The Role of Open Finance in Driving the Future of Digital Payments in Southeast Asia
23 August 2022
Author by Finantier

The Role of Open Finance in Driving the Future of Digital Payments in Southeast Asia

Southeast Asia has more than 400 million internet users, equivalent to 73% of the total population. The number continues to grow, along with the government's distribution of infrastructure. This population is also driving the digital economy in the region. In 2021, its value reached $174 billion.

Application-based services are the main driver of this economic growth. Platforms such as e-commerce, OTA (Online Travel Agency), online media, fintech, and ride-hailing have contributed the most. However, other services such as edutech, healthtech, agritech, to insurtech also have growth potential in this market.

In addition to the maturity of the business model presented by the innovators, the growth of these various businesses also depends on several factors, one of which is the provision of technology infrastructure, one which is a digital payment platform.

The role of this digital payment platform is quite crucial. According to the IDC report, the Southeast Asia region is undergoing a payment system transformation that leads to digital payments. As an example of e-commerce transactions, in 2025, it is projected to reach $179.8 billion (an increase of 162% from 2021), of which 91% of transactions are managed through digital payments.

The growth trend of digital payment services in Southeast Asia

According to data compiled by UOB in its "FinTech in ASEAN 2021" report, in H12021, there was $3.5 billion in funding that investors rolled out for fintech startups in Southeast Asia. Of the 167 funding transactions that occurred, the majority went to digital payment-based fintech platforms. The distribution is also evenly distributed in almost all countries --- even in some areas such as the Philippines, Malaysia, and Vietnam, the proportion dominates.

The hypothesis of investors in investing in this sector is based on nothing but the market potential that is still very large. Moreover, this region also has a large unbanked population – 290 million young people do not have access to banking services. On the other hand, a great need also comes from the industry in order to provide easier payment options to its consumers.

According to data, the two dominant digital payment platforms are generated from digital commerce and mobile point of sales. The first, namely digital commerce, is defined as digital payments used to facilitate transactions at online merchants. Meanwhile, the mobile point of sales is for accepting payments at offline merchants, including the QRIS method.

Several things make this digital payment platform loved by people in the Southeast Asia region, including:

  • Ease of access; To register for a new payment platform, call it e-money, users only need to download an app and then perform a fast and completely online registration process.
  • Complete digital ecosystem; Currently, digital payment applications can be used in various services. The digital application ecosystem is also very broad, starting from the retail sector, education, entertainment, and so on.
  • Mature regulation; The regulatory umbrella governing digital payment systems is solid enough in almost all countries in Southeast Asia. For example, in Indonesia, it is regulated in Bank Indonesia Regulation Number 20/6/PBI/2018.

Pleasant user experience, not just payments, the developers of digital payment platforms mainly provide an engaging user experience, for example, by including gamification or loyalty features that can provide more benefits to service users.

Digital Payment Regulation

Each country has a regulatory body to regulate digital payment systems. The rules require that each provider be licensed (or registered) to operate in the region. The following is a list of digital payment regulators for several countries in Southeast Asia:

The Role of Open Finance in Digital Payments

Open Finance is a provider of financial technology infrastructure, which aims to make it easier for companies to bring fintech capabilities into their business processes. The use cases of using Open Finance in digital payment systems are quite diverse, one of which is the Recurring Payment model.

Recurring Payment allows a business to automate recurring payments from its customers, to reduce the costs that are often passed on to the platform or consumer — up to 99% in savings.

Finantier is an Open Finance provider that also provides Recurring Payment services. Some conveniences are offered to developers, ranging from a simple integration process through a standardized Open API to a banking service-grade security and encryption system.

However, Open Finance does not stop there. Several features can also be optimized for the work process of a digital payment platform. Starting from the e-KYC system to account aggregation.

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