Indonesia and Thailand implement QR payment link
Indonesia and Thailand have implemented a Quick Response (QR) cross-border payment link, which means consumers can use their mobile apps to scan QR codes for products and services of either country.
The move is part of Southeast Asia’s increasingly integrated digital economy, so consumers in the ASEAN bloc will be able to transact across borders more easily.
Additionally, QR payment links could encourage greater financial inclusion in the region, which is infamous for its large unbanked and underbanked population.
The central bank of Indonesia (Bank Indonesia) and the central bank of Thailand (Bank of Thailand) have implemented a cross-border QR payment link between the two countries after conducting successful trials last year.
The new system allows Indonesian consumers to pay for goods or services in Thailand by scanning Thai QR codes. Additionally, Thai consumers can use their mobile apps to scan the Quick Response Code Indonesian Standard (QRIS) when purchasing products or services in Indonesia. Some 76 payment service providers from both countries have joined this project, and this number is expected to increase.
Bank Indonesia is exploring other QR payment links with Singapore and Malaysia. For Singapore, the cooperation is scheduled for a launch in 2023, while for Malaysia, the cooperation has been in a pilot phase since January 2022 and is expected to be operational by the end of 2022.
The ASEAN Economic Trade Agreement
Cross-border QR payment initiatives are in line with the ASEAN Economic Trade Agreement, which provides a set of rules to govern cross-border e-commerce in the Southeast Asian bloc in addition to paving the way to a regionally integrated digital economy. An important pillar of the agreement is the facilitation and flexibility of cross-border payments.
E-commerce has grown exponentially in Southeast Asia amid the COVID-19 pandemic and the region is on track to have an internet economy with a gross goods value of US$350 billion. by 2025, which will reach US$1 trillion by 2030. be driven by e-commerce, online food delivery and a growing base of digital consumers and merchants.
How QR Payments Can Empower Southeast Asian MSMEs
QR codes can encourage micro, small and medium enterprises (MSMEs) in Southeast Asia to adopt cashless payment options, especially since most MSMEs are in the informal sector and are either unbanked, or underbanked. It is estimated that 50% (about 300 million people) of the region’s population is unbanked and a further 24% is underbanked.
Financial inclusion varies across Southeast Asian countries. Singapore is one of the most financially inclusive countries in the world, while around 70% of the Vietnamese population is unbanked. For the Philippines it is 65% and for Indonesia it is 50%.
Barriers to Financial Inclusion in Southeast Asia
cash is king
As most MSMEs in Southeast Asia are in the informal sector, they pay wages in cash, especially in rural and low-income communities. Without a bank account statement, many Southeast Asian MSMEs and their employees lack a credit history, which hampers their ability to access financial services, such as business loans or mortgages.
Low levels of financial literacy impact the low adoption rate of financial services in Southeast Asia. Financial literacy is around 30% of the adult population in the region, which is below the global average.
Boosting financial inclusion
The importance of cell phones
More people in Southeast Asia have a mobile/cellular phone than a bank account. The mobile phone is therefore key to achieving financial inclusion in the region as it allows users to access mobile wallets, which are linked to QR codes.
Some of the most widely used digital wallets in Southeast Asia are GrabPay, GoPay, OVO, MoMo, and PayFazz. Through these digital wallets, consumers can transact online without having a bank account. Additionally, as more consumers and businesses use these digital wallets, more data is generated about their financial behavior and consumer trends. Financial institutions will then be able to adapt the type of financial products offered to this demographic group.
For foreign investors in the e-wallet industry, it is essential that they provide a customer-centric experience to enable customers to pay with the local payment method of their choice, ranging from mobile banking services to payments through convenience stores.
Many MSMEs in Southeast Asia have business models that are not compatible with the features of financial products offered by banks and other financial institutions. This includes aspects such as loan program payment terms, forms of collateral, and credit quality, among others.
Peer-to-peer (P2P) lending is a financing model that has the potential to serve the region’s underbanked and unbanked population. In Indonesia, for example, there are already over 160 officially registered fintech companies offering P2P lending services, which were valued at over US$7 billion in 2020. These microloans are becoming increasingly popular as they take little time to be disbursed (less than 24 hours), the amount being generally less than 100 USD. Moreover, the terms and maturity of the loans are also small and short, being repaid within a few weeks.
ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and has offices throughout ASEAN including Singapore, Hanoi, Ho Chi Minh City and Da Nang in Vietnam, Munich and Esen in Germany, Boston and Salt Lake City in the United States, Milan, Conegliano and Udine in Italy, in addition to Jakarta and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines and Thailand as well as our firms in China and India. Please contact us at [email protected] or visit our website at www.dezshira.com.