Consumers in Asia are spoilt for choice when picking a way to spend their money. Non-cash payments methods used now range from debit and credit cards, wallets, and QR payments, to smart point-of-sale (POS) and online banking. The Capgemini World Payments Report 2019 found that emerging markets in Asia had seen use of non-cash payments increase by 32%, and predicted that these countries would set the future agenda for the most successful payments methods.
Though consumers enjoy a wide choice of payment methods to suit their lifestyles, it creates a headache for corporates. They must decide whether to cater for all possible payment options – with the costs this entails – or restrict the number and risk losing some customers.
If they decide to offer multiple payments options, on an aesthetic level, this might result in multiple payment terminals in branch, with signs bearing QR codes cluttering up till space. On a deeper level, it means having separate payment rails, or platforms, in the background, all of which follow different methods of reconciliation. This can significantly complicate cash management operations for a company, especially small traders.
The situation has been exacerbated by the pandemic, which has caused payments to move away from cash to contactless. Kee Joo Wong, head of global liquidity and cash management, Asia Pacific at HSBC, says: “The move to digital has gained a lot of traction right now due to Covid-19. Having digital payment methods has moved on from being a nice-to-have to a must-have for companies in order to survive.”
As the markets begin to reopen and the competition for consumer spending becomes more ferocious, having the right payment option could mean the crucial difference between completing or losing a transaction, and so companies are on the lookout for solutions.
Ed Adshead-Grant, general manager and director of payments at Bottomline Technologies, says: “Covid-19 has intensified the focus on the level of necessity in payments that I just haven’t seen before. This has been seen commercially, as we’ve received more enquiries and requests for proposals around payments and cash management tools in the last three weeks than I think we did in the last 12 months.”
Bank-led innovation
With companies trying to get an understanding of what is now expected of them, an open goal is emerging for banks that can make the implementation of multiple payments systems as painless as possible. Being innovative now could pay dividends later.
“We saw clients having huge difficulties in terms of having multiple devices in their stores for collecting payments,” Mr Wong says. “From a customer-friendly perspective, they did not want to have multiple payment terminals as it is not attractive in a storefront. But further, having so many different terminals to process payments was creating challenges in reconciliation.”
HSBC worked around this issue by developing the ‘Omni Collect’ system. “The idea came to create an aggregator to consolidate the collection channels into one, and provide the customers with an integrated solution to reduce the number of terminals and provide one report in one format,” explains Mr Wong. “Omni Collect also integrates into online stores through APIs (application programming interfaces), catering for both the offline and online needs of clients.”
While the platform was initially developed for use in mainland China, it has since been integrated in Malaysia, Thailand, Hong Kong, Vietnam, Australia and Indonesia, while India and Singapore are currently adopting it. This shows how multi-channel payments are becoming the norm across all markets in Asia.
Citi has also stepped into this space with the launch of its ‘Spring by Citi’ system, which allows merchants to collect from various payments methods such as e-wallets, cards, and instant payments. For corporates, it will bring in consistency across their global payments operations. Meanwhile, the customer benefits from having access to their preferred payment method, extending to the smaller, more local payment options.
Alternatively, some banks have been looking to third parties to aid them in supporting multiple platforms, giving them the edge over their rivals. Mao-Chin Chen, president of Taiwan’s E.SUN Bank, says: “E.SUN is not only the exclusive partner of Paypal, but also the first Taiwanese bank to cooperate with Alipay and Tenpay. Through building third-party platforms, E.SUN has been leading in the e-banking and e-commerce businesses by bringing in innovative business models, and by aiding businesses and consumers in their daily payment requirements.”
Cross-border cash
With many mobile payment methods ubiquitous throughout the region, customers expect to be able to use them regardless of where they are. This means further work in the background to ensure payments are processed efficiently, but also providing the data back to the merchant in a usable format.
Having this level of data is a vital tool for working capital planning, regardless of merchant size. “For every payment type, the clients [businesses] were receiving a different reconciliation report, some on a daily basis,” Mr Wong says. “Some were coming in different formats, which was making it difficult for the clients to consolidate their books and understand their working capital.”
Due to jurisdictional differences, this was not as simple as creating one solution. The bank had to develop something that could be modified for use across the whole region, he says: “In most of the countries we have a centralised mechanism to support the different payment methods. But there are different aggregators between countries to cater for instruments ranging from QR codes to mobile wallets. It is possible to adapt the collection mechanism to those that are most relevant to the country.”
Third-party providers are also addressing the multi-channel payments difficulties. Hong Kong-based AsiaPay provides connectivity to cashless payments, ranging from global card providers such as Visa and Mastercard, to established mobile payment systems such as China’s Alipay and WeChat Pay. As importantly, it also extends to domestic providers, such as India’s BharatQR and Singapore’s NETSPay.
With many different forms of marketplace in operation across AsiaPay’s countries of operation, including China, Singapore and Malaysia, a spokesperson for the company says providers need to be looking beyond their domestic operations: “Some areas they should definitely address are related to an easy set-up, to the ways they serve their customers in the domestic market, but also cross-border and being multilingual. It is equally important to provide access to a broader range of payment options and multiple currencies, which can optimise sales conversions.”
Growth catalyst
Having cross-border capabilities is considered a fundamental driver for regional growth. The report from ACI Worldwide and consultancy firm Kapronasia ‘Envisioning a pan-regional, real-time payments ecosystem in south east Asia’, outlines how important having standardised and instant payments are to boosting intra-regional transactions, and could do so [?] at a low cost. This has been aided by the adoption of the ISO 20022 payment standard, which has allowed interconnectivity between domestic services such as DuitNow in Malaysia, Thailand’s PromptPay, and PayNow in Singapore. Having services like QR codes built into these can drive usage and participation by consumers.
There is also the issue of how to deal with funds that have been accepted across multiple countries. Mr Chen explains how the bank tackled the issue of pan-regional cash management in the market: “E.SUN has set up professional cash management teams in Taiwan, Hong Kong, Singapore and other south-east Asia operating sites. Whenever customers have need of opening overseas accounts, international transactions and cross border financial services, the E.SUN cash management team would provide instant and localised advisory services.”
Moving funds is more complex than just having the right technology in the background, and requires a deep understanding of complex local regulations. Mr Mao-Chin says this is where banks can leverage their experience: “As clients’ needs on cross-country payment and collection have become increasingly complex, E.SUN continues to improve its cash management service in terms of anti-money-laundering compliance, product, system, and service personnel. By investing in digital platforms and professional consulting, E.SUN provides clients with a total cash management solution, meeting their needs in both domestic and overseas markets.”
Crucially, the ACI report also notes how standardisation of interfaces makes it easier for merchants, fintechs, billers and intermediaries to leverage the value of a platform, and how open API technology will be integral to ensuring that technology does not create a barrier to widespread adoption.
The future in open APIs
The complexity of connecting multiple payment solutions could be simplified by standardisation, and the use of open banking technology. While other parts of the world have widely adopted open banking, Asia still has some way to go.
AsiaPay’s spokesperson says the company has released systems to create these linkages: “As part of our goal to innovate, we newly launched our software development kit to facilitate a secure interface from merchants’ mobile application to our gateway. It supports in-app payments for iOS and Android operating systems.”
These connections are made through the company’s PayDollar payment gateway, with an API for the POS barcode scanner or card reader. The system has been developed to be suitable for both larger merchants, such as supermarkets, to smaller convenience stores.
The newest forms of POS technology are designed to interact with open banking solutions. “Most of the POS terminals in shops today have the new-generation processor nodes on the terminal itself,” HSBC’s Mr Wong says. “There will be a screen and you have the selection option of a card, wallets, or QR codes being used to make the payment. By using APIs’ connectivity we can link up all of these to the online transactions tool as part of the Omni Collect mechanism. By connecting this to the back end you can give updates on transactions on a real-time basis.”
But it is the widespread adoption of open API technology that is becoming embedded in the very foundations of the transactional business, which will make the most difference. Mr Adshead-Grant says: “The world is moving to APIs – but I prefer the term ‘atomised’ APIs, because we’re going towards microservices that transfer the precise parts of the transaction for an even faster payment service. Swift [has said it’s] moving to cloud-based API technologies, so the whole industry is heading that way.”
Banks lag behind
Yet not every part of the industry is moving so quickly towards APIs. The World Payments Report 2019 outlined how banks in particular were sluggish to adopt API technology, with 60% globally wary of extending adoption further than the minimum required to meet regulatory compliance.
Those that adapt their operations could steal a competitive advantage, however. Mr Chen says E.SUN has used this technology in expanding its payments provisions: “In terms of open API, E.SUN cooperates with Pi Wallet, and launches E.SUN Payment Pass, a channel that helps merchants link to consumers’ main bank account for online payments,” he says. “According to the official statistics, E.SUN ranks top three in online mortgage, online lending, online card application, online instalment, and online trust account opening.”
The demand for change comes as businesses begin to expect more. “There is now greater understanding of what technology can do, which is probably why we’re busier than ever,” Mr Adshead-Grant says. “Customers have realised there are solutions where they have been accepting friction in the end-to-end process, and that now there is no excuse for inertia.”
As customers increasingly expect to have a highly sophisticated payments platform available to them, regardless of the size of the retailer, merchants will increasingly be looking for the best solution to keep them on top of their transactions. And if banks are slow to keep pace with the front end demands of payments, they could find their own customers are starting to look elsewhere.
