Why Southeast Asia Needs a Region-Wide Digital Payment System?

Why Southeast Asia Needs a Region-Wide Digital Payment System?

An analysis by Google found that between 2020 and 2022, more than 60 million people in six Southeast Asian nations—Singapore, Thailand, Indonesia, Philippines, Vietnam, and Malaysia—used digital services for the first time.

Temasek and Bain & Company also released the seventh edition of their e-Conomy SEA report at the same time. More than 75% of people in these six Southeast Asian nations have access to the internet, and most of them have done some online shopping at least once, according to the survey.

The analysis projects that e-commerce in this region is only going to expand. It predicts that by 2025, online expenditure would increase by 162 percent to $179.8 billion, with digital payments accounting for 91 percent of all transactions. These statistics demonstrate the region's enormous potential for e-commerce and digital payments.

How will Southeast Asia profit from such a widespread digital payment system? The ability to use mobile banking apps to make QR code-based payments for goods and services throughout the 10 ASEAN nations is one obvious advantage.

A buyer's home currency would be automatically transformed into the local currency of recipients without the need for an intermediary currency, such the U.S. dollar or Chinese yuan, creating an interoperable cross-border payment system. This would make it possible for the area to rely less on these intermediary currencies.

Adopting a digital payment system would improve efficiency while also improving ties between the countries in the region. ASEAN nations would have the ability to create tighter ties through cooperation between their central banks. By improving financial traceability and accountability, this kind of innovation has the potential to increase transparency and security while lowering corruption and international fraud.

Increasing regional accessibility to electronic payment methods would also immediately aid in the fight against poverty. According to a 2016 research, for instance, widespread use of mobile money services in Kenya helped 194,000 people, or 2% of Kenyan households, escape poverty between 2008 and 2014.

Changes in financial behavior, particularly the higher levels of financial resilience and saving among mobile users, were the main contributors to the impact.

While creating a payment system is necessary, it is crucial to have one that is open and safe. As a result, there are a few requirements that the ASEAN nations must take into account if they hope to establish a trustworthy digital payment system for their citizens.

First, to govern and offer standards for the payment system, ASEAN must first establish an organization that oversees the payment system, sort of like a central bank for ASEAN. This body needs to be autonomous, trustworthy, and have a back-up plan in place. To increase the effectiveness of the system, it must be a transparent organization that can offer prompt assistance.

Second, a digital payment system should also be built with rigorous security standards in mind. In order to create a digital payment system that meets user needs and is safe enough to prevent data breaches, ASEAN could use a variety of technologies. ASEAN might gain knowledge in this area from other nations that have already embraced these technology.

Third, the payment system needs to be made to accommodate individuals of all socioeconomic levels. It must be welcoming, inclusive, simple to use, and adaptable so that all citizens of each nation can rapidly become used to it. This will encourage additional users to join the system and guarantee that the region benefits to the fullest from financial inclusion and regional economic ties.



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