• Huge opportunity seen in cross-border payments in Asia Pacific
• Fintechs simplify money transfer and payment service, amid growing competition
• Large customer base, wider reach and secured banking are recipes for success

New ways of working are being driven by advances in technology, changing regulations and accelerated by the pandemic, impacting the global flow of money—and types of financial services available to the economy. With these changes, cross-border retail payment volumes have skyrocketed. Banks are in an excellent position to take advantage of dynamic changes brought about by innovative technologies that drive cross-border payments.

Cross-border payments in Asia Pacific have been making significant strides in recent years. While not all businesses have the means to trade internationally, marketplaces make it easy to capitalise on consumer demand and enable small businesses to sell their goods or services abroad.

Combine that with the fact that marketplaces relieve the administrative burden associated with overseas trade, making this move becomes a no-brainer for businesses.

Over the past 10 years, fintechs have been emerging thick and fast. They’re backed by serious investment too, with Boston Consulting Group reporting that investors funnelled $11 billion into payments-related fintechs in the first half of 2022 alone.

Fintech adoption rates have been steadily increasing and recent research found that 75% of people surveyed had used a fintech money transfer or payments service before. In Singapore, for instance, real-time payments platform PayNow is gaining traction.

Innovators in this fast-growing segment are not only fintechs, but also central banks keen to build faster, cheaper, transparent, and more efficient conduits for financial flow in the region. While the fintech offering may look a little different from what banks have traditionally provided, they still use many of the same networks and payment routes to process transfers, including the correspondent banking network.

The difference often lies in the experience. Fintechs have simplified the process of sending money abroad, with a minimalist approach to user experience that requires as few steps as possible. They also display fees upfront to give total transparency on the cost of a transfer before it’s sent, avoiding any unexpected surprises when the money arrives.

The reality is that banks already possess most of the ingredients needed to succeed, including customer bases that are millions strong and with unparalleled reach that facilitates the global movement of value. At its core, this reach is built on strong bilateral relationships that have been in place for years and stand as an indicator of success for banks looking to seize growing opportunities. Finally, robust compliance and the highest standards for financial crime prevention put customers in the safest place possible, wherever their money is heading.

Banks should play to these strengths while evolving their offering to add transparency, predictability and an improved user experience into the mix—building stronger relationships with customers that keep them coming back over and over again.

Here, a community-driven approach is likely to be the most effective route to success, both for the currencies we know today and a future that could see central bank digital currencies enter the frame.

Together, many banks are already collectively defining the new standard for cross-border retail payments within an interoperable framework that lowers costs, connects multiple payment methods and channels, and delivers instant and frictionless transactions to end-users.

Banks choose to progress and one thing is clear—doing nothing is not an option. Huge opportunities are waiting to be grasped, and banks must go all-in to future-proof their business and seize what this booming market has to offer.

 

Sharon Toh is the head of ASEAN region, SWIFT and board member of EU-ASEAN Business Council.

Views and opinions expressed in this opinion-editorial belong strictly to the author’s/contributor’s and do not reflect that of The Asian Banker.