In a rapidly digitalizing payments landscape in Asia Pacific, balancing convenience and security has become essential. Is tokenization or passkeys or biometrics the answer?
The Asia Pacific region makes up over two-thirds of global digital wallet spend at US$9.8 trillion, equivalent to 70% of the worldwide total, according to a 2024 report by Deloitte on cross-border payments.
While digital transformation brings unprecedented convenience to consumers, it also raises complex security challenges. Despite heightened customer awareness of ‘card not present’ frauds and phishing techniques, criminals are continually evolving their strategies.
As a result, banks and digital payments platforms are having to deploy countermeasures to secure data and transactions, while developing a satisfying user experience and maintaining regulatory compliance.
For more insights into the region’s challenging digital payments landscape, and payments trends and developments such as tokenization, we delved into a discussion with Hanspeter Jsler, Managing Director, Netcetera Singapore.
What are your observations on the regional digital payments landscape? What are the latest innovations in digital payments globally and regionally?
Jsler: As we look into the region, particularly Southeast Asia, we see a rapidly emerging market for digital consumer finance, driven by technological adoption and a young, tech-savvy demographic powered by rising smartphone penetration, an expanding middle class, and supportive government initiatives that encourage digital commerce and transactions.
One of the key observations when it comes to the digital payments landscape is looking at how innovations and technology have evolved in this space. From mobile wallets to contactless payments, real-time payments and Buy Now Pay Later (BNPL) initiatives, the region is witnessing a paradigm shift in consumer preferences, with an increasing emphasis on seamless and frictionless payment experiences, yet demanding security as well.
Banks and financial institutions are also integrating physical and digital solutions to elevate customer experiences. A term coined by combining the words physical and digital, the ’phygital’ revolution is being driven by these institutions’ efforts to offer their customers a seamless blend of online and offline services. This approach also helps traditional financial institutions to remain competitive and build customer loyalty via multiple channels, including online banking and smartphone apps.
Another observation we are seeing in the region is the rise of cross-border payments, with Thailand and Singapore spearheading such connectivity between their respective fast payment systems PromptPay and PayNow.
In another drive towards frictionless payment platforms, the central banks of India, Malaysia, Thailand, Singapore and the Philippines are also working together to start an instant cross-border retail payments platform by 2026.
Amidst all this drive towards seamlessness, customers are demanding advanced security as well. The need to balance security with convenience has become imperative. This is where we see the latest innovations shaping the digital payments industry.
For instance, online shopping cart abandonment – largely due to concerns about convenience and security – continues to be a major issue for online retailers. Technologies such as Click to Pay are emerging as a solution, providing a straightforward, intelligent, and secure e-checkout experience that works across all payment cards, channels, and devices.
What are the top concerns in terms of securing digital payments with the rise of tokenization and ‘card not present’ (CNP) transactions in the region? What are the latest technologies currently implemented for security against fraud?
Jsler: As with the convenience that comes with digital payment, there is a rise in fraud incidents as well. According to a FICO study, 1 in 4 Singaporeans concerned about payment fraud. Many organizations across Asia are still using passwords, or one-time passwords (OTPs) through SMS as forms of authentication. However, these methods of authentication are insecure by design.
It is not uncommon to see spoofing emails as well as SMS with URLs to lure unsuspecting victims to pagers whereby scammers trick people into sharing their OTP.
Banks are deploying countermeasures to secure data and transactions while developing a satisfying user experience and maintaining regulatory compliance. One of the effective ways banks can do so is through tokenization. This replaces sensitive data, such as card details, with a unique digital identifier known as a token. It involves replacing credit card numbers with unique numbers that are only accessible in limited contexts. For instance, it’s only available for one merchant or for a limited time.
With network tokenization, the token for card details is created and managed by the payment network provider, and the mapping of the payment card details is kept in a very secure fashion. Tokenization is also a good way to prevent fraud for Card-Not-Present transactions.
To meet customers’ demands for fast, convenient, and simple web payments, we need to integrate multiple technologies to cover different payment needs as this is crucial for business success. Secure Payment Confirmation (SPC) is a prime example of this approach.
The ecosystem can benefit from implementing SPC, a secure payment standard based on FIDO2 (a password-less authentication method using public-key cryptography). This method is enhanced with biometrics and performed on the same device where it was initiated — whether it’s a desktop computer, tablet, or mobile — without switching between devices or searching for passwords. This means customers won’t be bounced back and forth between the merchant’s and their bank’s apps during checkout; they can complete their shopping journey with just a click. It provides a secure, convenient, and fast authentication experience, ensuring a smooth customer journey and a safe and successful transaction.
What are your predictions for 2025?
Jsler: Here are my top predictions for 2025:
- Instant payments will continue to rise. Instant payment technology, from QR codes to click-to-pay, is already making payment acceptance more accessible for merchants and will continue to rise. This innovation reduces the need for complicated checkout setups, minimizes wait times, and offers numerous other advantages to businesses, including improved cashflow.
- Real-time cross-border payments will improve. Real-time payments across geographies are enhancing consumer choices and, as countries begin to connect their domestic payment systems, cross-border transactions will become more seamless. This is already being seen particularly in Southeast Asia, with governments pushing for such tie-ups.
Increased interoperability is also anticipated between real-time payments and other payment methods, including Central Bank Digital Currencies (CBDCs) and other digital assets. - Passkeys will continue to gain traction. Trusted identities empower individuals to interact seamlessly across various platforms. Supported by advancements in biometrics, machine learning, and identity insights, these enhance authentication throughout the customer journey. This innovation will drive improved experiences, particularly in the digital payments landscape.
- The Buy Now Pay Later (BNPL) conundrum – tackling a new fraud. As BNPL continues to gain popularity in Southeast Asia, fraud will also continue to increase. Merchants or players in this sector need to address tackling the fraud challenge from an authentication perspective. This is especially challenging as BNPL can be unregulated in some countries in this region.
