Payments, global trade head for digital ‘tipping point’ as corona-virus pandemic forces shift in business environment

Digitization in payments and global trade has reached a “tipping point” as a result of the challenges created by the corona-virus pandemic, creating a new level of comfort and trust in digitally driven transactions, according to a panel of fin-tech experts.

Global trade has entered a new era where the digital economy is going to be the center of the world’s economic structure, according to Jack Zhang, chief executive and co-founder of Tencent Holdings-backed payments operator Airwallex.

Airwallex saw usage by its customers jump by 53 per cent in the second quarter from the first, with some of its e-commerce customers experiencing 200 per cent growth in the April-May time frame, Zhang said. Seventy-five per cent of its customers who responded to a recent survey plan to continue to use the digital channel post-pandemic, he said.

“The speed of e-commerce is being accelerated – probably what happened in a decade happened in a couple of months,” Zhang said.

Zhang was one of the speakers at “Digital Trade in a Post-COVID World”, a virtual briefing organised by the South China Morning Post and the World Economic Forum on Wednesday.

Some industries, however, have not experienced the same growth, because the pandemic cut into their operations and consumer demand, Zhang said. Revenue from customers in the travel industry fell by 85 per cent quarter-on-quarter and international student tuition payments dropped by 40 per cent in the period.

Josh Kallmer, head of global public policy and government relations at video conferencing app Zoom, said the pandemic had reinforced the importance of making sure the regulatory environment is set up to support digital trade, from transactions to the ability to connect with each other.

“For all of us to experience higher living standards, for kids to be able to go to school, for people to get medical care, for business to get done, data has got to move. Digital trade has to succeed,” Kallmer said. “We’ve got to have the rules in place to support that.”

Kallmer said it has been an “eye-opening experience” for Zoom, which went from a company serving primarily large enterprises to one whose technology is being used for everything from yoga classes to telemedicine overnight. The company went from about 10 million daily users to more than 300 million users in a matter of weeks.

The challenge for regulators and the private sector is how to narrow a gap that is forming between some small and medium-sized enterprises (SMEs) in developing markets and their global competitors because of lack of access to capital as the digital economy grows, said Ankiti Bose, the co-founder and chief executive of Zilingo, a Singapore e-commerce start-up focused on the fashion industry.

“One of the challenges we are seeing is a lot of smaller and medium-sized businesses that have suddenly digitized and suddenly are part of the digital economy don’t have long enough, well-documented credit history in many of these countries simply because the credit scoring and the risk infrastructure has not existed for long enough,” Bose said. “A lot of these transactions, especially in countries like Indonesia, have historically not been factored in towards creating something in the form of a credit score, which would ease the access to capital for small merchants.”

Data from the widespread adoption of technology platforms should be used by governments and financial institutions to quickly and more easily create scoring for small businesses and provide capital to them, she said.

“Everybody realizes the need for that,” Bose said. “Banks, financial institutions, fin-tech companies, understand the need for urgency in solving [this].”

Ziyang Fan, head of digital trade at the World Economic Forum, said regulatory frameworks have traditionally lagged behind the private sector, but the pandemic has exposed an even greater divide and a greater urgency to address the needs of businesses in today’s rapidly changing environment.

“The reason why we have all the intermediaries in the trading system is because of the lack of trust. Technology and the internet have helped that, but also created some issues,” Fan said. “We need to find ways to increase the trust for digital trade really to flourish in the next decades to come.”

Nelson Chow, chief fintech officer at the Hong Kong Monetary Authority (HKMA), said the regulator is working with the Bank for International Settlements (BIS) and other international organisations to try to develop ways to leverage “alternative data” and use artificial intelligence technology to try to help SMEs undeserved by banks.

In August, the HKMA and the BIS Innovation Hub unveiled an initiative to highlight the ability to use new technology to enhance trade finance, including better inclusion for SMEs. The programme is seeking submissions from the private sector for potential solutions and the top proposals will be revealed in November.

“We have to move on and see whether a lot of the fundamental issues can be resolved,” Chow said. “What are the problems? Why are they seemingly undeserved by the banks?”

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