The regulatory support aside, Asia’s socio-economic landscape makes it’s a perfect place for DLT adoption. The region has been a big adopter of mobile internet. That has resulted in tremendous growth in the e-commerce sector.
E-commerce is expected to grow at an annual rate of 25 per cent across Southeast Asia over the next few years, according to a report by management consulting firm A.T. Kearney. The growth of the e-commerce sector has resulted in a surge in cross-border payments. Cross-border payments, the lifeblood of e-commerce. According to the McKinsey 2016 Global Payments Report, cross border payments have already reached over US$30 trillion annually and are increasing at a rate almost three times faster than the global gross domestic product (GDP).
Asian economies are now discussing a regional trade deal called the Regional Comprehensive Economic Partnership (“RCEP”) to achieve greater trade liberalisation. The RCEP is being negotiated between 16 countries including China and Japan. If completed and agreed upon, the RCEP has the potential to transform the region into an integrated market of more than three billion people (over 45 percent of the world’s population), with a combined GDP of about $17.23 trillion, which is about a third of the world’s current annual GDP. This will trigger further growth in cross-border flow and banks will need to be equipped to handle this surge.
At the same time, a large number of Asians work outside of their home country. That has seen a steady rise in money transfers within, and to, the region. According to data from the World Bank, China and India received $65.4 billion and $65.2 billion in remittances respectively, last year. These consumers will continue to demand more efficient, convenient and affordable products and service.
Asia has the perfect combination of having an established banking sector, fast-growing economies, increasing interconnectivity and a widespread enthusiasm from regulatory and governmental backing for financial technology. There is no reason why it can’t become the first region where real-time, cost-effective, international payments will become the norm, rather than an exception.
I, for one, won’t be complaining.
Dilip Rao is Managing Director Asia-Pacific for Ripple.
