Future of PaymentsMarket Spotlight: ASEAN

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Future of Payments • Market Spotlight: ASEAN

Market Spotlight ASEAN

ASEAN is a cluster of diverse, distinct and vibrant economies, and as both wealth and integration increases, clients are increasingly looking at the region as a source of growth.

The scale of opportunity is compelling. ASEAN already brings together the world’s largest population outside China and India1. By 2030, the combined countries of ASEAN are expected to represent the world’s third largest economy by size2. It is not only its size that is exciting, however, but also its demographics. ASEAN has a young

population with a rising middle class, expected to represent 65% of the total population by 20303. A young, high growth economy with a large consumer base, a high digital propensity, and a projected $300bn internet economy by 20254, is an exciting prospect for many industries.

1. aseanup.com/asean-infographics-population-market-economy

2. www.bloomberg.com/news/articles/2019-01-08/world-s-biggest-economies-seen-dominated-by-asian-ems-by-2030?srnd=premium

3. www.pwc.com/vn/en/publications/2018/pwc-gmc-the-future-of-asean-time-to-act.pdf

4. uk.reuters.com/article/us-southeast-asia-internet/southeast-asias-internet-economy-to-hit-300-billion-by-2025-report-idUKKBN1WI07X

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Future of Payments • Country Profile: ASEAN

Citi in ASEAN

Long term commitment, with a presence in ASEAN for 118 years.

Physical presence, with locations in 6 key markets, and leverage network relationships in 3 countries.

Clients include 90% of Fortune 500 companies doing business in ASEAN. Clients include >1,200 foreign multinational corporations, and the region’s largest banks, Asian corporations, non-bank financial institutions, governments departments and central banks.

Payments pioneer, as the only global bank with instant payment capabilities across 4 countries, in ASEAN, including support technology such as APIs. Citi holds the largest market share of payment channels among foreign banks in a number of countries including Malaysia and Philippines, as well as being first-to-market in Thailand.

Digital focused, as the only global bank with a digital onboarding process across ASEAN allowing clients to open bank accounts with no exchange of paper documents within 2 days. Citi was awarded Best Corporate / Institutional Digital Bank in 2019 for ASEAN by Global Finance.

Regulatory participant, holding vice-chair position and the only foreign bank to participate in the PesoNet Steering Committee in Philippines and in Indonesia, being a member of the Executive Committee of the National Payments of Association of Indonesia (ASPI).

Market Firsts

• Launch of Virtual Cards Solutions – 1st bank in Indonesia, 1st foreign bank in Malaysia, 1st bank in Philippines for seamless B2B payments and 1st foreign bank in Vietnam for supplier payments

• Offering of e-Customs payments – 1st foreign bank in Thailand and Vietnam to offer such services

• e-Withholding tax service – 1st and only foreign bank to offer such service in Thailand

• Introduction of paperless offering for submission of supporting documents – 1st bank in Indonesia to offer such services via CitiDirect BE eDocs

• Fully-digital import remittance solution for corporate clients leveraging AI to detect and highlight outliers in Corporate Payments – 1st bank in Philippines to offer such an innovative solution

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Future of Payments • Market Spotlight: ASEAN

The ASEAN growth story, coupled with favorable conditions that promote the increase of digital native consumers, places the region on a transformation path to digitize business models and customer experience. In the payments landscape there are abundant opportunities to explore both within countries as well as inter-ASEAN.

Further impetus comes from a proactive focus by governments across ASEAN, whoare motivated to increase financial inclusion, boost participation in the formal economy and promote growth across a wider base of the population. Digital payments have an important role to play in this, but given the different levels of maturity across countries, these initiatives can take different forms, e.g.

• Singapore, the most developed of ASEAN economies, has a sophisticated digital agenda, consistent with its role as a digital innovation hub. As a result, it has the highest penetration of cards in the region, a large number and widespread adoption of digital wallets, and a well-established instant payments capability. For example, As the COVID-19 pandemic struck, wage support to businesses was distributed via PayNow.

• Thailand introduced an advanced real time payment scheme in 2019, with significant promotion of bank-driven digital payments by government, regulators and banks.

• Indonesia recently announced a well-structured five-pillar digital banking vision, supported with concrete delivery strategies, addressing open banking, regulation, financial technologies, partnerships and adoption.

According to Citi’s Digital Money Index, published in conjunction with Imperial College London and covering 84 countries, 5 of the 6 largest ASEAN economies improved their ranking in 2019, reflecting government or market support, technology or financial infrastructure sophistication, prevalence of digital money solutions and/ or increased propensity to adopt5. Most notably, Thailand boosted its ranking by 10 places, with Indonesia and the Philippines both jumping 7 places.

Diversity and financial inclusion

According to Citi’s Digital Money Index, published in conjunction with Imperial College London and covering 84 countries, 5 of the 6 largest ASEAN economies improved their ranking in 2019

5. www.citibank.com/icg/sa/digital_symposium/digital_money_index

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Future of Payments • Market Spotlight: ASEAN

Innovative partnerships

While government and bank support, and increasing consumer demand, are essential drivers of digital payments, it is banks and technology players that deliver this capabilities to businesses and consumers, whether through account-based payments or mobile wallets. Increasingly, banks and fintechs are working co-operatively to enable financial inclusion and enhance customer experience.

This is particularly apparent in ASEAN, which has become an exciting centre of fintech innovation. According to Fintech Global, investment in ASEAN fintechs grew from $138 million in 2015 to $4.1bn in 2019, with this figure nearly 2.5x higher than 20186. While Singapore has long been an established innovation hub, Vietnam is now home to over 130 fintechs, with a strong emphasis on payments7.

Consistent with our global strategy, Citi in ASEAN has a history of collaboration with fintechs, such as our partnership with Payoo in Vietnam that delivers last-mile cash digitisation to large eCommerce players. Citi has also partnered a local fintech to help companies accept payments via Citi virtual cards, enabling an insurance company to pay hospitals more quickly. Both payer and beneficiary have improved working capital and reduced

administration, such as reconciliation, while hospital patients experience a better experience through faster check-out. We held our inaugural TTS ASEAN FinTech Day 2019 in Singapore last year where we reached out to over 3,000 fintechs in the region, working on a number of similar problem statements. An initial shortlist of 25 applicants was invited to pitch before the final eight teams were chosen and potential partnerships explored. To foster collaboration between financial institutions and FinTechs, MAS has developed the API Exchange (“APIX”), a FinTech marketplace and sandbox to facilitate experiments. During Singapore FinTech Festival in 2019, Citi has been invited to test the platform capability. Since then, Citi has been conducting experiments on a variety of use cases in partnership with FinTechs spread globally and on the APIX platform.

Investment in ASEAN fintechs grew from $138 million in 2015 to $4.1bn in 2019, with this figure nearly 2.5x higher than 2018.

6. asianbankingandfinance.net/financial-technology/in-focus/asean-fintech-investments-hit-89b-2015-2019

7. https://fintechnews.sg/35968/vietnam/a-review-of-vietnams-fintech-industry-in-2019/

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Future of Payments • Market Spotlight: ASEAN

Investing in digital paymentsFor businesses investing or expanding their business in ASEAN, the strengthening digital economy in the region creates a robust platform for growth for companies across a range of sectors that are looking to tap into the growing, dynamic consumer base.

It is not only tech-enabled companies that are transforming their businesses. Traditional sectors such as fast moving consumer goods, pharmaceutical and insurance companies are also evolving to digitise their business models to either sell directly or enhance the experience of their customers. As digital payment opportunities expand in ASEAN, Citi is pioneering the adoption

of new schemes to enable our clients to take early advantage. We also work closely with governments to share best practices derived from other markets to enhance new digital payment and financial inclusion initiatives.

In addition to integrating new payment methods into our platforms, we are also layering our own client-centred solutions on top of these initiatives, such as Payer ID, QR code payments initiation, Smart Match auto-reconciliation and sophisticated, seamless integration tools. These solutions are driving impressive innovation programmes amongst clients operating in ASEAN, leveraging new payment methods to enhance customer reach and create competitive advantage. While many companies may have found they could rely on debit and credit card collections in other regions, this is not an option in ASEAN.

“In the future, the BMW Group aims to be the leading technology company for Premium Mobility and we are tremendously delighted that here in Malaysia, we are able to kick start an initiative that is leading towards such objective together with our esteemed partners PayNet and Citi.”

Tobias Eismann

CEO and Managing Director of BMW Credit Malaysia Sdn Bhd and BMW Lease Malaysia Sdn Bhd (companies of BMW Group Financial Services)

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Future of Payments • Market Spotlight: ASEAN

Likewise, more established companies that have built customer engagement models around the use of cash or cheques urgently need to invest in and embrace the digital payment methods to which customers are most attracted, and refine their business models and engagement tools accordingly. Examples include:

Partnering to automate payments

Citi worked with PayNet and helped BMW Group Financial Services to become the first captive financial services provider in Malaysia to offer DirectDebit via e-Mandates to its customers. With easy registration and no transaction fees, this solution is a catalyst for the premium automaker’s mission to Make Mobility Easy, Flexible and Affordable for everybody. BMW customers are now able to service their monthly repayments automatically via DirectDebit at no cost8.

Streamlining with API technology

Fast-growing digital wealth management platform provider StashAway worked with Citi to expand its business rapidly into Malaysia, Singapore and Thailand, achieving a standardised banking approach whilst supporting local demands and conditions. StashAway used Citi’s digital onboarding to open accounts without delay and leveraged APIs to automate and streamline cross-border transfer of customers’ investment funds in local currencies. The outcome has been better control for trustees, enhanced efficiency and a better customer experience9.

Seamless with instant payments

In the insurance space, AXA enables policyholders to purchase insurance products through their online portal and pay seamlessly via the dynamic PayNow QR code. The process is simple, quick and intuitive for policyholders, while AXA can collect and receive funds instantly from customers at any time of the day, at a lower cost than other channels10.

8. moneycompass.com.my/2019/08/15/bmw-offers-direct-debit-without-transaction-fees

9, 10. www.citi.com/tts/sa/flippingbook/2020/CITI_NBFI_Casebook/20/index.html

Accelerating changeIn a post-COVID19 environment, we are likely to see further acceleration in the adoption of digital payments in ASEAN, both by its young, digitally savvy population and fast-transforming business.

Debopama Sen

Head of Singapore and ASEAN Treasury and Trade Solutions, Citi

Digital business models, and hence digital payments, are no longer a “nice to have” but a necessary enabler of growth. Citi continues to support this trend with expertise and innovative solutions, often leveraging design thinking and co-creation strategies with our clients as they work to capitalize on the unique opportunities that ASEAN provides.

AUTHOR

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Future of Payments • Country Profile: ASEAN

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