State of the Industry Report September 2024

CMSPI – IAC State of the Industry Report

A Leader in Real-Time Payment Adoption The Asia-Pacific region stands out as a global leader in the dynamic field of A2A payments, from creating the first three cases of real-time payments in the world – Japan’s Zengin System (1973), Taiwan’s Interbank ATM funds transfer system (1987), and South Korea’s CD/ATM (1988) and EBS (2001) – to 2023, where projections indicate that real-time payments in the region are poised to process over $2.4 trillion by 2025. 174 India In India, digital wallets are 35% of POS and half of ecommerce spend in 2022, 175 a growth largely enabled by Unified Payments Interface ( UPI), a real-time payments system that facilitates bank-to-bank transfers. The UPI architecture allows for payment service provider (PSP) integration primarily through consumer-facing apps such as Amazon Pay, Paytm, Google Pay that can be built by banks or by third parties (TPAPs). While the Indian government issued a zero-charge framework for UPI transactions in January 2020, accepting merchants were subject to fees from the PSPs. 176 In 2023, the Reserve Bank of India introduced interchange fees ranging from 0.5-1.1% on select UPI transactions. 177 Singapore Singapore real-time rail system, PayNow, has been the subject of many international technical milestones in collaboration with Project Nexus, an initiative launched by the Bank of International Settlements (BIS) Innovation Hub which aims to create the building blocks for cross-border interoperability between real-time payment systems. 178 In March 2023, the BIS Innovation Hub announced that the working prototype was able to successfully link three established instant payment systems: the Eurozone’s TARGET Instant Payment Settlement (TIPS) system, Malaysia’s Real-time Retail Payments Platform (RPP), and Singapore’s Fast and Secure Transfers (FAST) system – illustrating that proof of concept is technically feasible. 179 These explorations have also led to the bilateral linkage between Singapore’s PayNow and Thailand’s PromptPay in April 2021 and another between Singapore and India in February 2023.

Australia Australia’s National Payments Platform (NPP) is a real-time, open-source payments system developed in response to a 2012 Reserve Bank of Australia (RBA) Inquiry by the Payments Systems Board. 180 The RBA emphasized the need for the payment service to be provided at the lowest resource cost to the system, with businesses leveraging the NPP benefiting from the true cost of service acceptance, expected to shrink as the average NPP volume grows. As of October 2022, there are 13 million registered PayIDs, and AUD 1 trillion (~$660 billion) was processed through NPP rails. A fifth of all NPP payments were initiated through PayID, the system’s payment identification for individual users, (with the rest mostly from interbank funds). 181 NPP initially suffered from low volume uptake due to a lack of public awareness and limited integration with participating institutions and merchants. 182 Since its launch in 2018, the NPP has been steadily expanding its core domestic services and has plans for further investment, including the digital solution PayTo for real-time payments initiation in April 2023 and support for cross- border payments by December 2023. 183 However, enablement of services has been inconsistent due to staggered compliance of payment service providers from the official timelines. Section 4.4.3 – Pix Case Study (Brazil): The Poster Child for a Successful APM Brazil Pix, Brazil’s faster payments rail, was launched in November 2020 and proved to be an instant success. Pix volumes shot up quickly, exceeding both debit and credit card volumes by the start of 2022 to become Brazil’s most popular payment method (Figure 4.4). 184 By Q2 2023, Pix had a 36% market share of payment transactions in Brazil, higher than debit and credit cards combined.

174 https://thepaypers.com/thought-leader-insights/how-real-time-payments-are-transforming-southeast- asia--1260483 175 https://thepaypers.com/thought-leader-insights/how-real-time-payments-are-transforming-southeast- asia--1260483 176 https://www.linkedin.com/pulse/ok-so-upi-free-how-does-work-i-dig-mechanics-compare-credit-mohan/ 177 https://economictimes.indiatimes.com/wealth/spend/upi-merchant-transactions-ppi-which-upi-payments-will- attract-interchange-fee-will-you-have-to-bear-the-cost/articleshow/99087712.cms?from=mdr 178 https://www.bis.org/publ/othp62.htm 179 https://www.mas.gov.sg/news/media-releases/2023/project-nexus-prototype-links-payment-systems

180 https://nppa.com.au/the-company/ 181 https://www.rba.gov.au/speeches/2022/sp-gov-2022-12-14.html 182 https://www.rba.gov.au/speeches/2022/sp-gov-2022-12-14.html 183 https://nppa.com.au/wp-content/uploads/2021/10/NPP-October-2021-Roadmap.pdf 184 Pix by the Numbers Q4 2023 (hubspotusercontent-na1.net)