From your perspective, what are the biggest drivers behind the cashless (or “less cash”) initiatives taking place in the Asia Pacific region today?
Industry reform, technology innovation, and consumers are the most significant drivers of payment industry disruption underway across Asia Pacific.
Government initiatives and industry reform are having a profound influence in a number of Asian markets when it comes to cashless. Thailand’s e-payment initiative, new e-payment regulations introduced by Bank Indonesia, Bank Negara Malaysia’s Payment Card Reform, and India’s demonetization of INR 500 and 1000 notes are just a few examples. Digitization is also being fueled by continued smartphone proliferation, as well as increased consumer adoption of e-commerce and cashless payment methods— particularly cards, mobile wallets, and QR codes. While cashless is being pushed by reform and innovation, it is being “pulled” by consumers and their growing demand for convenience. As more consumers become aware of the convenience of new and existing digital payment options, and as merchants begin to understand the value of cashless-ness in providing a more convenient experience, it’s not hard to imagine that cash will one day lose its place as king.
How is the growing popularity of cashless payments in these countries unique compared to other markets where cashless payments have been around for quite some time?
Developed markets have seen cashless innovation and adoption occur at a gradual pace, and many are being “leapfrogged” by emerging markets. These remarkable gains are largely attributed to regulators that are promoting and evangelizing e-payments as a major vehicle to combat corruption and tax evasion. These regulators are also reducing interchange rates and improving merchant discount rates (MDRs) to encourage adoption, and many have facilitated national payment schemes and debit networks, such as PromptPay in Thailand and RuPay and Aadhar in India.
What do you see as potentially the most significant obstacle(s) to widespread cashless payment adoption in APAC?
There are many obstacles to cashless adoption, but the obstacles with the greatest potential impact are related to infrastructure, affordability, access to banking services in rural areas, and changes in government. Regulators have been a major force behind cashless progress throughout the region, however their advocacy has been supported by their country’s ruling government. Major changes in government leadership could potentially de-prioritize or shift focus away from cashless initiatives. When it comes to infrastructure, penetration of e-payment acceptance devices at the merchant point of sale is relatively low in Asia. Many banks throughout the region still rely on outdated legacy systems, operational processes, and servicing capabilities. The inefficiency of these systems can slow new POS technology integration and banks’ ability to onboard consumers and merchants.
Affordability of digital payment technology is also a significant variable—especially for small merchants. While larger merchants have budgets that can accommodate POS technology purchases, going cashless can be problematic for smaller merchants if the technology is priced beyond their reach. Lastly, while financial and technological literacy is improving among merchants and consumers, it is relatively low in many rural communities that still lack access to basic banking services needed to participate in the digital economy. Various financial inclusion initiatives are focusing on these areas; however, meaningful cashless adoption will not occur until these services gain traction in the local economy.