Technology and Policies Driving Cashless Economies!

Banking CIO Outlook | Monday, July 18, 2022

The trending technological, as well as, the economic situation in the APAC regions, make it favorable to adopt and implement cashless banking.  

FREMONT, CA: A cashless economy makes it a much better option when compared to a traditional cash-based economy. The APAC region has begun its transformation to go cashless. The significant drivers towards this development are the enhanced technological prowess, changing policies, and the emergence of digital disrupters in the financial sector of the region. Although APAC countries began their cashless journey much later than many other countries of the world, they have managed to undertake the changes rapidly. Australia, Japan, and China from the APAC region are among the most cashless countries in the world. In the other countries that include Malaysia and Indonesia, among others, the regulatory authorities, as well as technology companies, have together created a very conducive environment for the growth of digital payments. Mobile wallets, internet banking, and point-of-sale technology have collectively been the significant factors in making the transformation possible.

The biggest reason why governments and regulators pitch for cashless economies is that these enable transparent cash transfers. When a transaction is done through digital mediums, unethical practices like corruption become impossible. Tax evasion, which used to be a significant problem in many developing countries of the region, has now ceased to be a problem. Tracking transactions, levying taxes and duties, and distributing subsidies have become convenient today. The reason why the population and service providers are adopting the movement is that these are substantially safer and convenient. With digital wallets, users can send and receive payments in a matter of seconds. Cash flow becomes faster and safer with money transfer apps. Service providers are raking the benefits and doing great business even after giving consumers many discounts and incentives.

One cannot say that the transformation is unchallenged and smooth. APAC countries have seen several shifts in rules and strategies. Even service providers have been prey to changing regulations in many instances. Every time there is a change in leadership, there are chances of policies being rolled back. The accessibility of digital payment systems is also a concern as many users still don't have internet connectivity or smartphones. Thus, infrastructure and affordability are major areas that pose obstacles to making economies cashless in APAC countries.

However, studying individual countries from the region paints a clearer picture regarding how the government, the public, and the financial firms see the concept of a cashless economy and how they have been planning on implementing it. In the country of China, mobile wallets were introduced around 2010, and since then, they have been the most popular way of payment. According to 2017 WeChat Data Report, 92 percent of people in China’s largest cities use online payment apps as their primary means of payment. In rural areas, 47 percent of the population is reported to use mobile payments regularly. Service providers in China have taken advantage of the growing e-commerce business to make cashless payments appealing.

In Indonesia, as well, stakeholders are pushing for a swift transformation to cashless. In the year 2017, Bank Indonesia released its national payment gateway (NPG), purported to be the nation’s integrated and affordable solution for electronic payments. Many technology companies have realized opportunities for business in the nation and are investing substantially to develop e-payment infrastructure. The countries of Thailand and Malaysia have also seen strategic reforms concerning the financial sector, whereby the countries have tried to incentivize a cashless system. All of these countries are making progress towards e-payments with improved technological capabilities to support them.

Fintechs have been the major disruptors in the banking sector and have played an integral role in creating the best platforms for seamless online payments that are safe and convenient. In the coming years, the APAC region is well in contention of becoming one of the most cashless parts of the world.  

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