What B2B opportunities exist for banks and payment service providers in Asia?

FinTech investment may have increased across Asia, but so far, much of the innovation has been exclusively B2C. In fact, only 3% of FinTech investment in APAC has been B2B, and only 24% in enhancing banking efficiency. As the B2C marketplace becomes flooded with options, FinTechs that have a foothold in B2C are beginning to explore B2B solutions, including financial utility models, as there are huge opportunities to capitalise in these areas.

The cross border payments space continues to evolve as globalisation driven by ecommerce, and digitisation driven by new technologies, transforms the way that companies that are operating in multiple regions do business. With cross border trade flourishing, what is preventing FinTechs from stepping in to tackle one of the biggest problems hampering growth – inefficiencies in cross border payments?

Too many weak links in the chain

One of the main problems is that unlike Europe, where SEPA payments provide same day clearing solutions throughout the Eurozone, the banking ecosystem in Asia is disjointed, with 16 banking systems operating across APAC. In addition, the process of making B2B payments is inherently complex, often involving multiple banks, especially when dealing with cross border transactions.

There are a huge number of solutions for consumers which allow users to make payments to friends and family quickly and easily, in part due to how they extend beyond their core functions, like Tencent’s WeChat Pay. This same model is difficult to apply to cross border payments, particularly when it comes to businesses, who are still reliant on complex and slow correspondent banking networks.

Appetite for global banking waning

The other issue is that global banks are either pulling out of, or choosing not to expand into, new markets. Asia has many emerging economies and is experiencing a boom in smartphone and Internet penetration, making it ripe for the taking, so why don’t incumbents want to invest in the region?

According to the Cushman & Wakefield Asia Pacific Banking Report:

“Globally, banks are under intense pressure post the financial crisis. Tougher regulations, advancement in technologies, optimizing branch networks, rising rents, evolving co-working practices and outsourcing etc. are some of the major issues facing banks today. Several global banks have streamlined operations in Asia.”

The good news is that while these incumbents steer away, regional banks are stepping into their shoes. But as is the case with smaller banks, especially in volatile markets, the capital to develop new ways to deliver innovative services is lacking. Fortunately, new entrants are providing niche solutions that address issues with infrastructure, underpinning core services, which leaves banks time and resources to focus on delivering value-added services and an improved customer experience to its end users.

Banks can take advantage of payments utilities, like Banking Circle, to provide core banking services in a region plagued by issues in a fragmented marketplace. To find out more about the banking services we offer, including cross border payments and IBAN accounts, speak to us today.

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