05 October 2017

Utilisation of Technology Innovation in Payment Systems to Enhance Business Process Efficiency

Alternative payments have been on the rise with a significant global increase in e-commerce. According to WorldPay Global Payments Report, double-digit growth rates have been projected in most Asia Pacific markets until 2020, with the highest projected 2020 growth in China (USD 1,423 billion) and the highest 2016-2020 compound annual growth rate of 28 per cent in India.

Jakarta – The rise of middle class, rapid penetration of mobile commerce and internet access in Asia Pacific, as well as increasing logistics supports for e-commerce players, and vast growth of e-commerce sites have been the drivers of e-commerce in Asia Pacific (source: Singapore Post).

While on-line payment preferences differ by country, the systems of payments have also been evolving in terms of innovation, choice, complexity and fragmentation. Innovation in payments has been offered by HSBC through PayMe (Hong Kong), PayNow (Singapore) and SimplyPay (India).

The development of instant payments market infrastructure and the digitisation of transactions has also been part of the trends in treasury management. Instant payment scheme focuses not only on speed, but also on greater transparency, security and innovation; its strong growth and evolution of new features foster positive effects on customers’ experience, particularly in terms of instant access to accounts, irrevocability and availability.

The digitisation of an end-to-end buying / selling process aims to facilitate an easier process for clients. Despite the technological advances, commercial applications remain limited, particularly due to the lack of ubiquity and the reliance on existing payment infrastructure.

In terms of digital transformation for corporates, HSBC’s digital services are capable of providing a customer-centric digital banking experience, making life easier for clients to do transactional business banking.

As noted by Haryanto Suganda – Head of Global Banking PT Bank HSBC Indonesia, ASEAN is considered to be a very important region for HSBC, particularly in terms of population, GDP and available opportunities. It is hence important for HSBC to ensure that customers are fully-aware and fully-equipped with the latest technology available, and that technology is leveraged in favour of business and customers, assuring benefits for day-to-day business and enhancing business effectiveness and efficiency. A similar remark was conveyed by Herani Hermawan – Head of Global Liquidity and Cash Management PT Bank HSBC Indonesia, stating that the growth of innovation and digital aspects will be the platform for growth in Indonesia.

There are still a lot of potentials to unlock in ASEAN, which currently is the 7th largest economy in the world with USD 2.5 trillion in GDP, as opportunities are fostered by the presence of the regional base of over 3,600 MNCs, about 9 per cent of Global FDI reaching USD 122 billion, trade value of USD 400 billion with China, booming middle-class, dynamic demographic with 50 per cent of the population being below 30 years old, and soaring consumer spending power targeted to reach USD 2.3 trillion by 2020.

The birth of the ASEAN Economic Community (AEC) has made ASEAN  the world’s biggest free trade bloc by population and equal economic power to G7 in terms of GDP, with the largest shares of economic output being in services. The annual infrastructure investment in ASEAN is expected to reach USD 110 billion in the decade towards 2025, a large part of US businesses operating in ASEAN are also in the move to increase current levels of trade and investment in the region over the next five years.

The digital revolution in ASEAN covers the presence of instant payment schemes, the growth of e-commerce, and the drive to go paperless as well as the rise of mobile collection and e-wallet schemes. Instant payments increase financial inclusion for rural areas, not only for domestic coverage, but also covers the possibility of cross-border payments with immediate settlement as might be conducted through the SWIFT Global Payments Initiatives (SWIFT GPI).


Currently there are three phases of the SWIFT Global Payment Innovation Initiatives running in parallel:

Phase 1 – the delivery of a new standard in cross-border payments to enhance customer experience;
Phase 2 – the digital transformation of cross-border payments to enable digital payment services, and;
Phase 3 – the exploration of the use of new technologies.

On the e-commerce growth, ASEAN is currently the world’s 4th largest internet market, and  e-commerce is set for 32 per cent CAGR over the next 10 years, as companies  go online to keep up with customers’ expectations.

The drive to go paperless has brought more local authorities to rise up the digitisation curve to connect with foreign banks, enabling more simplified process for MNCs, hence HSBC’s holistic e-statutory and customs proposition across ASEAN helps improve corporates’ experience in statutory payments.

Mobile subscribers in ASEAN represent 130 per cent  of the entire population with younger and technologically-savvier consumers who embed mobile payment patterns in their lifestyle, while these e-wallet schemes provides rich consumer insights and offers the key to unlocking loyalty and growth of spending. Rohit Joshi, HSBC Singapore’s Global Liquidity and Cash Management mentioned that innovative thinking and enabling technology are elements inevitably disrupting the ASEAN banking landscape, and HSBC embraces it by remaining relevant to customers and communities.

Indonesia is the largest economy in ASEAN and the top 16th GDP worldwide. With sound macroeconomic policy, strong domestic consumption and a growing middle class, Indonesia has been able to maintain stability and is predicted to record 5.0 per cent - 5.4F economic growth in 2017*. In combination with a huge population dominated by the young and productive, Indonesia has a great potential to be the center of innovation in finance and technology.

The large and fast growing economy is also supported by a robust payment system. Bank Indonesia as the payment system authority continuously strengthening policies and enhancing the infrastructure to put in place a safe, efficient, and smooth payment system that also meets the international standards and best practices. These are conducted by strengthening the national payment system and promoting initiatives among industry and community, as well as conducting proactive efforts in pioneering cooperation and collaboration with all stakeholders including the Government and the private sector.

The four pillars in strengthening the national payment system include:

  1. Effective and efficient money management system
  2. Expansion of payment system electrification
  3. Reliable and secured payment infrastructure, and;
  4. Strong and rigorous payment system.

Bank Indonesia has developed various initiatives and continuous support towards innovation in the area of payment systems, and would continue supporting the Government in the area of financial inclusion and reducing cash in certain transactions, particularly the ‘government-to-people’ and ‘people-to-government’ transactions. The current campaign for non-cash transactions also includes the Government’s social assistance for the poor.

To improve efficiency, security, reliability and ease of access of the national payment system, Bank Indonesia and the payment industry (through Asosiasi Sistem Pembayaran Indonesia - ASPI) has developed three strategy initiatives: 1) implementation of national chip technology standard on atm and debit cards and six-digit online pin, 2) implementation of national payment gateway, and 3) implementation of full electronic payment system in toll roads.

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