A traveler’s dream: Southeast Asian countries are connected through cashless payment systems

Southeast Asian countries are connected through cashless payment systems.

People are substituting QR code cashless payment for cards from Bali to Bangkok. There’s a catch: It’s currently restricted to residents.

Countries in Southeast Asia are starting to successfully connect their payment systems.

Without the pain of fees or the hassle of carrying cash and credit cards across borders, QR code payments are possible.

The first of its type, it sets the path for further innovations like rapid international bank transactions.

When a Jakarta businesswoman named Jeniffer Stenlie learned she could use her Indonesian banking app in Thailand, she was dubious. A helpful Thai shopkeeper reassured her, “Just scan a QR code at the sales counter,” while she was making a purchase in June 2022. To her great surprise, the payment was processed right away and at a higher conversion rate than she had anticipated.

In the glitzy center of Bangkok, Stenlie, who owns a modest women’s apparel company, scanned QR codes to pay in mall after mall as she bought shoes, food, and beverages. From that point forward, she preferred QR to credit cards or cash.

The QR codes Stenlie scanned are part of an ambitious deal between Indonesia, Singapore, Malaysia, Thailand, and the Philippines — seemingly the first of its kind.

The central banks of these nations have been working to connect their systems over the past few years, enabling their citizens to use QR payments for cross-border transactions without incurring any fees and, in most cases, at conversion rates that are better than those set by payment processors like Visa and American Express. The system is starting to take off, anywhere from island party villages to high-end boutiques, after running a series of covert test programs and signing a formal agreement in 2022.

“The cross-border mechanism is quite simple … It loosens the local currency dependence on the U.S. dollar.”

QR payments have changed commerce in China and India. Even the tiniest payment may be done by scanning a QR code because to the might of private-sector banking behemoths like Paytm and Ant Group of Alibaba. Beggars in Delhi wave printed QR codes at drivers who are driving by. In China, 95% of people, including some robbers, use it as their primary form of payment.

Adoption of QR payments is one thing, but cross-border payment acceptance is quite another. The Southeast Asian network is a direct agreement between central bank systems, but a Chinese tourist may be able to use an Alipay QR code at a business that accepts it in Japan or the United States.

According to Indonesia’s privately held Bank Central Asia’s head economist David E. Sumual, “the cross-border mechanism is actually quite simple.” It entails the central banks of two nations reaching a settlement agreement using their domestic currencies instead of the US dollar. As a result, the local currency’s reliance on the dollar is lessened.

The advantages are much clearer for travelers. Gisela Swagarita, a 33-year-old copywriter from Jakarta, was on vacation in the Thai party resort of Pattaya in April of this year when she realized she had forgotten her wallet in the hotel. But she could use her Indonesian banking app to pay at the little cafe where she had been eating because of the cross-border QR code payment mechanism. Swagarita exhaled happily. Cashless and cardless payment is more practical for her because she tends to forget things.

The initiative is still in its early phases, and there are currently no official statistics on the volume or value of transactions. Although Singapore is only partially connected, according to public pronouncements, the system is currently operational between Indonesia, Malaysia, and Thailand, with the Philippines planning to join in the near future. Around 85% of Southeast Asia’s economic activity is concentrated in the five nations, which are also a major hubs for trade and travel.

The agreement’s momentum is due to the increase in QR code payments that occurred during the pandemic, particularly in Indonesia. Indonesia is by far the leader in Southeast Asia for QR adoption, with the number of QR payments there doubling almost every year since the technology was introduced in 2019, even if digital wallets are still the country’s preferred non-cash payment method.

Quick Response Code Indonesian Standard, often known as QRIS, is the country’s official QR code standard and represents “a revolution,” according to Teguh Yudo Wicaksono, the head of the Mandiri Institute, the country’s state-owned Bank Mandiri’s research division. Merchants don’t need to buy a cumbersome card reader, though they can use one if they already have one, and transaction costs are as low as 1,500 rupiah (10 cents), “it unlocked many opportunities, especially for the unbanked population.” On the other hand, fees from card providers range from 2,500 to 6,000 rupiah.

Each participating country has its own national QR code system, much like QRIS. In Singapore, it’s part of the wider-ranging NETS system, while Malaysia uses DuitNow and Thailand has PromptPay.

The following stage is for the central banks of the ASEAN countries to link this network with other regional organizations on a global scale, according to a panel discussion on G20-related topics in 2022, which was covered by Bloomberg. A comparable structure is intended to be established for immediate bank transfers and, possibly, even central bank digital currencies in the future.

Since technology trajectories are unpredictable, Sumual of Bank Central Asia underlined that QR code-based linkages are the initial step. “Right now, QR can be used anywhere, but we will never know for sure how long this system will be popular,” he stated. We might have a more creative payment mechanism in a few years. Thus, “everything depends on the public.”

The cross-border QR system is not yet accepted by every establishment in the participating nations; it is primarily found in the larger shops that cater to tourists.

 

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