Intellasia East Asia News – Pandemic compelling switch to digital currency

The sudden and unexpected emergence of the Covid-19 pandemic has raised serious concerns among people in all countries about the transmission of the virus through paper currency.

Pandemic compelling switch to digital currency ảnh 1 Illustrative photo

It is for this reason that more thought is being given to create alternate non-cash payment methods, with online and non-contact with cash across countries. This new preference and shift towards digitisation will bring about a new form of exchange between service providers and consumers.

New cashless trends

According to recent statistics from Square, which is a global payment service provider, the percentage of cashless service providers have more than doubled in the United States, Australia, Canada, the United Kingdom, and Japan. A survey by Frost & Sullivan shows that 53 percent of consumers in the Asia-Pacific region shop online more often than they did before the Covid-19 pandemic broke out. It was also seen that almost 54 percent of consumers in Thailand, 57 percent consumers in Singapore, and 68 percent consumers in Malaysia shop online more often now, than they did during the years before the global Covid-19 pandemic.

With the rise of e-commerce platforms, the use of digital pay services is forecast to also increase. A survey shows that non-cash payment methods, such as online payment by card, e-wallets, digital money transfer, will all grow strongly in the future. Contact forms of payment such as at a POS or transactions via ATM will drop sharply. Along with this will be the development of cashless payment support infrastructure such as UPI, IMPS, and BBPS. In addition, new payment types such as Buy Now Pay Later (BNPL) services have also appeared, which are often advertised as interest-free. BNPL services also allow users to make payments in scheduled recurring instalments. In Singapore, about 1.1 million people, or 38 percent of the total population, are using BNPL services.

Along with the development of non-cash payment methods in commercial activities, governments have also promoted the use of non-cash payments in disbursing support to people and businesses through digital payment service providers. For example, the Malaysian government supports people through the MySejahtera application which is a government mobile application, and Malaysia’s main e-wallet service providers, Boost, GrabPay, and Touch ‘N Go. While Indonesia offers support via Bank Negara Indonesia (BNI) bank account or e-wallets such as GoPay, OVO and LinkAja.

Vietnam is also moving fast towards this new trend. A survey by Visa in April 2021 showed that non-cash payment methods such as QR code increased by 56%, e-wallet increased by 51%, online card payment increased by 45%, non-contact payment by card increased by 48%, and non-contact payment by Mobil increased by 50%. In addition, a new form of payment, the BNPL form, has also appeared in Vietnam in the past two years.

Post pandemic pay methods

The serious effect of the Covid-19 pandemic has compelled the need to digitise payment methods, and develop forms of digital payments to also meet the needs of introducing a full scale digital economy in the future. In the post-Covid pandemic phase, payment forms such as digital currency and e-wallets, wearable and contactless payments, and QR code scanning will continue to be emerging payment technologies as consumers will feel more comfortable and safe about such payment technology methods.

In the future, stablecoins, especially stablecoins with very low value and volatility, will increase as a means of payment, because stablecoins have the potential to be universally accepted for payments globally and become a convenient means of payment for e-commerce, especially when integrated into online platforms.

However, the development of digital forms of payment also pose several challenges. If cash is not accepted as a means of payment, this can create a ‘payment gap’ between those who can access digital payment services and those who cannot. This could negatively impact elderly consumers and those consumers who do not bank. A BIS report in 2020 showed that in London difficulties in paying with cash made it difficult for 1.3 million consumers who did not bank in the United Kingdom.

Along with the diversity of digital payment forms is the increasing participation of Non-Banking Payment Service Providers (NBPSP), especially for financial technology companies and big techs. The participation of these organisations, in addition to promoting financial inclusion, also increases competition and efficiency in the payment market. However, this comes with potential risks in terms of consumer protection, operational resilience, and complicated network infrastructure, protecting customer funds when using payment services, data protection, user access issues, and market concentration.

In addition to the development of private sector powered digital payment methods, countries will also accelerate the conversion of paper money to digital currencies. According to a report released by the Bank for International Settlements (BIS) in January 2021, a survey conducted with Central Banks of 65 countries and regions around the world, showed that 86 percent of banks are actively learning about Central Bank Digital Currency (CBDC). Six out of ten central banks are in the process of piloting, while 14 percent are in the process of developing and arranging for pilot implementation. In this field, China is currently the leading country in the development of CBDC.

Almost all forecasts for the future show that retail payments will first switch to using digital currency, especially those currently only using high-value transfers. If this becomes a reality, banks will need to review their existing payment infrastructure methods to ensure that they have the necessary capacity, capability and resources to carry out CBDC payment methods in the very near future to meet a fast rising consumer demand.

https://sggpnews.org.vn/business/pandemic-compelling-switch-to-digital-currency-93757.html

 

Category: Finance, Vietnam


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