22 Nov, 2023

Indonesia and Singapore Implement QR Linkage Payment

On November 17, 2023, Indonesia and Singapore officially launched their cross-border quick response (QR) payment linkage, enabling consumers and businesses to conduct cross-border transactions instantly.The cooperation between Bank Indonesia and Singapore’s Monetary Authority of Singapore aims to promote greater integration of Indonesia and Singapore’s digital economy. Indonesian consumers This initiative is in line with the ASEAN Agreement on Economic Commerce, which provides a set of rules to govern cross-border e-commerce in the Southeast Asian bloc in addition to paving the way towards a regionally integrated digital economy. An important pillar of the agreement is the facilitation and easing of cross-border payments.Further, the QR payment linkage will also benefit the large number of travelers that visit each country. In the first half of 2023, an estimated 1.1 million Indonesian travelers to Singapore and 600,000 arrivals from Singapore to Indonesia.How QR payments can strengthen Southeast Asia’s MSMEsQR codes can encourage Southeast Asia’s micro, small, and medium-sized enterprises (MSMEs) to adopt cashless payment options, particularly since most MSMEs are in the informal sector and are either unbanked or underbanked. An estimated 50 percent (approx. 300 million people) of the region’s population are unbanked and a further 24 percent are estimated to be underbanked.Financial inclusion varies among Southeast Asian countries. Singapore is one of the most financially inclusive countries in the world whereas some 70 percent of Vietnam’s population is unbanked. For the Philippines, it is 65 percent, and for Indonesia, it is 50 percent.ASEAN aims to create seamless cross-border payments between member states under the ASEAN Payments Policy Framework (APPF), by harmonizing and modernizing payment infrastructures. This will enable ASEAN to ensure that regulatory frameworks can safeguard the service users’ interest, while also promoting innovation and investments in information and technology (ICT) in the region.Despite the lack of uniform regulations and economic disparities between ASEAN states, market forces driven by consumer and business demands will propel the bloc toward realizing a multi-country real-time network.The bloc is trying to emulate the European Union’s (EU) Single European Payments Area (SEPA)-style payments network. The system was introduced for credit transfers in 2008 before being fully implemented in the Euro area by 2014. The pace of SEPA’s development was assisted by the fact that participating countries were already members of the EU and used the same currency — the Euro.Barriers to financial inclusion in Southeast Asia① Cash is KingAs most Southeast Asian MSMEs are in the informal sector, they pay wages in cash, especially in rural and low-income communities. Without bank account records, many Southeast Asian MSME firms and their employees do not have credit histories, which hinders their ability to access financial services, such as business loans or mortgages.② Financial literacyLow levels of financial literacy are impacting the low adoption rate of financial services in Southeast Asia. Financial literacy is around 30 percent of the region’s adult population – lower than the global average.Boosting financial inclusion① The importance of mobile phonesMore people in Southeast Asia have a mobile/cell phone than a bank account. The mobile phone is thus key to achieving financial inclusion in the region as it enables users to access mobile wallets, which are linked to QR codes.Some of the most used digital wallets in Southeast Asia are GrabPay, GoPay, OVO, MoMo, and PayFazz. Through these digital wallets, consumers can conduct online transactions without having a bank account. Moreover, as more consumers and businesses use these digital wallets, more data gets generated around their financial behavior and consumer trends. Financial institutions will then be able to tailor the type of financial products offered to this demographic.Foreign investors in the e-wallet industry, must deliver a customer-centric experience to allow customers to pay with the local payment method of their choice, ranging from mobile banking to payments via convenience stores.② P2P lendingMany MSMEs in Southeast Asia have business models that are not compatible with the characteristics of the financial products offered by banks and other financial institutions. That includes aspects such as payment terms for loan schemes, forms of collateral, and credit quality, among others.Peer-to-peer (P2P) lending is one financing model that has the potential to serve the region’s underbanked and unbanked population. In Indonesia for instance, there are already over 160 officially registered fintech companies that offer P2P lending services, which was valued at over US$7 billion in 2020. These microloans are becoming increasingly popular as they take a short time to be disbursed (less than 24 hours), usually less than US$100. Furthermore, the terms and maturity of the loans are also small and short, being repaid within a few weeks.

18 Nov, 2023

Digital Transformation in ASEAN: Laos Leads with USDA Digital Currency

The ongoing digital revolution is reshaping global financial systems, and ASEAN countries are at the forefront of this transformative wave. Cross-border payments, a pivotal aspect of this evolution, are gaining unprecedented momentum.As Laos prepares to assume the chairmanship of ASEAN in 2024, it strategically positions itself as a leader of the digital revolution by introducing the USDA digital currency to revolutionize financial transactions.Digital Payments in ASEAN: A Growing TrendIn the ever-evolving landscape of digital payments, ASEAN nations are actively developing a cross-border payment system to boost financial inclusivity across the region. Projections indicate a remarkable 14.16% growth in the Digital Payments market in ASEAN from 2023 to 2027, underscoring the increasing significance of cross-border transactions.As economies become more interconnected, the need for efficient, secure, and inclusive cross-border payment systems becomes paramount. ASEAN nations, recognizing this imperative, are working collectively to establish a framework that facilitates seamless financial transactions across borders, thereby fostering economic growth and inclusivity.Laos and USDA Digital Currency: A Strategic MoveLaos, poised to lead ASEAN, acknowledges the necessity of embracing robust digital payment solutions to facilitate intra-regional commerce. In a strategic move, Laos has expressed readiness to utilize the USDA digital currency, developed by LADT, as a means to catalyze a revolution in the country’s financial transactions.The USDA digital currency introduces innovative solutions to the challenges of cross-border payments. Notably, it enables users to make payments or transfer funds through QR codes, streamlining the process and making it accessible to all, irrespective of their banking status. This forward-thinking approach positions Laos at the forefront of financial inclusion, especially in a country where a significant portion of the population remains unbanked.Benefits of USDA Digital Currency for LaosThe advantages of the USDA digital currency for the Laotian people and businesses are many. Primarily, it facilitates cross-border transactions, providing a means of transferring funds between ASEAN nations. This feature becomes increasingly crucial as projections indicate a substantial uptick in cross-border payments within the region.Furthermore, the USDA digital currency plays a pivotal role in promoting financial inclusion among the unbanked population in Laos. This is particularly significant in a country where household incomes often struggle to keep pace with inflation rates, forcing families to make difficult decisions about essential items such as food and healthcare. The introduction of the USDA allows these households to actively participate in the digital economy, potentially improving their overall financial stability.The Power of Money in MovementBeyond the confines of ASEAN, the essence of money lies in its circulation. Each day, billions of transactions occur globally, making payments the most tangible and frequent use of money. These transactions, whether mundane like purchasing a cup of coffee or monumental like transferring funds overseas, symbolize our financial independence.The most recent seismic shift in payments came with the rise of the internet. As the internet evolved into a library of vast amounts of information, the mechanisms for tracking and managing money also moved online. This included everything from account balances and transaction histories to larger commercial activities.The Crypto Revolution: Blockchain as the New Payment RailIn response to the growing demand for seamless and borderless payments, cryptocurrencies have emerged as a practical solution. The answer to the question of "Why use digital currencies?" is an easy one – digital currencies bring us closer to what people want: fast, cheap, and global payments. As we assert our commitment to being in the business of payments, blockchain technology takes center stage as the new financial infrastructure, a revolutionary payment rail transforming how transactions operate.Blockchain technology enables almost instantaneous settlement times for both customers and businesses, irrespective of their location in the world. The neutral outlook on blockchain and crypto underscores a commitment to providing customers with faster, cheaper, and more accessible payment solutions, addressing the evolving needs of the digital era.Addressing Customer Needs: Easier, Faster, and Cheaper PaymentsAt the heart of this digital transformation is a commitment to addressing customer needs. Laos recognizes that customers desire easier, faster, and cheaper payments. Businesses seek efficient vendor payments without the burden of extended settlement times, while individuals aim to send money to their families without incurring high fees or waiting days for transactions to be completed.The USDA digital currency aligns perfectly with what customers want. Launched with the purpose of providing faster, cheaper, and more accessible transactions, it ensures that customers don't lose value while waiting for traditional financial systems to catch up to their transactions. This customer-centric approach acknowledges the need for value preservation and swift financial transactions in the digital age.ConclusionIn conclusion, Laos' digital transformation within ASEAN signifies not just a technological advancement but a monumental shift in the region's financial landscape. The introduction of the USDA digital currency is a signal of financial empowerment for the Laotian people. As Laos embraces the digital age, leveraging advancements to foster economic growth and improve citizens' lives, it becomes evident that digital currencies have the transformative potential to reshape and redefine our financial systems. This transformative journey is a testament to the power of innovation and its capacity to create inclusive and efficient financial ecosystems.