Another foray into cross-border payments, this one dropped in ASEAN Business and stays pretty much with APAC and that sub-region’s advancements in the space, starting with domestic real-time payments both existing and almost ready for deployment. Readers familiar with the ASEAN acronym will know it is an economic development association comprised of ten southeast Asian nations. So, we have been covering these various articles about efforts there to conduct cross-border real-time payments between several of the countries. The author discusses these and what more needs to be done.
‘The APAC region has traditionally been a pioneer in terms of fast payments technology, with Japan launching its Zengin payment system over 40 years ago. Eleven countries in APAC now have active real-time payment networks – including Singapore’s FAST network, which was launched in 2014 – whilst five other countries are getting their own networks ready for launch. APAC has also taught the world how to harness mobile apps, QR codes and contactless technology to make instant payments a simple and convenient process, establishing them as the preferred payment methods for many consumers and businesses…
However, whilst simple, fast and free domestic payments have become the norm across APAC, the same cannot be said for international payments. Sending money between countries has typically meant long processing times and high transaction fees, with fees in ASEAN often being well above the UN’s Sustainable Development Goal of 3 per cent, according to the Asian Development Bank. This is far from ideal in a region where an estimated 320 million people rely on money sent from abroad by family members, and at a time where SMEs are seeking to trade more internationally.’
The author then goes on to discuss whether or not banks are in position to capitalize on the new rails and capabilities in this space. Since most non-P2P x-border transactions are still initiated through FIs, we don’t see why not. We are not sure about the article’s claim that ISO 20022 messaging will play a role in 80% of all payments transactions by 2025 but it will certainly be a much larger percentage than now, since domestic wire systems are converting over, as is SWIFT, so B2B and other high value flows will be moving under that messaging standard. The point is that banks will be modernizing their infrastructure to adapt, so should also be able to play a large role in real-time cross border.
‘There is also another huge opportunity for banks to collaborate with corporates that want to offer cross border payments services under Banking as a Service (BaaS), a new model which enables non-banks to build banking offerings on top of an established bank’s regulated infrastructure. To avoid being left behind, banks must collaborate with these fintechs, technology and service providers to take advantage of new cross-border payment rails and develop innovative new services that provide added value to the customer…
Through a combination of central bank-driven agreements, standardisation and technological innovation, real-time cross border payments are a reality. The benefits are many, both for consumers and businesses, and the potential for non-bank players to find new revenue streams means the proliferation of new agreements and services will continue at a pace. With more opportunities to deepen, expand and monetise transactional relationships, it’s a no-brainer that this will be the way forward for banks, with fast movers gaining from the first mover advantage.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
