The ASEAN digital economy is estimated to add US$1trillion to the regional GDP over the next 10 years. This potential rests on creating meaningful partnerships and collaborations with other governments, central banks and regulating bodies. It is no longer enough to only grow as a country, but to be seen as part of a bigger integrated market under the ASEAN umbrella.
Despite being a relatively young nation with a population of 5.6 million, Singapore is one of the world’s most digitally competitive countries. In fact, it ranks second in the latest IMD World Digital Competitiveness Rankings. The government’s Smart Nation initiative hopes to not only maintain Singapore’s global status as a leading economy but to take it to the next level. Through the Smart Nation initiative, we aim to make Singapore an “outstanding city in the world for people to live, work and play in, where the human spirit flourishes”.
As the digital economy becomes the next key driver of growth for the Lion City and Southeast Asia, companies are looking at how to capitalise on this momentum, especially through payments. From Grab to Gojek, the most successful companies today are gravitating towards payments. This is no surprise as the space is booming. Consumers across ASEAN currently spend US$30bn online and this is expected to rise to $200bn by 2025.
With the regional payments market set to grow relentlessly, enabling connectivity and seamless cross-border payments is key. The benefits are manifold: costs are cut, time is saved and intra-regional trade and business activity is enhanced. Cross-border payments have tremendous potential to meet the needs of businesses and consumers in Southeast Asia.
The Association of Southeast Asian Nations (ASEAN) has recognised this and is diligently working toward developing a regional payment system. But interoperability is difficult to accomplish within a single country, let alone across a region like Southeast Asia. This doesn’t stop Singapore, a springboard for innovation in the region, being a huge catalyst for change. If we continue to help make progress in overcoming the several hurdles that still need to be crossed regionally, our digital economy – as well as that of Southeast Asia overall – stands to advance significantly.
LEAD BY EXAMPLE AND CONVINCE OTHERS OF BENEFITS
Singapore’s position at the forefront of digital financial technologies is not a recent thing, and the work the country has done in the past 30 years has proved that it is possible to provide open, accessible and interoperable national payments infrastructures.
The Little Red Dot became an early payments adopter with the launch of automated bill payment services like the General Interbank Recurring Order (GIRO). From then, many e-payment milestones have happened in the past decade – the launch of Fast and Secure Transfers (FAST), followed by the Smart Nation initiative, PayNow. A year later, NETS was appointed to develop an interoperable and open access e-payment solution over two years and most recently, the Singapore Quick Response Code (SGQR) standard was officialised, the world’s first unified payment QR code. To date, we have seen innovations in transit, parking and toll payments, creating a network that doesn’t rely on individuals carrying huge wads of cash.
Having seen Singapore try and test such technologies successfully, other countries are following suit. Indonesia and the Philippines are the latest in planning to launch their own national standardised QR payment system to drive interoperability between e-wallet providers. Earlier this year, Liquid Group and CIMB Niaga announced their strategic partnership that will be looking at opening the Singapore – Indonesia corridor for QR payments of Singapore’s local payment apps and e-wallets at participating merchants in Indonesia.
Digital payments alone are expected to cross US$1 trillion by 2025, accounting for nearly one in every two dollars spent in the region. As the frontrunner of the payments boom, the only way for Singapore’s digital economy is up should national initiatives like these push on and proliferate.
KEEP BLAZING THE FINANCIAL TECHNOLOGY TRAIL
Once a sleepy fishing village, our island city-state is now a prosperous technology hub, even described as a “miniature Silicon Valley”. After all, we’re poised to lead the race in deploying 5G compared to the rest of the region. Research shows that Singapore will outperform its peers in 5G penetration, with an expected rate of close to 60% by 2025. It’s projected it will only reach 40% within almost all of the 10 countries of the Association of Southeast Asian Nations in the same timeframe.
Singapore’s current standing as the tech capital of the region is a collective, whole-of-nation effort – the same approach of the Smart Nation initiative, which can be categorised into three pillars: Digital Government, Digital Economy and Digital Society. Unlike other countries, the government in Singapore has traditionally set the pace for technology advancement, instead of the private sector.
Innovation cycles have shortened, and Singapore has proved successful in specifically bringing technological change to life in the payments landscape for the benefit of consumers, and doing business. If it continues to do so – that is, flex its standing as Southeast Asia’s technology capital – there is no telling how soon or how great the impact will be on the payments industry, on a regional level.
The momentum has started with initiatives like Project Ubin – the next phases of which will focus on new methods to conduct cross-border payments using central bank digital currency. The government is also pushing cashless transactions, aiming to make the country cheque-free by 2025. There is no shortage of services designed to replace coins and notes.
Already in use are wearables that are more convenient and secure than using a physical contactless card. On the horizon, consumers will be able to go as far as making payments using facial and voice recognition, as well as their biometric data. Wearables like smartwatches have integrated with popular wallets such as Apple Pay, Google Pay and Dash through NFC or near-field communication.
In the e-commerce space, Qoo10 has launched Asia’s first Distributed Ledger Technology (DLT)-based marketplace, QuuBe, which allows buyers and sellers to transact via its own digital token, the US dollar-backed Q*coin. It is initiatives and initial deployments like these that are illustrative of how Singapore is driving innovative solutions in the payments sector, setting an example for the region to follow suit.
FOSTERING INNOVATION WILL HELP INTEGRATION
In a region with multiple developing economies, businesses need to be prepared to operate in a scenario where there is greater global integration and higher trajectory growth. Singapore is already seeing this to fruition and has become a model of what other regions can learn from its successful innovations in being able to incubate and accelerate payment services.
If Singapore continues to lead by example through partnerships and collaborations with other governments, central banks and regulating bodies, the rewards will be plentiful and only sets Singapore as a leader in the region’s next stage of economic growth.