The future of paytech in APAC
The COVID-19 pandemic has undoubtedly caused a lot of hardships for businesses worldwide.
However, it has also created a chance for innovation and evolution in the paytech space. As a result, we’ve seen the digital payments industry soar to new heights, with payment companies recording surges in transaction volumes and driving faster adoption for new-to-market payment methods.
The Asia-Pacific (APAC) region in particular has seen high digital adoption in recent times, leading to a surge in new fintech start-ups. Let’s take a look at some of the emerging paytech trends that have picked up steam in APAC.
Central bank digital currencies (CBDCs)
Countries in APAC are taking a serious look at central bank digital currencies (CBDCs).
China for example is currently trialling the digital yuan – a national currency, exactly like the paper RMB, but in a digital form, backed and issued by the People’s Bank of China (PBOC). Digital yuan is essentially cash in your smartphone where every single cent is accounted for and traceable.
Gone will be the days of money laundering and tax evasion where unlawful acts are hidden in complex and hard to trace financial transactions. With the digital yuan, all transactions will be recorded and traceable, and since it is developed on blockchain, information will be available across multiple participants.
Another trend that I see gaining momentum is “carbon credits”. Carbon credits are quotas issued to corporations whose business models require the release of carbon emissions into the environment. Businesses can use the carbon credits themselves or, if they have an excess quota, they are allowed to trade and sell the rights to other businesses.
The marketplace for the trading of carbon credits is still not mature, but with the global push for a reduction in greenhouse emissions, and with the USA and China reaffirming their commitment to the Paris Agreement, details, rules and regulations will keep on being developed and defined. In the future, carbon trading could become both an investment tool and a form of currency recognised globally, similar to cryptocurrencies, given that the underlying “asset” is common globally.
One of the most noticeable trends in APAC that has gained major momentum over the pandemic is buy now, pay later (BNPL). I might even dare to say that BNPL has become the hottest new trend in Asia.
There are a couple of reasons why BNPL has become so popular. The main one is that consumers in APAC are worried about additional debt. According to research by Experian, since the pandemic began in 2020, consumers in the Asia Pacific reported difficulties in paying their bills, 23% reduced their discretionary spending, and there was a 50% increase in the number of consumers facing challenges in paying personal loans and mortgages.
BNPL offered them a solution, with interest-free “instalments” and short repayment terms with a shorter commitment. This especially worked well for the 18 to 30 age group, whose limited spending power is fueled by the ability to purchase more with minimised repayment risks. Merchants also benefited from this, as they enjoyed more sales with no significant increase in exposure among this age group.
Companies such as Atome, Hoolah, Paidy, Akulaku and Cashalo are leading the BNPL space in Asia, while China, the largest BNPL market in the region, is dominated by Alipay’s Huabei and JD’s Baitiao.
BNPL is still primarily built on the foundations of traditional card schemes and is subjected to the same rules. BNPL companies have to tear themselves away from cards to really become an independent payment method, and they have to be able to differentiate themselves from microloans.
But leaving the card schemes infrastructure will lead to unchartered waters, meaning national regulations will have to be implemented, as current regulations for loans and credit might have little control over BNPL. If this isn’t done, a playground with no safety measures will be created and with no clear guidelines in place, the necessary business environment won’t be provided.
About the author
Robert Ang is general manager APAC at Unlimint.
He has experience in the payments and fintech industries in Asia, having previously served as director of regional merchant solutions at Wirecard and as business development manager at Worldpay Singapore.