The pace of innovation in payments in Asia has accelerated significantly in the last five years, driven by alternative payment providers taking advantage of the increase in smartphone ownership and improvements made to Internet infrastructure. In addition to this, the boom in Asian FinTechs was born out of a lack of legacy infrastructure within the region – meaning that traditional banking and payment methods such as credit cards are being skipped altogether, with consumers, in particular, embracing digital payments.
A level playing field for all?
For payment giants like Alipay and Tencent, who have already built up huge customer bases thanks to their innovative mobile payment solutions within their own platforms, expansion into territories outside of Asia has already begun, but for new players that want to make the move into new regions, there are numerous challenges.
One of the biggest challenges faced by FinTechs in the region is moving money across borders. The correspondent banking network does not lend itself well to high volume, low-value payments, and with the majority of banks across Asia being regional, this impacts the issue further.
Greater regional collaboration and modernisation of payments infrastructures will help to alleviate some of the interoperability issues and will make sending money across borders more streamlined, but it isn’t something that can be fixed overnight.
Sending high volume, low-value payments is costly, which has resulted in a significant increase in demand from consumers for remittance companies to plug this gap in the market. Both have done very well by addressing the needs of B2C and P2P customers, but when it comes to B2B, solutions are lacking.
Cross border ecommerce is one of the fundamental factors driving growth across Asia, and coupled with demand increasing from the West for gig economy outsourced solutions, such as design and programming, payment platforms need to be able to process payments from all across the globe in a fast and cost-effective manner. As it stands, the platforms that process these payments are simply not getting a good enough deal on cross border payments, and unfortunately, their options are limited.
With the infrastructure across the region being disjointed, FinTechs are finding it hard to develop solutions that solve these problems.
The opportunities are endless
In a disjointed correspondent banking network, sending money across borders via traditional methods is not only slow, but also often very costly. While there are inefficiencies within the existing infrastructure, opportunities do exist for smaller banks, acquirers, PSPs and FinTechs thanks to collaboration with ‘financial utilities’.
Effectively, a financial utility takes on the back office processes that form the backbone of a core service delivered by a bank, acquirer, or PSP. In the case of cross border payments, the utility acts as the payment rails, working in the background with a focus on optimising only this process, resulting in the bank, acquirer, or PSP being able to deliver a better service to end users without having to invest time or resource into building and maintaining their own infrastructure.
Regional banks, acquirers, PSPs, and FinTechs now have access to a global payments infrastructure allowing them to offer cost effective cross border payments to merchants, gig economy platforms, alternative payment providers, and telcos. With this model, the opportunities within the payments landscape in Asia are endless – and for everyone.