The recent unveiling of the Greater Bay Area blueprint by China’s State Council has ignited lots of conversation across Asia-Pacific about the impact of emerging technologies, the entrance of new players and the importance of connectivity and expanded partnerships with existing providers to support the growth of technology in the South China region.
It can be said that new routes of connectivity and innovation go hand in hand. A great example of this is the digital payments sector, where we have seen improving rates of interconnection helping to drive adoption of new services. Globally, electronic payment volumes are increasing at around 11% per year, with double-digit growth likely to continue through 2020.
The adoption of digital payments across Asia-Pacific is outpacing that of the US. In Singapore, the usage of mobile payments is rising, growing by 53% since 20171, while 72.4% of Australians use at least one digital payment method2. In Japan, the government is seeking to double digital payments to 40% of all transactions by 2027 and put efforts behind the promotion, development and adoption of digital payments. In Hong Kong, the government is studying the launch of cross-boundary electronic payments in the Greater Bay Area with the Chinese government.
While the digital payment phenomenon is not new, the statistics above indicated that it is only in recent years that we witness its rapid acceleration, driven by factors such as an abundance of new electronic payment methods and the rise of contactless card transactions in the region, making it possible for new entrants and new routes of interconnection.
At the same time, we are witnessing the “urbanization” of the IT world. InvestHK’s 2018 Hong Kong Fintech Map demonstrated that payment players are coming together in ecosystems to offer direct access to data sources, service providers, networks and clouds to gain the performance and cost benefits of direct connections.
With consumers seeking more convenient, reliable and secure transactions, success in the digital payment space will depend on the ready access which businesses have to data, applications, networking controls and their associated technologies as well as the proximity with which they can deliver their services to end-users. The closer the services are located at their end users, the more successful the end-user digital payment experience will be.
Finding the Right Payment Partner
The latest payment research conducted by the Reserve Bank of Australia (RBA) shows continued preference for electronic payment methods over paper-based methods, such as cash (now below 45% of all transactions) and checks (almost extinct), with consumers making over 450 electronic payments per person from January to June 2017. In Singapore, debit and credit card usage account for just 25% of consumer payments but mobile payments have seen tremendous growth, experiencing a 42% increase between 2013 and 2016.
Our 2018 white paper titled “Key Trends in Digital Payments Markets and Strategic Infrastructure”, developed by the Initiatives Group, identifies three key trends that are shaping the payments industry:
- Real-time payments: A shift in focus away from P2P has steered conversations towards value-added products and services by merchants that an enhanced infrastructure will allow financial institutions (and others) to bring to market. These payments require systems to process and analyze additional data, placing higher demands on the underlying technology and requiring low end-to-end latency to transfer funds within seconds in a secure and reliable way.
- Regulatory intervention: Concurrently, regulatory changes and technology advances have been driving what some think will bring about a revolution in retail banking — open banking and greater choices. Regulators are seeking to capture the economic efficiencies embedded in electronic transactions, and drive increased competition and innovation by opening up customer banking data to third parties.
- Open banking: As with real-time payments, open banking will facilitate the creation of new products and services, driven by regulation and enabled by advances in technology. New players are becoming a part of the payments ecosystem as banks create API gateways providing authorized access to customer data to facilitate the creation of new products and services, all leading to an enhanced customer experience.
As the world of digital payments continues to evolve, private and direct connectivity between multiple payment players is becoming more and more critical. It can take weeks, even months, to establish connections with new partners through traditional network. This stands in stark contrast to companies that reside within the same data center where connections can be achieved within minutes via direct and virtual connections.
Whether your payments strategy is focused on innovation, revenue growth or access to new markets the digital payments ecosystem at Equinix offers access to new partners and new routes of connectivity.
The future for digital payment remains promising for businesses in Asia-Pacific, as made evident in our market study Global Interconnection Index Vol. 2, which predicts that direct interconnection to financial service providers for digital payment purposes will grow rapidly by 47% by 2021.
Learn more about the trends shaping the future of digital payments and the ecosystem by attending our webinar “Key Trends in Payments Markets and Digital Infrastructure” on March 27 (HKT & SGT 9:30am / AEDT 12:30pm).