When it comes to payments, Asia is a region of rapid growth and change. The region accounts for more than half of total global payment revenues, while the volume of QR code payments across south-east Asia is predicted to increase from 13 billion in 2023 to 90 billion in the next five years. The number of cashless payments in Apac is set to be higher than those in Europe and North America combined.
But such rapid behavioural and technological change means that regulators are often playing catch up. The result is that individual countries often have diverging licensing, compliance and safeguarding requirements. For firms looking to enter the Asian payments arena for the first time — or to expand their services to offer additional payment facilities — costly hurdles can often crop up.
Earlier this year, Amazon Pay (India) was ordered to pay a penalty of $373,000 to India’s Reserve Bank as a result of deficiencies in compliance with local guidelines surrounding know your customer (KYC) and prepaid payment instruments.
Philip Panaino, global head of cash at Standard Chartered, spotted an opportunity to help calm the waters for firms. “From conversations with [fintech and corporate] clients, we understood that they often face challenges in keeping abreast of the rapidly evolving regulatory payment and e-money landscape,” he says. “This is particularly the case in a region as diverse as Asia, where regulations that govern the provision of payment services vary across markets.”
To support clients seeking to expand or deepen their payment operations in Asia, Standard Chartered, in collaboration with law firm Allen & Overy, have published the Guide to Payment Regulations. The guide gives an outline of the regulatory frameworks and related licensing schemes for payments in eight key Asian markets: Hong Kong, India, South Korea, Singapore, mainland China, Taiwan, Malaysia and Thailand, with an additional eight jurisdictions to be added later in the year.
Consolidating regulatory diversity
Shuhui Kwok, Allen & Overy lead partner, and one of the authors of the guide, believes the first thing people might be surprised to learn is that Asia is not a uniform jurisdiction. “While a lot of the regimes are built on similar principles such as consumer protection and ensuring the stability of the financial system, the environment in each country is quite different. There is not a consistent regulatory regime, like in Europe,” she says.
For example, cross-border remittances and foreign exchange transactions are highly regulated in India. Money transfer service schemes, donations to charities or remittances towards property are specifically prohibited. Meanwhile, Hong Kong has no restrictions, but in mainland China, the amount of a single transaction involving foreign exchange cannot exceed the equivalent of $50,000.
South Korea generally has no restrictions on receiving foreign currencies nor for payments to foreign companies. But some payments, such as payments for capital transactions, do require prior confirmation of, or notification to, the Bank of Korea.
Ms Kwok believes the value of the guide will be in helping clients and potential clients avoid falling foul of legal and linguistic misinterpretation. “If you’re looking at South Korea or Thailand — in both these jurisdictions, you’ll find plenty of information online on ‘how to set up a payments business’. But what you’ll also find is that a lot can be lost in translation. Particularly when you’re dealing with areas of the law, you may lose vital nuance,” she says.
To provide the specialised insight, Ms Kwok’s team engaged both the wider Allen & Overy network and local counsel in each market. “You don’t need to go through 35 different websites and pages. We’ve made a snapshot”.
Mr Panaino sees the guide serving as a supplement to the conversations his clients are already having, and acting as a springboard to get firms thinking about what building blocks they need to expand their operations. He stresses that it is not intended to replace legal advice. Once the guide has helped highlight potential hurdles or areas for further investigation, he recommends clients seek specific advice when they are ready to make business decisions.
Ms Kwok agrees. “Once you read it, you’ll get a better sense of what you need to do. For example, if you were setting up a remittance business and trying to expand into a new jurisdiction, you'll know ‘okay, so these are the minimum requirements’, and then review your next steps and engage legal counsel to get more detail or simply ask better questions to your internal or external advisors,” she says.
A moving picture
Considering the dynamism of the sector and nature of the content, the guide’s PDF format could seem rather fixed. While Ms Kwok believes the usefulness lies in its clarity in distilling very technical legal guidance, she concedes that depending on the “pace of the various jurisdictions”, regular — possibly annual — updates might be needed.
Even throughout the 15-month process of putting the guide together, the regulatory landscape shifted, so revisions were conducted right up to launch.
But while the pace of change creates an almost constant need for monitoring and oversight, it is what makes the sector so exciting for Ms Kwok: “That’s always been the beauty of being a lawyer in this particular space. We work with a lot of disruptors who are coming into the market, who are trying to do something new. And we’re able to be there and understand their business, make sure they’re compliant and able to, then deliver the services that they want to deliver.”
