Asia’s digital payments ecosystem is worth US$2.5 trillion, and this accounts for various payment modes, including mobile and peer-to-peer transactions through cryptocurrency, according to Statista. A big percentage of this will be in digital commerce.

This market will grow with a CAGR of 15.2 per cent to US$ 3.86 trillion by 2023. China is, by far, the biggest market with an estimated US$1.93 trillion in transactions in 2020. 

There is certainly a big opportunity here, and fintech companies are in the best position to enable growth in the market, both for companies dealing with consumer or B2B payments, as well as platforms that facilitate digital transactions.

Even major global tech companies have started to leverage this opportunity with their own digital payment platforms, such as WeChat Pay, GrabPay, and the like.

Challenges in collaboration and scale

In a recent report, Getting Real with Digital Payments, Deloitte cited three big challenges that will shape how businesses tackle the future of digital payments in the region. First is the customer experience–retail companies have been leading in terms of innovation, but many of these are focused on proprietary solutions.

Second, there is fragmentation in the market across Southeast Asia, in terms of both technology and regulatory concerns, especially with emerging trends such as cryptocurrency payments. The third is the challenge of finding the right talent in the region to build into huge opportunities in the digital payments space.

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“The ecosystems that many of the players have built with their collaboration partners have resulted in fragmentation across the payments landscape in Southeast Asia, and interoperability between the different payment systems is quickly becoming an issue that needs to be addressed,” it reads.

The Deloitte report is optimistic that the region’s key players can collaborate toward growing the ecosystem. Victoria Krapivina, Head of Business Relations at Elevate Ventures, affirms this observation: “Both regulatory hindrances and technology concerns can be addressed by the various companies and startups that are focusing on innovation or improving digital payments in the region. This will require the ability to collaborate closely with other value chain players and even with new industry entrants,” she says.

Collaborating towards achieving growth

Fintech startups are aware of the importance of collaboration, especially in enhancing the capability of businesses in leveraging the growth opportunities in digital payments. “Our approach is to partner with great companies that understand the value of our solution,” says Felix Mago, Co-Founder at Dash NEXT and Dash Thailand, a global e-commerce platform for digital currency payments.

“Dash is offering the crypto payment solution, our partners offer the settlement,” he adds, citing the importance of partnering with different players in the ecosystem. This also addresses the third point of Deloitte’s concerns cited earlier, which refers to the talent gap in the region. By partnering with other solution providers, technology companies can leverage each other’s expertise in further enhancing the ecosystem.

In the case of the company, Mago says that Dash is partnering with retailers, payment processors, technology providers, and other stakeholders in the region in order to make payments more secure and convenient for both end-users and businesses that want to engage customers through digital payments. The company is also dealing with developers of decentralised apps (dapps), who can integrate payment capabilities into their applications without the need to build their own payments infrastructure.

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A focus on data collaboration

In its Technology 2020 and Beyond report, PriceWaterhouseCoopers placed a highlight on application programming interfaces (APIs) as a key driver of collaboration across technology and financial companies. However, businesses will need a paradigm shift, in terms of how such interfacing is treated. PwC says that such data and meta-data may become commoditised in order for fintech to truly flourish. 

The report reads: “The global industry has been standardising the way it handles payments messaging and remittance meta-data. These standards will define consistent structures for individual messages, promoting interoperability and helping developers define API requirements.

But APIs require that financial institutions think differently about strategy, given that the transactions that call them may come from third parties. The payment transaction may become more of a commodity, but the data itself that is captured in the process could drive drastically different business models.”

Interfacing with data can be complicated when it comes to transactions on distributed infrastructure, however, which is another reason for collaboration. For one, Dash NEXT, the Asia-based business development unit of Dash, has announced a partnership with blockchain analytics company PARSIQ in providing real-time payment notifications to merchants, users, and dapp developers that use Dash for payments. 

This is perhaps but one of the many use cases that technology companies can leverage in order to have a bigger impact on Southeast Asia’s growing digital payments ecosystem. According to Anatoly Ressin, Co-Founder and Chief Blockchain Architect at PARSIQ, the ability to monitor transactions in real-time will also ensure better compliance with regulations–thus addressing the need for improved regulatory frameworks in the region.

For users and businesses, this will provide the comfort that their transactions are secure. “Notifications and additional transaction information can be provided in real-time, allowing deeper insights during the transaction process and potentially allowing to react to certain transactions accordingly when time is of the essence.”

Also Read: How is technology influencing Southeast Asia’s fintech industry in 2020

The takeaway

Deloitte reported one stark reality in the payments industry whether in Asia or across the globe: “Customers are used to seamless payments for most daily transactions – with ever-increasing expectations for integrated and secure ways to pay for any product or service.”

For many users and businesses, having to install, understand, and fund different sets of payment applications will only add to the complexity. Thus, interoperability will mean less friction from the perspective of businesses and users, and this can help increase the utilisation of digital payment platforms toward the projected multi-trillion-dollar goal.

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