Logo of Phnom Penh Post newspaper Phnom Penh Post - SE Asian banks set to lose out on $5B in payments revenue

SE Asian banks set to lose out on $5B in payments revenue

Content image - Phnom Penh Post
In Singapore, as much as 20 per cent of banks’ payments revenue is likely to be displaced by the growth of digital payments and competition from non-banks, Accenture said. THE STRAITS TIMES/ASIA NEWS NETWORK

SE Asian banks set to lose out on $5B in payments revenue

Banks in Southeast Asia are set to miss out on as much as $5 billion, or 14.3 per cent of their payments revenue by 2025, displaced by the growth of digital payments and competition from non-banks, a new report says.

This comes as payments become more “instant, invisible and free”, professional services firm Accenture said in a report titled Banking Pulse Survey: Two Ways to Win.

The research notes that over the next six years, banks will face further pressure on income from card transactions and fees, with free payments putting 9.6 per cent of payments revenue at risk in the region.

In addition, competition from non-banks in invisible payments – where payments are completed in a “virtual wallet” on a mobile app or device – will put 3.1 per cent of bank revenues at risk, Accenture said.

Card displacement by instant payments, where funds are settled and transferred in real time, and banks make little to no interest, is projected to put an additional 1.7 per cent of payment revenues in jeopardy.

Divyesh Vithlani, who leads Accenture’s financial services practice in Asean, said: “The world of instant, invisible and free payments is here to stay, squeezing margins further on a business that was already feeling a lot of pressure from new competition, particularly in Southeast Asia with the proliferation of e-wallets.

“As payments modernisation has already made a good headway in Asean, with the introduction of instant payment schemes in many countries, revenue from the consumer space is already low or near zero, except in the cards space, so the push to find alternate sources of revenue and optimise costs is already an immediate concern here,” Vithlani said.

He said the payments market is booming, and that there’s a multibillion-dollar opportunity for those willing to invest in new technologies and business models based on the new digital landscape.

In Singapore

In Singapore, as much as 20 per cent of banks’ payments revenue, or nearly $1.3 billion, is likely to be displaced by the growth of digital payments and competition from non-banks, Accenture said.

However, with payments revenue in the country growing at an annual rate of 3.6 per cent, from $6 billion this year to nearly $7.5 billion by 2025, banks will still have an opportunity worth about $1.4 billion in incremental revenue growth to tap.

Overall, the survey, which polled 240 payments executives from the largest banks across 23 markets, found that the industry is aware of the challenges posed by new technologies in payments.

Of the banking executives polled in all markets, 71 per cent agree that payments are becoming free, 73 per cent believe that most payments are already invisible, or will become so over the next 12 months and 78 per cent said that payments are either already instant, or will become instant over the next 12 months.

Vithlani said: “The digital transformation in payments throughout the region will have a deep impact on all industry players and banks will have to fundamentally change how they think about their revenue in this area.

“Banks previously earned billions of dollars from some of these channels, and that’ll dry up eventually as competition heats up, so they’ll need to develop new digital business models to compete in this new era.”

In response to these key market challenges, 18 per cent of respondents said the main priority for the bank is to build security into retail payments transactions.

Some 22 per cent cited artificial intelligence, robotics, machine learning and innovative payments hubs as the key platform technology capabilities they need to adapt their core systems to high-speed and continuous payment flows.

The report also recommended that banks scale their technology to reimagine how their core payments operations are done, and to differentiate themselves by adding value in a low-margin, high-volume business.

Three tactics to better differentiate their payments business and increase profitability include focusing on customer-centric value-added services, open banking for corporate and data monetisation, Accenture said.

THE STRAITS TIMES (SINGAPORE)/ASIA NEWS NETWORK

MOST VIEWED

  • Phnom Penh International Airport wins award as passenger traffic soars

    The Phnom Penh International Airport has been awarded Best Asia Pacific Regional Airport 2019 for its sustained high growth in passenger traffic in recent years. The award was presented by the Capa Centre for Aviation (Capa) – a world-leading and trusted organisation that provides market intelligence to

  • PM responds to Rainsy ticket claims

    Prime Minister Hun Sen on Monday expressed frustration over claims by Sam Rainsy that he had altered Rainsy’s ticket with Thai Airways to prevent him boarding his November 7 flight to Thailand, from where he had claimed he would enter Cambodia. Hun Sen made the

  • PM urges ‘democracies’ to learn from horrors Cambodia faced

    Prime Minister Hun Sen on Tuesday chided countries that he said declared themselves a democracy while supporting a military coup that eventually gave birth to the Khmer Rouge regime. Speaking during the 2nd Asia-Pacific Summit at the Peace Palace, Hun Sen said without naming those

  • Princess Buppha Devi passes away aged 77

    Princess Norodom Buppha Devi, who was famous for her skills and key roles behind the Kingdom’s Royal Ballet, passed away on Monday from unspecified illness at a hospital in the Thai capital Bangkok, according to the official Facebook page of King Norodom Sihamoni. “May

  • PM: Request for release of plotters not due to pressure

    Prime Minister Hun Sen on Saturday said his request to have the supporters of former opposition leader Sam Rainsy and his “coup plot” released on bail was not made under international pressure. Speaking at the groundbreaking ceremony for the construction of 34 roads in Preah Sihanouk

  • Ministry deplores RFA report on EBA

    The Ministry of Foreign Affairs and International Cooperation on Friday deplored as fake news a Radio Free Asia (RFA) report that it had received a copy of the European Commission’s assessment on the human rights situation in Cambodia as part of the Everything But