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Asia's Real-Time Payments Revolution: Transforming Economies and International Trade

“Payments revenues grew at 11 per cent in 2022 — a double-digit rate for the second consecutive year — reaching more than $2.2 trillion, an all-time high,” says the 2023 McKinsey Global Payments Report. On a global scale, revenues in the payments sector displayed remarkable resilience, defying various regional challenges and registering growth rates that significantly surpassed the established long-term trend.

The Asia Pacific region is at the forefront of a financial revolution, witnessing the rapid expansion of real-time payments. These account-to-account (A2A) payment innovations are reshaping the financial landscape, driving international trade growth, and facilitating the transition from cash-based economies to cashless societies.

Transaction Volume and Growth Expectations

Asia’s real-time payments landscape is witnessing explosive growth, with transaction volumes soaring year after year. This surge is attributed to the convenience, speed, and low cost associated with real-time payments.

In recent times, the Asia-Pacific region, responsible for 47 percent of worldwide payments revenues, has been the main driver of growth. However, in 2022, regional revenues experienced a modest 4 per cent increase, primarily due to a 3 per cent decline in payment revenues within China.

Excluding China from the equation, the Asia-Pacific region exhibited impressive growth at 25 per cent, surpassing the previous year’s performance.

Catalyst for International Trade

Moving from a cash-based economy to a cashless one is crucial, especially for the Global South. Real-time payments reduce reliance on physical currency, mitigating security risks and promoting financial inclusion. The ability to access digital financial services empowers individuals and businesses, fostering economic growth and reducing poverty.

Popularity of A2A Payments

A2A payments have gained popularity due to several factors. Chief among these is their low cost, which is particularly attractive to businesses conducting frequent transactions. Real-time payments also offer unparalleled speed, enabling instant settlements and reducing the risk of delayed payments.

The Unified Payments Interface (UPI) in India has emerged as a standout performer in the Asia Pacific region. UPI has become a model for other nations with its user-friendly interface and widespread adoption. Its success lies in its interoperability, enabling seamless transactions across various banks and payment service providers.

Future Outlook

The future of real-time payments in Asia looks promising. As technology continues to advance, we can expect even more innovative payment solutions, including blockchain-based systems, further simplifying international trade and financial transactions.

The McKinsey report indicates that future revenue growth will likely stem from innovations in instant payments and the growing prevalence of digital wallets in specific regions. Over the past five years, electronic payment transaction volumes have consistently outpaced payment revenue growth at 17 per cent versus 6 per cent.

This reflects evolving payment preferences, a shift towards lower-fee options, and narrowing profit margins as scale increases.

These trends are also evident in the declining cash usage. Globally, cash usage decreased by nearly four percentage points in 2022, and this downward trend, especially pronounced in cash-dependent economies like India and Brazil, shows no signs of reversal.

We can anticipate further advancements in artificial intelligence, machine learning, and blockchain technology that will enhance the precision and reliability of compliance processes.

Asia’s embrace of real-time payments represents a pivotal moment in the region’s financial evolution. The exponential growth in transaction volumes, the transformative impact on international trade, and the transition from cash-based economies to cashless societies all underscore this shift’s significance a leading example, UPI demonstrates the potential for success in this dynamic landscape.

As real-time payments continue to flourish, they will shape the future of finance, fostering economic growth and prosperity throughout the Asia Pacific region.