining greater financial inclusion, these infrastructures have the potential to bring about long-standing changes. When coupled with emerging technologies such as blockchain, a new breed of legacy financial infrastructures can be transformed to better serve those in need.
If the last few months are any indication, the willing acceptance of innovative financial technologies is intrinsic to shaping Southeast Asia’s next digital financial revolution. So, where do we go from here?
From crisis to a cashless world
Crises have the power to enact great change. This narrative is far from unfamiliar, harkening back to the seismic growth of China’s digital payments and e-commerce scene taking place in tandem with the aftermath of the 2003 SARS outbreak. Today, of course, China is home to a vibrant e-payment ecosystem dominated by tech giants such as Alipay and WeChat Pay.
In developed markets such as Singapore, where a sophisticated network of digital payment options exists, the coronavirus simply served as an accelerant for increased adoption. As part of the government’s public health strategy, the Monetary Authority of Singapore encouraged the use of e-payment infrastructures such as the islandwide SG QR code system to mobile e-wallets to enable social distancing and contactless transactions. In the first quarter of 2020 alone, the number of e-payment transactions doubled in the city-state. This behavioral change in payment preferences has taken place on a multi-generational level with banking customers over the age of 54 expressing increased confidence in online banking services throughout the pandemic.
Meanwhile, other developing economies have seen the coronavirus as a much-needed catalyst for urgent change. No longer able to lag behind their developed counterparts, it’s here where the enabling impact of financial technologies has been especially pronounced. According to Thailand’s central bank, digital payments in the country increased by 93% in March compared to the year before — a dramatic increase for a country where 90% of all transactions were still predominantly conducted with cash.
Meanwhile, Indonesia — dubbed as “APAC’s most valuable untapped e-money market” — still struggles with a sizable unbanked population, standing at 66% as of 2018. Today, it’s now home to 37 local e-payment methods, and the government’s standardized QRIS QR code payment system is expected to bridge the financial inequality gap further.
Despite the economic strain triggered by the global health crisis, emerging markets stand to gain a great deal by living by the motto of “go digital or die” in a bid to drive a tech-enabled model of greater financial and social mobility.
Going from the top-down
The culture of open finance is one that needs to begin from the top-down in order to promote a more collaborative ecosystem where fintech companies can work with traditional banks to offer better payment infrastructures, seamless Know Your Customer procedures and transparent operations. Yet, there are certainly opportunities to take it one step further.
On an institutional level, the acceptance of emerging technologies such as blockchain can promote and make the financial ecosystem even more open. Enabled by high-grade security standards through cryptography, blockchain technology can power even more innovative financial instruments that are future-fit by design. Across emerging markets that aren’t burdened by legacy banks, the appetite for innovation at this scale is clear.
Meanwhile, jurisdictions such as Singapore have taken on a pro-innovation approach to introducing blockchain technology to the local financial ecosystem. This July, the Monetary Authority of Singapore released its fifth and final report for Project Ubin, highlighting the commercial viability of a blockchain-based multi-currency payments network. Pointing to existing synergies with other industries that would benefit from the use of a transparent, immutable ledger to facilitate payments, Project Ubin attests to the long-term viability of blockchain technology for a broad base of financial use cases. Often positioned as one of the region’s leaders in financial innovation, the step that Singapore has taken is likely to set a precedent for the rest of Southeast Asia in the years to come.
Be it trade finance or cross-border transfers, there’s certainly room for collaboration between the incumbents and challengers of the status quo as the region continues to mature. Amid the backdrop of the coronavirus, what the last few months have shown is that the capacity for real and meaningful change is there within the financial ecosystem. In a region that’s home to 10% of the world’s total internet user base and ever-growing smartphone penetration rates, it’s clear that the region is primed for a digital-first future.
Whether it’s in developed markets that have taken on a progressive stance or emerging markets free from the binds of traditional players, that Southeast Asia’s financial services space will be characterized by accessibility and choice. With the presence of blockchain technology, we’re sure to see more exciting institutional use cases on the horizon as the region continues its open financial journey.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.