2023 was a good year for fintech innovations, which happened at breakneck speed. In the middle of last year, we made some predictions about cross-border payment trends. Did we get them right or miss the mark completely?
1st prediction: More regional partnerships than even ever
Verdict: Hit
Indeed, we saw more and more countries integrating their payment systems. One of the clearest examples of this is ASEAN’s Regional Payment Connectivity. Singapore, Malaysia, Indonesia and Thailand have linked their payment network, providing an expanded regional cashless transaction network that serves their collective residents. The central banks of these countries have also signed an agreement to promote the use of local currencies in bilateral transactions. The Philippines is expected to follow soon.
Asian countries have also linked their payment systems, such as Singapore – India and Hong Kong – Thailand. This is not new, but Alipay+ has expanded its capabilities, with its global payment platform supporting 25 digital wallets and 1.5 billion accounts since 2020. The latest development saw it encouraging transactions across 5 major regional wallets - Alipay (China), AlipayHK (Hong Kong), Touch ’n Go eWallet (Malaysia), GCash (the Philippines) and TrueMoney (Thailand).
In the European Union, a groundbreaking deal potentially heralded the dawn of wide instant payment adoption across the region, with its authorities agreeing on the mandatory provision of instant payments. With payment service providers now required to offer instant money transfers at no extra charge, the biggest winners here might be the consumers.
2nd prediction: Watch out for Apple and Google’s take on mobile payments
Verdict: Miss (only because we are finicky about Apple Pay and Google Wallet)
The global mobile payments market was predicted to grow to USD 2.98 trillion in 2023. We knew China’s AliPay would dominate, as it had - its 1.3 billion users worldwide were the highest. In comparison, while there were a few wins, such as Vietnam joining Malaysia and Singapore as the third ASEAN nation to support Apple Pay and Google Wallet expanding to numerous countries, including the Balkans, we consider these 2 as facilitators, not true mobile payment systems.
What this means is that these 2 do not store money, rather a user has to add their credit or debit card to the apps for them to work. On the other hand, they did enjoy great clout - topping usage and adoption in the US, UK, Australia and Europe. We are only slightly disappointed that they did not have “truer” mobile payment apps to unify and capture the market segments over here in the East or emerge as a challenger to Alipay and Alipay+ in Asia.
3rd prediction: AI post-ChatGPT is a serious business
Verdict: Hit
What can we say about AI that has not been said? Generative AI is progressing fast in 2023, partly because of ChatGPT which notched an estimated 100 million monthly users in just 2 months. The global AI in fintech market size was expected to grow to USD 11.59 billion in 2023 at a CAGR rate of 26.8%.
In fintech, one of the factors that led to the rapid growth of AI is the need for fraud detection. A poll conducted by Certified Fraud Examiners (ACFE) and analytics pioneer SAS shows that AI and Machine Learning (ML) are increasingly being used for fraud detection internationally, with 13% of organisations currently using AI and ML to detect and deter frauds, while another 25% expressed they are planning to do in the next year or two, representing a 200% growth. In another example, the Reserve Bank of India reported the total value of bank scams fell from INR1.38 trillion to INR 604 billion, thanks to new AI-enabled technologies.
Closer to home, we have to give this a resounding yes because we see its value in our data parsing tools that enable us to tailor our compliance and backend payment technologies to match our partners’. For other usages in marketing, for example, we still find generative AI a hit or miss (pun intended), so approach with caution.
4th prediction: Can CBDCs come of age with help?
Verdict: Miss
This is a quick one. While there is no shortage of CBDC supporters and proponents, with even the International Monetary Fund repeatedly highlighting the role of CBDC in promoting financial inclusion, most CBDC use cases still need to be solved in development.
Statistics show that 11 countries have launched their CBDCs. Some 21 countries, including China, Russia, Australia, Hong Kong, Malaysia, Japan and South Korea, are running pilot projects either in retail or wholesale or both. Globally, 130 countries, together representing 98% of the world’s GDP, are exploring a CBDC. However, exploration isn’t application.
CBDCs are often viewed as a risk-free form of digital money, backed by governments, and potentially offering lower costs with greater accessibility. However, their adoption has been slow, possibly due to regulatory constraints. With many stakeholders, it has proven to be particularly challenging for major currencies to implement cross-border CBDC transactions. We will be pleased to be proven wrong about CBDCs.
