Blockchain startup Ripple recently summed up a speech by Kapronasia’s Zenon Kapron during a Ripple Regional event in Bangkok that focused on the importance of Southeast Asia. He talked about the evolution of digital payments and development of real-time infrastructure in the region along with payments-as-a-platform services. Ripple has a strong presence in the region and has tied up with several institutions in the past for making remittance payments via its blockchain solutions.
The Shift to Digital Ensues
According to Kapron, there is a huge shift to digital in both offline and online transactions. This is due to the rise in non-cash payments, QR codes and the explosion in smartphone use. Asia has billions of consumers which help in pushing the digital narrative here. Digital payment volume is strikingly high for Asia vs. the rest of the world. In 2018, the US made $125 billion in digital payments while China made $40 trillion worth of payments.
Smartphone adoption has been catching up in Asian countries. According to GSMA, smartphone adoption will grow to 66 percent by 2020 while in China alone, it will go to 73 percent. Local producers like Xiaomi are making smartphones cheaper and more readily available. On the other hands, governments are committing to real-time payment adoption too.
Kapron also highlighted the difference between near-instant and instant payments. He said that instant money is the goal but near-instant money, i.e., payments within a few seconds, is the norm. However, this technology has also diminished the distinctions between banks and innovators as all can access the same kind of real-time payments technology. Companies are now using payments as a platform with value-added services on top to differentiate themselves.
The Rise of Payments-as-a-platform
Payments as an infrastructure is giving birth to a new revenue model. Companies depended largely on fees from credit and debit card services. While they are still supplying a huge chunk of their revenue, the shift to digital will limit these fees. Kapronasia predicts that this phenomenon made Chinese banks lose nearly $50 billion in fees last year.
However, the loss of fees could be offset by data insights on user behavior which could help lenders more. Consumers will have to compromise on privacy, but they will gain more utility and convenience of quick transactions. Kapron even went on to suggest that he has accepted the fact that privacy doesn’t exist anymore. As data is driving business, financial companies will now offer the right product at the right time to the right person.