Agility and Risk Management: Essential Components

During recent years, the Asia-Pacific (APAC) region has appeared as a driving force in the digital payments space, with the region’s quick technology adoption and changing consumer behaviors placing it as a crucible for innovative payment solutions.  

“In 2023, we observed QR codes and digital wallets usage surge throughout the region,” Chris Winter, managing director and head of APAC at Discover® Global Network, conveyed to PYMNTS in a recent interview. “Consumer adoption continues to speed up as do the chances and the ways in which the spend can take place.”  

Winter ascribed this growth to factors such as consumer convenience, low transaction costs and increasing familiarity with mobile apps, while underscoring how super wallets have experienced remarkable growth, expanding beyond traditional use cases to providing users with multiple services in one place. 

“Users are becoming far more familiar with using their local wallet to transact using QR codes, not simply for taxis or food delivery … but for grocery shopping, mass transit and fast foods,” he observed.  

In spite of the reluctance to dwell on the lingering impact of the COVID-19 pandemic, Winter also highlighted its role in expediting the shift from cash payments to contactless technology — an acceleration that has opened new dimensions for QR codes in the region, beyond traditional applications to encompassing functionalities like ordering and payment in restaurants.  

“We have to recognize the impact [the pandemic] had in terms of accelerating the move from cash payments, the adoption of contactless technology, and introducing other uses for QR codes as well,” he expressed.  

How Payment Schemes Can Help 

In spite of innovative payment solutions such as QR code and digital wallet transactions taking place outside the traditional payment networks, Winter mentioned that card schemes like Discover Global Network can still play a significant role in facilitating these transactions. 

“A lot of networks often provide the originating funding mechanism for the wallets, often in preference to direct banking accounts or in terms of being able to fund the wallet in a relatively secure way,” he articulated.  

He further underscored concerns about the safety and security of wallets and apps, highlighting the absence of a regulatory framework comparable to traditional banks. In doing so, he identified this as another opportunity for payment schemes to play a pivotal role in bolstering their growth. 

Still on challenges, he pointed to how the absence of a common usage standard among the myriad of proprietary payment apps and wallets, each offering distinct functionalities, complicates the landscape for consumers. 

“There are a lot of proprietary payment apps and wallets, and they’re all fighting for relevance within the user’s smartphone,” he said. “They all require downloading, registration and loading of a funding mechanism [but] there’s no common [standard].”  

Another significant hurdle is the limited interoperability within the domestic and cross-border digital payments landscape. Here too, payments schemes can play a crucial role, Winter noted, leveraging their expertise to provide solutions that foster the seamless integration of diverse digital payment platforms. 

Agility, Collaboration, Risk, Compliance 

Gazing ahead, Winter cited generative artificial intelligence (AI), open banking and central bank digital currencies (CBDCs) as pivotal innovations shaping the future of the APAC payment landscape. 

Regulation will also be a critical factor shaping the landscape, he added, with less-regulated APAC markets implementing policies governing QR codes and digital wallets to catch up with more developed ones.  

Winter also predicted an uptick in regulatory scrutiny for payment businesses in the region in 2024, while highlighting examples of successful collaborations between regulators and payment operators in India and Malaysia to emphasize how regulators and payment operators can partner effectively to create a conducive environment for growth and innovation. 

Lastly, for businesses eyeing entry or expansion within the dynamic region, Winter distilled his advice into three key points: maintain agility and flexibility, actively engage with payment schemes and uphold robust risk and compliance practices.

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