EXCLUSIVE: “Payments on the Menu” – Eli Shoshani, Bottomline Technologies and Sandeep Lai, DBS Bank in ‘The Fintech Magazine’
To be capable of eating well in every country across the Asia-Pacific (APAC) region requires a high degree of adaptability. From chewing through jet-black fermented century eggs in China, to devouring an actively angry live octopus in Korea, it’s an area of rich culinary traditions that have differentiated countries over centuries of development.
Banking options in the region have followed a similar pattern. Try settling by card at a small food stall in Taiwan or Japan and you may be asked to install the popular local telecom operator’s mobile wallet LINE Pay. Alipay and WeChat Pay are dominant in China, boasting as many as two billion combined users, while digital wallet PayTM is India’s chosen payment method. People in the Philippines and Indonesia have no appetite for cards, with penetration at just two per cent, while in Hong Kong and Japan, they gorge on them.
Accounting for financial taste here is hard and can be expensive, which is why banking-as-a-service (BAAS) offered by larger, regulated and often pan-regional institutions, is seen as a huge area for growth in APAC, especially when it comes to cross-border payment solutions. Trade among APAC economies last year rose to the highest level in three decades, exceeding that of trade with the rest of the world, according to a 2022 report from the Asian Development Bank. It noted that integration among regional economies has continued to deepen, encouraged by regional trade agreements like the Regional Comprehensive Economic Partnership (RCEP), potentially covering 30 per cent of the world’s GDP, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
“We aren’t competing with the banks, but supporting and complimenting them to provide a better service “
Global payments technology company Bottomline’s view is that banks need to keep an open mind as to what technology they build and what services they buy in, to remain adaptable in this changing market. Its mission is to make business payments smart, sharp and secure with a software-as-a-service (SAAS) offering for all aspects of payments and cash management, including fraud and financial crime management, and sanctions screening.
Eli Shoshani heads up the APAC region for Bottomline, and says adoption of Cloud-based technology has been key to its and banks’ strategy there. “We see banks moving away from traditional areas of focus to offer Cloud services. This, in turn, is helping us provide more services to them.
“It is precisely because banks are so highly regulated that they need to go through so many processes to build changes. Whereas, Bottomline, as an established and seasoned service provider, can handle the changes that need to be applied across the whole region at pace,” he adds.
Bottomline’s Universal Aggregator IQ solution delivers a single API-enabled SaaS platform for payments, securities and messaging that helps financial institutions achieve lower costs, wider reach, speed-to-market, industry compliance, greater security and improved risk and treasury management. Payments handling has become more complex for banks as the industry diversifies away from existing infrastructure, particularly in APAC.
Shoshani points to schemes like Visa B2B Connect, enabling bank-to-bank transactions with tokenise credentials for business buyers and. suppliers, as examples of the proliferating number of alternative payment rails it can offer over a single platform, making it easier and cheaper for banks to access.
“Banks and fintech companies are being driven to build a service to accommodate today’s needs,” he says. “Even large corporates want to make payments immediately – the industry no longer has the luxury of T+1 in local or cross-border payments. In a region rich with exotic currencies and plagued by trapped liquidity is the opportunity for multi-lateral platforms and intelligent routing to come to the fore – where you choose the best channel for a payment, based on specific requirements, such as speed, cost, location, or FX rates.
“No payment is ever the same and so the flexibility to choose what matters most and then decide the payment rail is key to operational efficiency – a path recommended by the Bank of International Settlement in multiple cross-border best practice guides.”
The Singapore-based bank DBS is a case in point. It has been diversifying its payment channels for a while, most recently by starting to build its own 24/7 multi-currency payment settlement solution on Partior, the first live permissioned, blockchain-based clearing and settlement platform for commercial bank money – in effect providing immediate cross-border payments to its clients, bank books-to-books.
DBS currently holds the World’s Best Bank and World’s Best Digital Bank titles from Euromoney. More than half its services are now hosted in the Cloud, a technology that has become central to achieving its mission of ‘Making Banking Joyful’. In recent years, that has seen it moving more of DBS’ services to its QR code-based payments app PayLah!, a solution that’s becoming available in 45 countries within APAC, thanks to a tie-up with Union Bank and Singapore’s electronic payments provider, Nets.
For Sandeep Lai, head of digital payments at DBS, embracing the Cloud doesn’t just enable DBS’ customers to enjoy a better banking experience, it also allows it to more easily reach out to customers of other financial institutions via BaaS options and, since November 2021, its API marketplace.
“Where we have a really good product that is better than people can build it, we’ve looked at scaling up and commercialising that software,” he says. “Cross-border payments is one area we started to look at some years back, creating it internally and then commercialising it.
“But it isn’t all one-way traffic. This nimble approach to infrastructure development can make it easier for banks like DBS to utilise the hard work done by others as part of their own product portfolio, too. Because customers sometimes want something that is not our strength, like accounting software, we have partners that offer our payment services with accounting software to SMEs, for example.”
This means smaller banks interested in leveraging secure, regulated solutions, have an increasing variety to choose from that can run parallel to their own tech stack, without tinkering too much.
For Lai, the industry has the potential to pull towards a common goal, best achieved with a nimble and adaptable approach.
“The needs of bank customers – including corporate ones – will be diverse. They will be looking for efficientcross-border payments, efficient acquiring, good FX rates, reconciliation, cash management and treasury. Ideally, they don’t want to go to hundreds of providers that make it complex, but one that can deliver them all – not necessarily alone, but by orchestrating services efficiently,” he says. “The technical side of that can’t be understated: APIs should be easy to integrate into. So, the discussion won’t be with the CFO, but with the product engineers. As a bank, we’ll have to morph ourselves, that’s what our customers will be looking for.”
Shoshani agrees that the need for change comes from market drivers, and from a bank’s clients: “They are demanding immediate solutions, and there are a lot of competitors in the market coming up with them – fintechs, Visa B2B and other cross-border providers. Banks need to adopt these types of solutions, otherwise they will be left behind.”
Just as consumers can choose which service to take from a bank and which from a fintech, Bottomline offers banks a choice of wraparound services to support their payment systems.
“Customers’ needs are going to be diverse. They do not want to go to hundreds of providers that make it complex “
“If they don’t want to use our anti-money laundering (AML) or sanctions screening, that’s fine, but it’s available to just turn on,” he says. ”We aren’t competing with the banks, but supporting and complimenting them to enable them to provide a better service to their clients.”
Once in a while, something really big comes along that demonstrates the wisdom of adopting such an approach. The ongoing global transition to enriched financial messaging standard ISO 20022 is one such. It’s already been implemented by in-country clearing, real-time gross settlement (RTGS) and low-value, real-time payment systems across APAC, in all the large economies as well as the Philippines, Vietnam, Malaysia and Thailand.
Globally, institutions running on SWIFT must all have transitioned to ISO 20022’s XML-based messaging format by 2025. Importantly for APAC operators, the new format allows for character sets 10 times larger than legacy MT messages – useful for non-Latin languages – so the network can carry much more information per payment.
“At some stage, without the right message types, you will not be able to communicate,” says Shoshani. “This is where we come in, doing the conversion
and enrichment, as a service.
“For customers that need to enrich the data, you have to change the channels and train/educate users. Banks have to change payment and other supporting systems for channel, statement and compliance, to handle the extra information. Some local clearing systems may not be processing many cross-border payments and are not in a hurry to adopt ISO 20022, which adds complexities; how do you handle this until they do?” he says.
Had a solution like Bottomline’s Universal Aggregator been available when DBS started building its payments capability nearly a decade ago, the bank might well have gone down that route, he reveals.
“We looked for providers offering that single point of connection,” he says. He thinks fintechs like Bottomline have ‘done a remarkable job’ so far in connecting the pieces, and that’s to the banks’ advantage:
“Given banks have direct access to clearing systems and FX markets, and are gurus on compliance and risk, they should be able to put this together to deliver great payment rails on the banking network.”
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