## APPENDIX A. VOLUME AND VALUE OF E-MONEY TRANSACTIONS IN INDIA, INDONESIA, AND SINGAPORE

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### Context and definitions
- CBDC is central bank–issued digital money denominated in the national unit of account. It represents a liability of the central bank. If the CBDC is intended to be a digital equivalent of cash for use by end users it is referred to as a “general purpose” or “retail” CBDC (Boar and Wehrli, 2021). This paper focuses on broadly available general purpose CBDC.
- PSPs (payment service providers) describe all intermediaries between the central bank and users. PSPs can include banks, non-bank financial institutions, mobile operators, and fintech or Big Tech companies.
- The BIS survey in 2021 covered 81 central banks, representing close to 76 percent of the world’s population and 94 percent of global economic output. The survey found that 9 out of 10 central banks are exploring CBDC, with half developing or running experiments. It also showed that more than two-thirds of central banks were likely to issue a retail CBDC in the short or medium term (BIS, 2022).
- Adoption has been lackluster in countries in which CBDCs have been issued. Adoption of Nigeria’s e-Naira, the Bahama’s Sand Dollar, Jamaica's JAM-DEX, and the Eastern Caribbean’s DCash did not take off.

### Key empirical observations from Asian e-money schemes
- Large, successful e-money PSPs in Asia include Alipay and WeChat Pay in China; Paytm in India; and GoPay, GrabPay, and ShopeePay in Southeast Asia.
- Asian e-money PSPs promoted e-money adoption by responding to unmet user demand for payment services and exploited both economies of scale and economies of scope (for example, integration of payments with e-commerce and social networks).
- These schemes created challenges such as data silos that result in market dominance; firms may harness the data-network-activities (DNA) loop to exclude competitors (BIS, 2020b).

### Four attributes CBDC should embody (from lessons)
- Trust
- Convenience
- Efficiency
- Security

### Four channels to facilitate CBDC adoption
- Leveraging digital technology (e.g., cell phones and the Internet)
- Targeting use cases (e.g., e-commerce and social networks)
- Developing business models (e.g., revenues sufficient to ensure cost recovery)
- Complying with legal and regulatory requirements (e.g., customer funds security and financial integrity requirements)

### Roles and incentives for central banks and PSPs
- Central banks can incentivize CBDC service providers to develop the four channels above when considering CBDC adoption.
- If PSPs do not have sustainable business models for CBDC provision, CBDC adoption will be too limited to allow central banks to achieve their policy objectives.
- Central banks can establish data-sharing arrangements that preserve privacy while leaving room for CBDC service providers to explore the economic value of data.

### Architecture and operational considerations
- Most, if not all, CBDC experiments have adopted a two-tier architecture that includes “hybrid” and “intermediated” models.
  - Hybrid model: financial intermediaries provide retail services to end users; the central bank retains a ledger of all retail transactions and operates a backup of technical infrastructure and the payment system. Should a PSP fail, the central bank has the information it needs—the balances of the PSP’s clients—to substitute for the PSP and guarantee a working payment system.
  - Intermediated model: issuance by the central bank but a role for private sector firms to interact with end users. In this model, the central bank does not record retail transactions, recording only the wholesale balances of individual PSPs. PSPs maintain the detailed records of retail transactions.

### Research gaps and priorities highlighted
- Little analysis has been conducted on the incentive structures and business models of second-tier PSPs, such as banks and non-banks, with respect to CBDC provision.
- Understanding PSP business models and incentives is critical for designing fee structures and pricing models that support widespread CBDC adoption and achievement of policy objectives such as promoting financial inclusion and complementing declining cash use.

*Source: IMF Working Paper excerpt — https://www.imf.org/-/media/files/publications/wp/2023/english/wpiea2023123-print-pdf.pdf*

---

### E-Money Development and Analytical Framework (Sections II–IV)

#### Overview
- Sections covered: Section II (E-Money Development in Asia), Section III (Analytical (Demand and Supply) Framework), and Section IV (Stages of E-Money Adoption in Asia).
- Appendices referenced: Appendix A (volume and value of e-money transactions in India, Indonesia, and Singapore), Appendix B (e-money policies and regulations in Asia), Appendix C (data protection policies in Asia).

#### Definition and scope of e-money
- E-money used without distinguishing e-money, mobile money, and e-wallets.
- IMF (2018) definition: e-money is "monetary value represented by a claim on the issuer that is electronically stored on a card, device, or server and used for payments to third parties."
- E-money includes mobile money, prepaid cards, and web-based products.
- Mobile phone payment applications linked to a financial institution account (e.g., QR code payments) are considered an extension of e-money but are excluded from mobile money in the paper’s taxonomy.
- Issuers can include banks, telecommunications firms, and other registered nonbanks.
- E-money accounts do not pay interest and can be held by people who do not have bank accounts.

#### E-money development in Asia — key empirical findings
- China, India, Indonesia, Malaysia, Singapore, and Thailand witnessed substantial increases in both the volume and value of e-money payments, eclipsing card payments.
- China has the largest base of active users, followed by India.
- China’s penetration rate, as measured by percent of the population using smartphones, is described as the highest in the world.
- Market concentration examples in 2020:
  - Alipay and WeChat Pay accounted for more than 90 percent of the Chinese market.
  - GrabPay market shares: 35 percent in Singapore and 38 percent in Malaysia.
  - GrabPay dominates the Indonesian market through partner OVO.
  - Paytm accounts for 26 percent of India’s market.
- Rapid market dynamics example: WeChat Pay’s market share increased from 7 percent in 2013 to 21 percent in 2015 and 39 percent in 2019 (IResearch, 2019).
- COVID-19 impact: 40 million people in Southeast Asia used the Internet for the first time in 2020 alone (Google, Temasek, and Bain & Company, 2020).

#### Analytical (demand and supply) framework — Demand side: three drivers
- Missing attributes
  - Early-2000s payment services lacked convenience, efficiency, and trust.
  - China’s bank-based payment systems required repeated manual entry of bank details to place e-commerce orders.
  - Consumers cited reliability and cost as the most important attributes driving preferences (Facebook and Bain & Co., 2020).
  - Merchants were not attracted by services charging more than the 1–3 percent transaction fees charged by credit card companies.
- Growing use cases
  - Rapid growth in e-money use cases: e-commerce, social network, transportation, food delivery, streaming services, and on-line media.
  - Ride-hailing transactions value rose from $3 billion to almost $13 billion between 2015 and 2019; users increased from 8 million to 40 million (Google, Temasek, and Bain and Company, 2019).
  - The pandemic amplified e-commerce demand and new users bolstered e-wallets like ShopeePay.
- Diverse buying patterns
  - Consumers sought better price and quality comparison and switching across platforms (ride hailing, e-commerce, social networks), increasing demand for efficient and tailored payment services.

#### Analytical framework — Supply side: limitations of bank-based systems
- Early-2000s banking-based payment systems were inconvenient, inefficient, and costly.
- China example: value of credit card transactions in 2005 was $43 billion (1.9 percent of China’s GDP in 2005 and just 2 percent of the credit card transaction value in the United Sates) (Euromonitor International, 2005).
- Settlement frictions: consumers preferred delivery before payment; merchants preferred payment before delivery; post office or wire transfers were slow, costly, and exclusive.
- Indonesia example: large share of unbanked adults, low merchant acceptance, and limited digital banking use cases constrained early e-commerce growth.

#### Stages of e-money adoption in Asia (three stages)

- Stage 1: Promoting financial innovation to build trust and confidence
  - Mechanisms used:
    - Connecting e-wallet payment services to escrow accounts at banks.
    - Compensation schemes for fraud and non-delivery:
      - Alipay (February 2005): committed to reimbursing the full amount paid for fraud losses with the policy “you dare to pay, I dare to compensate.”
      - GoPay reimburses users for the full amount as soon as it receives a report of fraud (GoPay investigates suspected fraud and, if loss not merchant/driver fault, re-debits user account).
      - GrabPay reimburses on-line users if a purchased item does not arrive or malfunctions.
      - ShopeePay provides similar guarantees through its parent company.
      - Paytm has an instant refund scheme that both merchants and customers can initiate.

- Stage 2: Leveraging digital technology, targeting use cases, and developing business models to increase convenience and efficiency
  - Leveraging digital technology
    - Adoption of QR codes:
      - Alipay introduced almost zero-cost mobile app QR code in 2011.
      - QR codes removed the need for POS card readers and reduced installation costs and interchange fees.
    - Security enhancements: multi-factor authentication (PINs, passwords, security codes), face recognition, and biometrics.
  - Targeting use cases and bundling ecosystems
    - Vertical/horizontal bundling examples:
      - Alipay: bundled with Alibaba e-commerce; lifestyle super-app use cases (taxi, hotel, movie tickets, utility bills, doctors’ appointments, asset management; on-line and in-store off-line payments).
      - WeChat Pay: bundled with Tencent’s social networking and gaming; similar lifestyle super-app use cases.
      - Paytm: payment services to off-line and on-line markets; bill payments, mobile top-ups, Paytm Mall, Paytm Money.
      - GoPay: bundled with ride-hailing and food delivery (Gojek); purchases, groceries, delivery, bill payments, healthcare, financial services, social security insurance.
      - GrabPay: bundled with ride-hailing and food delivery (Grab); supports cashless payments including credit/debit cards and partner wallets.
      - ShopeePay/AirPay: bundled with gaming and supermarkets (SEA); game credits, mobile top-ups, bill payments, movie tickets, online shopping, lifestyle services.
    - Cross-border and integrations:
      - Alipay set up a global payment network in 2015.
      - 2018: Alipay Financial Services (HK) Limited, Standard Chartered, and Gcash launched a blockchain-based cross-border remittance product for the Hong Kong SAR–Philippines corridor.
    - Critical mass and integration:
      - Vertical integration with Alibaba and horizontal integration with Ant Group services (lending, insurance, wealth management) helped Alipay reach "critical mass" where new-user value exceeded participation costs.
      - Example product: Yu’e Bao allowed Alipay users to earn higher returns than on Alipay wallet and demand deposits.
        - Yu’e Bao annual return reached 6.13 percent in March 2014; in 2021 its annual yield was about 2 percent, six times that of demand deposits.
  - Developing sustainable business models
    - Fees
      - Fee examples:
        - Alipay and WeChat Pay charge online payments merchants a 0.6 percent fee.
        - GrabPay charges merchants a 0.8 percent fee in Singapore (compared with 1.5 percent the national payments system charges or 1–3 percent credit card companies charge).
        - Indonesia PSPs charge merchants a 0–2 percent fee.
      - Reserve Bank of India (RBI) capped the MDR at 0.25–0.5 percent following the 2016 demonetization policy; this MDR was shared by card-issuing institutions, acquiring institutions, and card schemes.
    - Interest revenue
      - PSPs deposit customers’ funds with central banks or commercial banks and collect interest revenue without passing it to users.
      - Alipay and WeChat Pay deposit customer funds at the People’s Bank of China (PBC).
      - In Southeast Asia, e-money PSPs are required to safeguard customer funds at commercial banks and/or specialized institutions (such as trust funds).
      - Indonesia: e-money is deposited in commercial bank accounts at market rates (in October 2021, market rates were 0–0.11 percent).
      - India and Malaysia allow e-money PSPs to invest customer funds in high-quality liquid assets (government securities).
    - Cross-subsidies and data monetization
      - PSPs cross-subsidize services using data and other financial services:
        - Ant Group: non-payment-related financial services accounted for over 60 percent of Ant Group in the first half of 2020.
        - GrabPay combines wallet services, pay-later, and payment gateway transaction history to analyze consumer and merchant behavior and sell analytics to merchants.
        - GoJek partners with Moka (POS start-up) and offers Bank Jago loans to selected drivers and merchants using GoPay transaction history and ratings to reduce default risk.
        - Paytm offers school-fee payments, metro-card top-ups, utility payments, Digital Gold, and cross-border payments.
    - Cost management
      - High fixed costs are significant in payment institutions: at Visa, fixed costs were 89 percent of total costs in 2019.
      - Traditional POS device installation cost example: $40–$50 in China.
      - Digital technology reduced fixed costs (QR codes, cloud storage, no brick-and-mortar branches) and lowered variable costs through large transaction volumes (e.g., banks charge Alipay lower service fees of 0.05–0.08 percent because of large volume).
      - PSPs incur variable costs for promotions, discounts, and reward systems (GrabReward, Paytm First, free deliveries and low commissions by Shopee).

- Stage 3: Standards, interoperability, and public policy to ensure contestability and stability
  - POS and merchant fee structures: most POS schemes adopt a four-party model with higher interchange fees; installation costs constrained POS use in rural areas.
  - Biometrics: encrypt account information, preventing account identity exposure at the transaction interface.
  - Payment corridors and interoperability examples:
    - Thailand (PromptPay)–Singapore (PayNow)
    - Thailand (PromptPay)–Indonesia (QRIS)
    - Malaysia (DuitNow)–Singapore (PayNow)
    - Remittance corridors between Malaysia and the Philippines and between Singapore and the Philippines.

---

### Merchant and consumer fee structures for e-money PSPs
- Alipay (China)
  - Consumers pay no transaction fees, except for a 0.1 percent fee if they redeem more than RMB 20,000 ($3,000) of cash using an Alipay account, to compensate the bank for providing the redemption services.
  - Ant Group uses Alipay’s payment data to provide services such as lending, insurance, and wealth management.
- WeChat Pay (China)
  - Online payment merchants pay 0.6 percent of the transaction value, and off-line payment merchants pay 0.3 percent.
  - Consumers pay no transactions fees, except for a 0.1 percent fee if they redeem more than RMB 20,000 ($3,000) of cash using a WeChat Pay account, to compensate the bank for providing the redemption services.
  - Tencent uses WeChat Pay’s payment data to provide services such as lending, insurance, and wealth management.
- Paytm (India)
  - Most transactions are free.
  - A fee of about 1.9 percent of the transaction value is charged to merchants for transactions made through payment gateway services.
  - Paytm handles a wide range of use cases, including the payment of school fees and utilities; the recharging of metro cards; the buying, storing, and investing in gold (through Digital Gold); and the facilitation of cross-border remittances/payments.
- GoPay (Indonesia)
  - Transaction fees to merchants are free, although Gojek (GoPay’s parent) charges an MDR for certain product categories (such as food purchased through GoFood).
  - Customers pay some small, fixed fees for on-line purchases.
  - Gojek offers a loan program for drivers and merchant partners integrated with customers’ ratings.
- GrabPay (Malaysia and Singapore)
  - Transaction fees to merchants range from 0 to 2 percent—less than the 2–3 percent Visa and MasterCard charge or the 1.5 percent NETS charge.
  - Slightly higher fees are charged for the use of payment gateway services, depending on the payment method.
  - GrabPay introduced GrabPay Credit through its wallet and PayLater feature.
  - The GrabPay app provides merchants with data services through its partnership with payment gateways (Adyen).
- ShopeePay/AirPay (Thailand and Singapore)
  - Transaction fees vary.
  - In Indonesia, Thailand, and Vietnam, merchants pay no fees.
  - In the Philippines and Malaysia, they pay 1.5–2.0 percent of the transaction value.
  - In Singapore, they pay 2.0–5.35 percent, depending on the product category, type of merchant, and program.
  - ShopeePay/AirPay integrates e-money payments with e-commerce.

### Cost advantages and scale examples
- Industrial and Commercial Bank of China (ICBC) example (2018)
  - ICBC operated 16,004 branches.
  - Assuming the average cost of operating a branch was RMB 10 million ($1.5 million) a year, ICBC’s total annual cost could be as high as RMB 160 billion ($22 billion).
- System-level reserve balances
  - The total balance of nonbank online payment institutions (including Alipay and WeChat Pay) in the PBC reached RMB 2.3 trillion ($331 billion) in December 2022, equivalent to 6.4 percent of total reserves at the PBC.

### Compliance, regulatory steps, and infrastructure
- Licensing and acquisitions
  - Alipay secured a payment license in May 2011 and later expanded Ant Group’s approvals for more financial services licenses in 2014.
  - GoPay acquired a license by acquiring an existing licensed e-money company in 2018.
  - GrabPay acquired a digital banking license in Singapore through a consortium with Singapore Telecommunications.
  - In August 2015, Paytm received a license from the RBI to launch the Paytm Payments Bank as a separate entity.
  - Alipay, ShopeePay, and GrabPay acquired e-money licenses in many Asian countries.
- Customer funds and settlement practices
  - Alipay transferred 100 percent of customer funds gradually from banks to its reserve account at the PBC by early 2019 to protect users and mitigate credit, liquidity, market, and operational risks.
  - NetsUnion Clearing Corporation (NetsUnion) was established in March 2017 to settle transactions by nonbank online payment institutions; it is responsible solely for the transaction information flow and platform operation and helps reduce counterparty risks and enhance settlement security.
- Standards and engagement
  - GoPay and GrabPay followed QR standards set by the Bank of Indonesia and engaged with regulators on standardization (such as open Application Programming Interface [API] standard in Indonesia).

### Data use, market concentration, and contestability
- Data-driven business models
  - PSPs use payment data to expand into lending, insurance, and asset management; harnessing economic value of user data enables rapid scaling across business lines.
  - Using data well while protecting privacy is challenging: not all PSPs can retain users in their ecosystems; payment data can drive monopoly formation; privacy restrictions may reduce PSP revenue streams and product innovation.
- Market concentration and dynamics
  - The payment market in the six Asian countries is concentrated; expansion through parent companies, acquisitions, and vertical integration created platforms with data advantages.
  - Examples of competitive entry and shifting dynamics:
    - Pinduoduo entered e-commerce and competed with Alibaba since 2015.
    - ByteDance entered social networks and competed with Tencent since 2016.
    - GoPay and GrabPay face competition from ShopeePay since the onset of the COVID-19 pandemic.
    - In India, Paytm faces competition from Google Pay, WhatsApp Pay, and PhonePe.
  - Contestability matters: if entry remains free and competition exists, concentration does not necessarily imply lack of competition.

### Lessons and implications for CBDC adoption
- Four attributes CBDC should embody
  - Convenience, efficiency, security, and trust.
- Four channels central banks could incentivize CBDC service providers to develop
  - Leveraging digital technology, to ensure low-cost access, provide convenience, and support scalability.
  - Targeting use cases, to connect consumers and merchants in various use cases to achieve economies of scale and scope.
  - Developing business models, to ensure that PSPs have sufficient revenues to cover costs.
  - Complying with legal and regulatory requirements, to ensure security, confidence, and trust.
- Revenue and cost coverage considerations
  - CBDC service providers should be capable of collecting sufficient revenue to cover costs while meeting legal and regulatory requirements and implementing AML/CFT and privacy protection.
  - Options to cover costs for CBDC service providers include: making CBDC services free to individuals and inexpensive for merchants; subsidization through public funding; private cross-subsidy; or granting access to consumer data.
- Data-sharing, privacy, and contestability
  - Central banks can address data silo problems by establishing clear data-sharing arrangements and public data architectures with APIs that ensure secure data exchange and interoperability between PSPs.
  - Sharing CBDC data based on consent can help integrate CBDC into existing payment systems, break data monopolies, and harness the economic value of data while preserving privacy.
  - Privacy and anonymity differ: privacy can be engineered without full anonymity; current CBDC solutions are at best pseudo-anonymous.
  - Promising cryptographic techniques (zero-knowledge proofs, blind signatures, private decentralized networks, off-line smartcards, layered data management) could enable privacy while complying with AML/CFT.
- Central bank roles to strengthen contestability
  - CBDC can be used to encourage data sharing between public and private ecosystems, discipline the market, enhance competition, reduce dependency on private sector solutions, and strengthen regulation across public and private solutions.
  - Regulatory coordination on competition, financial integrity, consumer protection, privacy protection, and financial stability is needed within and across jurisdictions.

*Source: IMF Working Paper content (authors), based on information from company websites and regulatory sources as presented in the PDF content provided.*

### APPENDIX A. VOLUME AND VALUE OF E-MONEY TRANSACTIONS IN INDIA, INDONESIA,

### APPENDIX A. VOLUME AND VALUE OF E-MONEY TRANSACTIONS IN INDIA, INDONESIA, AND SINGAPORE

### Context and definitions
- CBDC is central bank–issued digital money denominated in the national unit of account. It represents a liability of the central bank. If the CBDC is intended to be a digital equivalent of cash for use by end users it is referred to as a “general purpose” or “retail” CBDC (Boar and Wehrli, 2021). This paper focuses on broadly available general purpose CBDC.
- PSPs (payment service providers) describe all intermediaries between the central bank and users. PSPs can include banks, non-bank financial institutions, mobile operators, and fintech or Big Tech companies.
- The BIS survey in 2021 covered 81 central banks, representing close to 76 percent of the world’s population and 94 percent of global economic output. The survey found that 9 out of 10 central banks are exploring CBDC, with half developing or running experiments. It also showed that more than two-thirds of central banks were likely to issue a retail CBDC in the short or medium term (BIS, 2022).
- Adoption has been lackluster in countries in which CBDCs have been issued. Adoption of Nigeria’s e-Naira, the Bahama’s Sand Dollar, Jamaica's JAM-DEX, and the Eastern Caribbean’s DCash did not take off (https://techmonitor.ai/policy/digital-economy/nobodys-using-cbdcs-indias-piloting-one-anyway; Ree, 2023; The Economist, 2023).

### Key empirical observations from Asian e-money schemes
- Large, successful e-money PSPs in Asia include Alipay and WeChat Pay in China; Paytm in India; and GoPay, GrabPay, and ShopeePay in Southeast Asia.
- Asian e-money PSPs promoted e-money adoption by responding to unmet user demand for payment services and exploited both economies of scale and economies of scope (for example, integration of payments with e-commerce and social networks).
- These schemes created challenges such as data silos that result in market dominance; firms may harness the data-network-activities (DNA) loop to exclude competitors (BIS, 2020b).

### Four attributes CBDC should embody (from lessons)
- Trust
- Convenience
- Efficiency
- Security

### Four channels to facilitate CBDC adoption
- Leveraging digital technology (e.g., cell phones and the Internet)
- Targeting use cases (e.g., e-commerce and social networks)
- Developing business models (e.g., revenues sufficient to ensure cost recovery)
- Complying with legal and regulatory requirements (e.g., customer funds security and financial integrity requirements)

### Roles and incentives for central banks and PSPs
- Central banks can incentivize CBDC service providers to develop the four channels above when considering CBDC adoption.
- If PSPs do not have sustainable business models for CBDC provision, CBDC adoption will be too limited to allow central banks to achieve their policy objectives.
- Central banks can establish data-sharing arrangements that preserve privacy while leaving room for CBDC service providers to explore the economic value of data.

### Architecture and operational considerations
- Most, if not all, CBDC experiments have adopted a two-tier architecture that includes “hybrid” and “intermediated” models.
  - Hybrid model: financial intermediaries provide retail services to end users; the central bank retains a ledger of all retail transactions and operates a backup of technical infrastructure and the payment system. Should a PSP fail, the central bank has the information it needs—the balances of the PSP’s clients—to substitute for the PSP and guarantee a working payment system.
  - Intermediated model: issuance by the central bank but a role for private sector firms to interact with end users. In this model, the central bank does not record retail transactions, recording only the wholesale balances of individual PSPs. PSPs maintain the detailed records of retail transactions.

### Research gaps and priorities highlighted
- Little analysis has been conducted on the incentive structures and business models of second-tier PSPs, such as banks and non-banks, with respect to CBDC provision.
- Understanding PSP business models and incentives is critical for designing fee structures and pricing models that support widespread CBDC adoption and achievement of policy objectives such as promoting financial inclusion and complementing declining cash use.

*Source: IMF Working Paper excerpt — https://www.imf.org/-/media/files/publications/wp/2023/english/wpiea2023123-print-pdf.pdf*

### Section III presents the analytical framework. Section IV identifies the three stages of e-money adoption in

### E-Money Development and Analytical Framework (Sections II–IV)

### Overview
- Sections covered: Section II (E-Money Development in Asia), Section III (Analytical (Demand and Supply) Framework), and Section IV (Stages of E-Money Adoption in Asia).
- Appendices referenced: Appendix A (volume and value of e-money transactions in India, Indonesia, and Singapore), Appendix B (e-money policies and regulations in Asia), Appendix C (data protection policies in Asia).

### Definition and scope of e-money
- E-money is used in this paper without distinguishing e-money, mobile money, and e-wallets.
- IMF (2018) definition: e-money is "monetary value represented by a claim on the issuer that is electronically stored on a card, device, or server and used for payments to third parties."
- E-money includes mobile money, prepaid cards, and web-based products.
- Mobile phone payment applications linked to a financial institution account (e.g., QR code payments) are considered an extension of e-money but are excluded from mobile money in the paper’s taxonomy.
- Issuers can include banks, telecommunications firms, and other registered nonbanks.
- E-money accounts do not pay interest and can be held by people who do not have bank accounts.

### E-money development in Asia — key empirical findings
- China, India, Indonesia, Malaysia, Singapore, and Thailand witnessed substantial increases in both the volume and value of e-money payments, eclipsing card payments (Figure 1 and Appendix A).
- China has the largest base of active users, followed by India (Figure 2).
- China’s penetration rate, as measured by percent of the population using smartphones, is described as the highest in the world.
- Market concentration examples in 2020:
  - Alipay and WeChat Pay accounted for more than 90 percent of the Chinese market.
  - GrabPay market shares: 35 percent in Singapore and 38 percent in Malaysia.
  - GrabPay dominates the Indonesian market through partner OVO.
  - Paytm accounts for 26 percent of India’s market.
- Rapid market dynamics example: WeChat Pay’s market share increased from 7 percent in 2013 to 21 percent in 2015 and 39 percent in 2019 (IResearch, 2019).
- COVID-19 impact: 40 million people in Southeast Asia used the Internet for the first time in 2020 alone (Google, Temasek, and Bain & Company, 2020).

### Analytical (demand and supply) framework — Demand side: three drivers
- Missing attributes
  - Early-2000s payment services lacked convenience, efficiency, and trust.
  - China’s bank-based payment systems required repeated manual entry of bank details to place e-commerce orders.
  - Consumers cited reliability and cost as the most important attributes driving preferences (Facebook and Bain & Co., 2020).
  - Merchants were not attracted by services charging more than the 1–3 percent transaction fees charged by credit card companies.
- Growing use cases
  - Rapid growth in e-money use cases: e-commerce, social network, transportation, food delivery, streaming services, and on-line media.
  - Ride-hailing transactions value rose from $3 billion to almost $13 billion between 2015 and 2019; users increased from 8 million to 40 million (Google, Temasek, and Bain and Company, 2019).
  - The pandemic amplified e-commerce demand and new users bolstered e-wallets like ShopeePay.
- Diverse buying patterns
  - Consumers sought better price and quality comparison and switching across platforms (ride hailing, e-commerce, social networks), increasing demand for efficient and tailored payment services.

### Analytical framework — Supply side: limitations of bank-based systems
- Early-2000s banking-based payment systems were inconvenient, inefficient, and costly.
- China example: value of credit card transactions in 2005 was $43 billion (1.9 percent of China’s GDP in 2005 and just 2 percent of the credit card transaction value in the United Sates) (Euromonitor International, 2005).
- Settlement frictions: consumers preferred delivery before payment; merchants preferred payment before delivery; post office or wire transfers were slow, costly, and exclusive.
- Indonesia example: large share of unbanked adults, low merchant acceptance, and limited digital banking use cases constrained early e-commerce growth.

### Stages of e-money adoption in Asia (three stages)

- Stage 1: Promoting financial innovation to build trust and confidence
  - Mechanisms used:
    - Connecting e-wallet payment services to escrow accounts at banks.
    - Compensation schemes for fraud and non-delivery:
      - Alipay (February 2005): committed to reimbursing the full amount paid for fraud losses with the policy “you dare to pay, I dare to compensate.”
      - GoPay reimburses users for the full amount as soon as it receives a report of fraud (GoPay investigates suspected fraud and, if loss not merchant/driver fault, re-debits user account).
      - GrabPay reimburses on-line users if a purchased item does not arrive or malfunctions.
      - ShopeePay provides similar guarantees through its parent company.
      - Paytm has an instant refund scheme that both merchants and customers can initiate.

- Stage 2: Leveraging digital technology, targeting use cases, and developing business models to increase convenience and efficiency
  - Leveraging digital technology
    - Adoption of QR codes:
      - Alipay introduced almost zero-cost mobile app QR code in 2011.
      - QR codes removed the need for POS card readers and reduced installation costs and interchange fees.
    - Security enhancements: multi-factor authentication (PINs, passwords, security codes), face recognition, and biometrics.
  - Targeting use cases and bundling ecosystems
    - Examples of vertical/horizontal bundling:
      - Alipay: bundled with Alibaba e-commerce; lifestyle super-app use cases (taxi, hotel, movie tickets, utility bills, doctors’ appointments, asset management; on-line and in-store off-line payments).
      - WeChat Pay: bundled with Tencent’s social networking and gaming; similar lifestyle super-app use cases.
      - Paytm: payment services to off-line and on-line markets; bill payments, mobile top-ups, Paytm Mall, Paytm Money.
      - GoPay: bundled with ride-hailing and food delivery (Gojek); purchases, groceries, delivery, bill payments, healthcare, financial services, social security insurance.
      - GrabPay: bundled with ride-hailing and food delivery (Grab); supports cashless payments including credit/debit cards and partner wallets.
      - ShopeePay/AirPay: bundled with gaming and supermarkets (SEA); game credits, mobile top-ups, bill payments, movie tickets, online shopping, lifestyle services.
    - Cross-border and integrations:
      - Alipay set up a global payment network in 2015.
      - 2018: Alipay Financial Services (HK) Limited, Standard Chartered, and Gcash launched a blockchain-based cross-border remittance product for the Hong Kong SAR–Philippines corridor.
    - Critical mass and integration:
      - Vertical integration with Alibaba and horizontal integration with Ant Group services (lending, insurance, wealth management) helped Alipay reach "critical mass" where new-user value exceeded participation costs.
      - Example product: Yu’e Bao allowed Alipay users to earn higher returns than on Alipay wallet and demand deposits.
        - Yu’e Bao annual return reached 6.13 percent in March 2014; in 2021 its annual yield was about 2 percent, six times that of demand deposits.
  - Developing sustainable business models
    - Fees
      - Fee examples:
        - Alipay and WeChat Pay charge online payments merchants a 0.6 percent fee.
        - GrabPay charges merchants a 0.8 percent fee in Singapore (compared with 1.5 percent the national payments system charges or 1–3 percent credit card companies charge).
        - Indonesia PSPs charge merchants a 0–2 percent fee.
      - Reserve Bank of India (RBI) capped the MDR at 0.25–0.5 percent following the 2016 demonetization policy; this MDR was shared by card-issuing institutions, acquiring institutions, and card schemes.
    - Interest revenue
      - PSPs deposit customers’ funds with central banks or commercial banks and collect interest revenue without passing it to users.
      - Alipay and WeChat Pay deposit customer funds at the People’s Bank of China (PBC).
      - In Southeast Asia, e-money PSPs are required to safeguard customer funds at commercial banks and/or specialized institutions (such as trust funds).
      - Indonesia: e-money is deposited in commercial bank accounts at market rates (in October 2021, market rates were 0–0.11 percent).
      - India and Malaysia allow e-money PSPs to invest customer funds in high-quality liquid assets (government securities).
    - Cross-subsidies and data monetization
      - PSPs cross-subsidize services using data and other financial services:
        - Ant Group uses transaction data to provide lending, insurance, and asset management; non-payment-related financial services accounted for over 60 percent of Ant Group in the first half of 2020 (Financial Times).
        - GrabPay combines wallet services, pay-later, and payment gateway transaction history to analyze consumer and merchant behavior and sell analytics to merchants.
        - GoJek partners with Moka (POS start-up) and offers Bank Jago loans to selected drivers and merchants using GoPay transaction history and ratings to reduce default risk.
        - Paytm offers school-fee payments, metro-card top-ups, utility payments, Digital Gold, and cross-border payments.
    - Cost management
      - High fixed costs are significant in payment institutions: at Visa, fixed costs were 89 percent of total costs in 2019 (Visa, 2019).
      - Traditional POS device installation cost example: $40–$50 in China.
      - Digital technology reduced fixed costs (QR codes, cloud storage, no brick-and-mortar branches) and lowered variable costs through large transaction volumes (e.g., banks charge Alipay lower service fees of 0.05–0.08 percent because of large volume).
      - PSPs incur variable costs for promotions, discounts, and reward systems (GrabReward, Paytm First, free deliveries and low commissions by Shopee).

### Additional implementation details and examples
- POS and merchant fee structures
  - Most POS schemes adopt a four-party model with higher interchange fees involving card-issuing institution, acquiring institution, card schemes, and merchants; installation costs constrained POS use in rural areas.
- Biometrics
  - Biometrics encrypt account information, preventing account identity exposure at the transaction interface.
- Payment corridors and interoperability examples
  - Recent corridors: Thailand (PromptPay)–Singapore (PayNow); Thailand (PromptPay)–Indonesia (QRIS); Malaysia (DuitNow)–Singapore (PayNow); remittance corridors between Malaysia and the Philippines and between Singapore and the Philippines.

*Italic: Source — IMF Working Paper (Sections II–IV) as provided in the content unit.*

### 0.3 percent. Consumers pay no transaction fees,

### wpiea2023123-print-pdf - 0.3 percent. Consumers pay no transaction fees,

### Merchant and consumer fee structures for e-money PSPs
- Alipay (China)
  - Consumers pay no transaction fees, except for a 0.1 percent fee if they redeem more than RMB 20,000 ($3,000) of cash using an Alipay account, to compensate the bank for providing the redemption services.
  - Ant Group uses Alipay’s payment data to provide services such as lending, insurance, and wealth management.
- WeChat Pay (China)
  - Online payment merchants pay 0.6 percent of the transaction value, and off-line payment merchants pay 0.3 percent.
  - Consumers pay no transactions fees, except for a 0.1 percent fee if they redeem more than RMB 20,000 ($3,000) of cash using a WeChat Pay account, to compensate the bank for providing the redemption services.
  - Tencent uses WeChat Pay’s payment data to provide services such as lending, insurance, and wealth management.
- Paytm (India)
  - Most transactions are free.
  - A fee of about 1.9 percent of the transaction value is charged to merchants for transactions made through payment gateway services.
  - Paytm handles a wide range of use cases, including the payment of school fees and utilities; the recharging of metro cards; the buying, storing, and investing in gold (through Digital Gold); and the facilitation of cross-border remittances/payments.
- GoPay (Indonesia)
  - Transaction fees to merchants are free, although Gojek (GoPay’s parent) charges an MDR for certain product categories (such as food purchased through GoFood).
  - Customers pay some small, fixed fees for on-line purchases.
  - Gojek (GoPay’s parent) offers a loan program for drivers and merchant partners that is integrated with customers’ ratings.
- GrabPay (Malaysia and Singapore)
  - Transaction fees to merchants range from 0 to 2 percent—less than the 2–3 percent Visa and MasterCard charge or the 1.5 percent NETS charge.
  - Slightly higher fees are charged for the use of payment gateway services, depending on the payment method.
  - GrabPay introduced GrabPay Credit through its wallet and PayLater feature.
  - The GrabPay app provides merchants with data services through its partnership with payment gateways (Adyen).
- ShopeePay/AirPay (Thailand and Singapore)
  - Transaction fees vary.
  - In Indonesia, Thailand, and Vietnam, merchants pay no fees.
  - In the Philippines and Malaysia, they pay 1.5–2.0 percent of the transaction value.
  - In Singapore, they pay 2.0–5.35 percent, depending on the product category, type of merchant, and program.
  - ShopeePay/AirPay integrates e-money payments with e-commerce.

### Cost advantages and scale examples
- Industrial and Commercial Bank of China (ICBC) example (2018)
  - ICBC operated 16,004 branches.
  - Assuming the average cost of operating a branch was RMB 10 million ($1.5 million) a year, ICBC’s total annual cost could be as high as RMB 160 billion ($22 billion).
- System-level reserve balances
  - The total balance of nonbank online payment institutions (including Alipay and WeChat Pay) in the PBC reached RMB 2.3 trillion ($331 billion) in December 2022, equivalent to 6.4 percent of total reserves at the PBC.

### Compliance, regulatory steps, and infrastructure
- Licensing and acquisitions
  - Alipay secured a payment license in May 2011 and later expanded Ant Group’s approvals for more financial services licenses in 2014.
  - GoPay acquired a license by acquiring an existing licensed e-money company in 2018.
  - GrabPay acquired a digital banking license in Singapore through a consortium with Singapore Telecommunications.
  - In August 2015, Paytm received a license from the RBI to launch the Paytm Payments Bank as a separate entity.
  - Alipay, ShopeePay, and GrabPay acquired e-money licenses in many Asian countries.
- Customer funds and settlement practices
  - Alipay transferred 100 percent of customer funds gradually from banks to its reserve account at the PBC by early 2019 to protect users and mitigate credit, liquidity, market, and operational risks.
  - NetsUnion Clearing Corporation (NetsUnion) was established in March 2017 to settle transactions by nonbank online payment institutions; it is responsible solely for the transaction information flow and platform operation and helps reduce counterparty risks and enhance settlement security.
- Standards and engagement
  - GoPay and GrabPay followed QR standards set by the Bank of Indonesia and engaged with regulators on standardization (such as open Application Programming Interface [API] standard in Indonesia).

### Data use, market concentration, and contestability
- Data-driven business models
  - PSPs use payment data to expand into lending, insurance, and asset management; harnessing economic value of user data enables rapid scaling across business lines.
  - Using data well while protecting privacy is challenging: not all PSPs can retain users in their ecosystems; payment data can drive monopoly formation; privacy restrictions may reduce PSP revenue streams and product innovation.
- Market concentration and dynamics
  - The payment market in the six Asian countries is concentrated; expansion through parent companies, acquisitions, and vertical integration created platforms with data advantages.
  - Examples of competitive entry and shifting dynamics:
    - Pinduoduo entered e-commerce and competed with Alibaba since 2015.
    - ByteDance entered social networks and competed with Tencent since 2016.
    - GoPay and GrabPay face competition from ShopeePay since the onset of the COVID-19 pandemic.
    - In India, Paytm faces competition from Google Pay, WhatsApp Pay, and PhonePe.
  - Contestability matters: if entry remains free and competition exists, concentration does not necessarily imply lack of competition.

### Lessons and implications for CBDC adoption
- Four attributes CBDC should embody
  - Convenience, efficiency, security, and trust.
- Four channels central banks could incentivize CBDC service providers to develop
  - Leveraging digital technology, to ensure low-cost access, provide convenience, and support scalability.
  - Targeting use cases, to connect consumers and merchants in various use cases to achieve economies of scale and scope.
  - Developing business models, to ensure that PSPs have sufficient revenues to cover costs.
  - Complying with legal and regulatory requirements, to ensure security, confidence, and trust.
- Revenue and cost coverage considerations
  - CBDC service providers should be capable of collecting sufficient revenue to cover costs while meeting legal and regulatory requirements and implementing AML/CFT and privacy protection.
  - Several options to cover costs for CBDC service providers include: making CBDC services free to individuals and inexpensive for merchants; subsidization through public funding; private cross-subsidy; or granting access to consumer data.
- Data-sharing, privacy, and contestability
  - Central banks can address data silo problems by establishing clear data-sharing arrangements and public data architectures with APIs that ensure secure data exchange and interoperability between PSPs.
  - Sharing CBDC data based on consent can help integrate CBDC into existing payment systems, break data monopolies, and harness the economic value of data while preserving privacy.
  - Privacy and anonymity differ: privacy can be engineered without full anonymity; current CBDC solutions are at best pseudo-anonymous.
  - Promising cryptographic techniques (zero-knowledge proofs, blind signatures, private decentralized networks, off-line smartcards, layered data management) could enable privacy while complying with AML/CFT.
- Central bank roles to strengthen contestability
  - CBDC can be used to encourage data sharing between public and private ecosystems, discipline the market, enhance competition, reduce dependency on private sector solutions, and strengthen regulation across public and private solutions.
  - Regulatory coordination on competition, financial integrity, consumer protection, privacy protection, and financial stability is needed within and across jurisdictions.

*Source: IMF Working Paper content (authors), based on information from company websites and regulatory sources as presented in the PDF content provided.*

### References

### References

### Bibliographic references
- Extensive list of cited works on central bank digital currency, e-money, fintech, payments, privacy, and platform competition, including publications from:
  - Auer, Raphael; Boehme, Rainer; Frost, Jon; Gambacorta, Leonardo; Monnet, Cyril; Rice, Tara; Shin, Hyun Song; Holti Banka; Nana Yaa Boakye-Adjei; Ahmed Faragallah; Harish Natarajan; Jermy Prenio.
  - Bank of England. 2023. “The Digital Pound: A New Form of Money for Households and Businesses.” Consultation Paper, February.
  - BIS (Bank for International Settlements): multiple 2020–2022 reports and papers (e.g., Working Paper 948, Working Paper 976, BIS Papers 125).
  - IMF working papers and policy papers (e.g., Kiff et al. 2020; He et al. 2017; IMF 2018).
  - Other institutional and private-sector reports (Bank of Canada, Federal Reserve, FSB, Google/Temasek/Bain, Visa, The Economist, Smartkarma, Belfer Center).
- Topics represented: CBDC technology and design, user needs and adoption, interoperability, financial inclusion, e-money scheme lessons from Asia, data localization and privacy, payment system innovations, fintech market structure, and platform competition.

### Appendix A — Volume and Value of E-Money Transactions in India, Indonesia, and Singapore
- Data source: Bank for International Settlements (authors’ aggregation).
- Period covered: 2012–20.
- Key empirical findings:
  - Singapore: volume of e-money transactions was high between 2012 and 2020, when it fell 33 percent (attributed to the COVID-19 pandemic).
  - Indonesia: in 2020, volume dip was 12 percent; value of transactions rose 37 percent in 2020.
  - India: in 2020, volume dip was 4 percent; value of transactions dropped 18 percent in 2020; value has been high especially since 2018.
- Figures described:
  - Figure A.1 panels:
    - a. Volume of E-Money Payment Transactions (Millions)
    - b. Value of E-Money Payment Transactions (Millions of dollars)
    - c. Volume of Card Payments Transactions (Millions)
    - d. Value of Card Payment Transactions (Millions of dollars)
- Note: Electronic money products defined as stored value or prepaid products in which a record of the funds or value available to the consumer is stored on a device in the consumer's possession.

### Appendix B — E-Money Policies and Regulations in Six Asian Countries
- Summary: Asian countries have adopted varied policies/regulatory measures to promote e-money development; Table B.1 catalogs country-year policy milestones for China, India, Indonesia, Malaysia, Philippines, Singapore, and Thailand.
- China (selected entries):
  - 2010: Adoption of administrative measures for payment services provided by nonfinancial institutions
  - 2013: Adoption of measures on custody of clients’ reserves at payment institutions
  - 2016–2018: Regulations on payment service business and centralized deposit of funds of pending payments of clients of payment institutions
- India (selected entries):
  - 2010: Launch of Aadhar unique ID (12-digit identification number issued by UIDAI)
  - 2014: Introduction of payment bank license
  - 2016: Release of Bharat QR; Release of Unified Payment Interface (UPI); Demonetization (withdrawal of specific bank notes)
  - 2018: Release of Payment Systems Vision 2018; Master Directions on NBFC-AA, Access Criteria for Payment System, Prepaid Payment Instruments (PPIs); Operational Guidelines on PPI Interoperability
  - 2019: Release of Payment System Vision 2019–21
  - 2021: Release of E-rupee (government-sponsored electronic voucher); Linkage of UPI with Paynow Singapore
- Indonesia (selected entries):
  - 2009: Release of e-money regulation (licensing and oversight)
  - 2016: Introduction of PSP regulation and license; First amendment increasing maximum balance limit
  - 2017: Establishment of fintech office and regulatory sandbox
  - 2018: Second amendment providing access guidelines for foreign PSPs
  - 2019: Indonesia Payment System Blueprint 2025; launch of QRIS
  - 2021: Launch of National Open API Payment Standard; Sandbox trials of QRIS and Thai QR Payment (PromptPay); Issuance of Regulations No. 23/6/PBI/2021 and No. 23/7/PBI/2021
- Malaysia (selected entries):
  - 2008: Issuance of guidelines on e-money by Bank Negara Malaysia (BNM)
  - 2010: Passage of Malaysia Personal Data Protection Act 2010
  - 2016: Financial Technology Regulatory Sandbox Framework
  - 2017–2019: Launch of PayNet and DuitNow; Interoperable Credit Transfer Framework; Real-Time Retail Payment Platform; DuitNow QR
  - 2020: Issuance of license framework for digital banks
  - 2021: Release of exposure draft of policy document on e-money
- Philippines (selected entries):
  - 2009: BSP e-money circular opening issuance to nonbanks
  - 2012: Republic Act 10173–Data Privacy Act of 2012
  - 2017–2019: Launch of PESONet; NRPS Framework; InstaPay; e-Gov Pay; National QR code standard
  - 2020: BSP’s Digital Payments Transformation (DPTR) Roadmap 2020–2023
- Singapore (selected entries):
  - 2006: Introduction of Payment Systems (Oversight) Act
  - 2013: Passage of Personal Data Protection Act (PDPA)
  - 2016: Fintech regulatory sandbox by MAS
  - 2017–2019: Introduction of PAYNOW; SGQC; nonbank fast access to FAST; Payment Services Act and Payment Services Regulations 2019; sandbox express guidelines
- Thailand (selected entries):
  - 2016: Launch of PromptPay; regulatory sandbox; Thai FinTech Association
  - 2017: Payment Systems Act 2017 (B.E. 2560) and comprehensive digital payment regulations; Thai QR code payment standard
  - 2019–2020: Payment Systems Roadmap No. 4 (2019–2021); Policy Guidelines for Standardized Thai QR Code; Notice permitting nonbank operators to apply for foreign exchange e-money licenses; Passage of Personal Data Protection Act (PDPA)
- Source note: Authors, based on central bank websites, company websites, and Gadget360.

### Appendix C — Data Protection Policies in Asia
- Overview:
  - China, India, Malaysia, the Philippines, Singapore, and Thailand have regulations protecting personal data.
  - Brunei, Cambodia, Indonesia, Lao People’s Democratic Republic, Myanmar, and Vietnam lack overarching data protection frameworks.
  - ASEAN personal data protection laws are generally less strict than the GDPR.
- Breach notification practices:
  - Philippines and Thailand: data controllers must notify regulators and data subjects within 72 hours of a breach.
  - Singapore: organizations are advised to notify the Personal Data Protection Commission (PDPC).
  - Indonesia: no requirement to notify authority; electronic system provider must inform the data owner in written or electronic form within 14 days.
- Common e-money provider practices:
  - All e-money providers establish data protection policies describing collection, storage, use, transfer, disclosure, and protection of personal information.
  - Policies recognize individual ownership of personal data and require users’ consent for use of personal data.
  - E-money providers collect registration, transaction, communication, and technical data (examples: Internet protocol (IP) address, webpages viewed, duration of visits/sessions, device identity (ID), mobile advertising ID or media access control address, device manufacturer/model/operating system).
  - Personal information may be transferred to, stored, used, and processed in jurisdictions other than the user’s home jurisdiction.
  - Providers may disclose/share personal information with affiliates and other parties as permitted by applicable law; privacy policies generally prevent selling or leasing users’ personal information to third parties.
- Data localization policy typology (Table C.1, source Wu 2021):
  - Local-only storing, transmission, and processing: China, Indonesia, Russia.
  - Local copy required: India.
  - Narrower, conditional restrictions: Brazil, European Union.
- Retention and rights:
  - E-money providers can hold users’ personal information only for as long as necessary under applicable law; all providers grant users rights to access and/or correct personal information.
  - Rights to be forgotten are unclear across these countries; GDPR provides clearer terms and controller/processor liability for breaches.
- Notes and cross-references:
  - Personal Information Protection Law of the People’s Republic of China adopted August 20, 2021; went into force on November 1, 2021.
  - User consent definition: consent generally obtained at account registration and continued use.
  - Trade-offs: CBDC service providers could consider data-driven business models while ensuring privacy protection; privacy policies and cross-jurisdiction operations create regulatory challenges when data sovereignty/localization requirements apply.

*Source: Authors, References and Appendices from the IMF working paper "Some Lessons from Asian E-Money Schemes for the Adoption of Central Bank Digital Currency."*

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_Source: https://www.imf.org/-/media/files/publications/wp/2023/english/wpiea2023123-print-pdf.pdf_