The Global adoption of fast ‘real-time payment’ platforms started to gain momentum in the first decade of the second millennium due to its value proposition of faster 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 Taipei, Iceland, and Malaysia 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.
The APAC region is steadily but surely headed the real-time way when it comes to payments. Some countries in South-East Asia, particularly 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 background, it would be interesting to take a look at the real-time payment systems and infrastructure in the two countries: Singapore and Thailand
Singapore’s FAST (Fast and Secure Transfers), launched in 2014, is the foundation for 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 July 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 is not 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 is not 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 88% of the country’s citizens do not have a credit card. Going even further, approximately 31% of Thai citizens remain unbanked. As a result, reliance on cash for most if not all transactions. But 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’s 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 96 million transactions, which comes to around 369 billion baht in transfers across 36 million savings accounts. 24 million of those accounts were opened with ID numbers, and the rest, with mobile phone numbers. Now, with smartphone penetration estimated to increase to 42% by 2021 in the country, Thailand’s financial landscape is set to evolve rapidly and witness progress.
In addition, QR code payments are becoming increasingly common among larger retailers. Notably, the Thai state-owned petroleum company PTT introduced this payment method at its retail stores, including Café Amazon, Daddy Dough, and FIT Auto. Even the Mall Group has installed smart self-checkout kiosks for cashless payments at Gourmet Market (including QR code payment and LINE Pay). In addition, there are around 2,180 ‘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 have to display just a single QR code for customers’ payments.
Some interesting analytical insights:
1) Despite Thailand being the most recent to launch their RTP, they have the highest volume of transactions (in volume and number). Thailand had 332 million transactions amounting to USD 51,000 million in contrast to Singapore's 65 million transactions amounting to USD 6522 million.
2) However, this may be due to the higher population of Thailand and their ability to integrate PromptPay with QR codes, unlike Singapore, which has launched its nation-wide unique QR code called SGQR, which is also performing very well in the market.
3) The transaction limits vary widely in the two countries. While many successful RTPs solutions have flourished, there remains a lack of a uniformly comprehensive infrastructure in the region, also there are distinct differences between the RTP systems in Singapore and Thailand.