Sassoon Grigorian, Director of Public Policy, Asia pacific, eBay Inc.
The Asian Development Bank Institute estimates a country’s payments costs (in ASEAN) can be 3% of Gross Domestic Product GDP, and if there is a shift from fully paper-based to fully electronic-based payment system, cost savings at 1% of GDP can be realized. Yet regulations governing payments are based in the pre-Internet era, and have been updated as a catch up, rather than to encompass future developments.
Asia is the focal point - not only because of the varying levels of ePayments penetration across the region, but because for the first time, consumers in Asia-Pacific will spend more on ecommerce purchases than those in North America. Making it the largest regional eCommerce market in the world (source).
With more eCommerce purchases, naturally there's going to be an increase in ePayments. ePayments harmonization does not mean creating the same law in different countries, it’s about setting a common or even minimal standards when it applies to regulating ePayments. For example, efforts in harmonization have been attempted in relation to product standards through the World Trade Organization and International Organization for Standardization.
There are three key reasons why we need ePayments harmonization among different countries in Asia.
Financial Inclusion
More than a third of the world’s population are excluded from the financial sector, and it has been demonstrated that ePayments is more secure, transparent, cost efficient and help enables financial inclusion.
Financial inclusion helps SMEs access to markets they previously never had access to, and helps consumers receive funds in a secure way, that can be more cost efficient.
Risk-Based Approach
Traditionally, Know Your Customer or KYC is done face-to-face. And banks, remittance agents, money-changers and financial institutions will ask for a photocopy of your National ID and a photocopy of your utilities bills or cable-TV bills. It is a one-time deal triggered by certain threshold being reached. And it is susceptible to forgery and identity theft.
Some cross-border transactions, depending on their value and your geographical location, may trigger Anti-Money Laundering threshold set by the local government and the KYC process is instigated. Thresholds per transaction varies from country to country.
This means that I have to scan copies of my National ID and send them to that payment provider facilitating the transaction. Wait a couple of days for their review before the payment instruction was carried out. In the meantime, the merchant whom I purchased the product is chasing me up on payments and wondering if I have had cold feet. Now, imagine this happening hundreds and thousands of times each week. What kind of compliance costs are imposed on us? And more importantly, what kind of customer experience will that produce for your citizens?
A model that leverages big data more effectively and take a risk-based approach to KYC using multiple data points can better address this situation. These data points could include your IP address, your smart device’s unique identification code, your geo-location based on the nearest WiFi’s IP address and GPS – of course all encrypted and within the boundaries of acceptable data collection methods.
Authentication
We are moving in a direction beyond passwords.
Authentication is becoming increasingly challenging for users. Industry statistics show that many people simply reuse the same password everywhere and most of the rest have only three or four passwords that are reused everywhere. This means that users’ security is more vulnerable to malware, phishing and identity theft.
At PayPal, we believe that our customers deserve authentication solutions that are both strong and easy to use. At the same time, there are different forms of payments authentication in different markets with no regional consistency:
3-D Secure (3DS) is an XML-based protocol designed to be an additional security layer for online credit and debit card transactions. Two Factor Authentication is a process involving two subsequent but dependent stages to check the identity of an entity trying to access online services. Biometric authentication uses your fingerprint on certain mobile phones to verify your payments account.PayPal also co-founded the FIDO Alliance to address some of these issues. The FIDO (Fast IDentity Online) Alliance is a non-profit organization to address the lack of interoperability among strong authentication devices as well as the problems users face with creating and remembering multiple usernames and passwords.
ePayments harmonization will help set the standard and set the foundation for sensible regulation.