The Asia-Pacific (APAC) region is spearheading the global shift towards cashless payments, projecting a staggering 108% growth in cashless transaction volumes from 2020 to 2025, surpassing the global average growth rate. This rapid expansion underscores APAC’s pivotal role in shaping the future of digital finance. However, APAC’s financial institutions (FIs) must navigate a landscape rich in opportunities and challenges.
Real-Time Payment Strategies Across Diverse APAC Economies
The G20 Cross-Border Payments Report 2023 highlights significant disparities in digital payment experiences across APAC, driven by economic diversity. Lower-income areas face challenges meeting cost and speed targets due to regulatory barriers, outdated infrastructures, and reliance on correspondent banks for cross-border transactions. These factors contribute to delays, higher fees, and limited transaction options. Bottomline’s Competitive Banking Report 2023 shows that APAC respondents prioritize fair and transparent pricing in the coming year, emphasizing the need to address customer price sensitivity.
With the global surge in digital payments, upgrading payment infrastructure for real-time transactions is increasingly vital. This urgency is underscored by 73% of APAC respondents expressing a strong desire to transition to Software as a Service (SaaS), compared to 60% globally, as reflected in findings from Bottomline’s 2023 survey. Modernizing payment infrastructure is critical for banks and FIs involved in initiatives such as Regional Payment Connectivity, aligned with G20 cross-border roadmaps. Countries like Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam are at the forefront of this initiative, highlighting the interconnectedness of APAC economies. Notably, 32% of APAC financial institutions cite legacy systems as a major impediment, reiterating the importance of embracing SaaS solutions.
Overcoming Challenges in APAC’s Cross-Border Payments
Unlike the European Union (EU), APAC faces unique challenges due to its diverse currencies. APAC banks maintain an average of 58 Nostro accounts, incurring substantial annual maintenance costs exceeding $1.7 million. The rising volume of business-to-business (B2B) cross-border payments in APAC adds complexity, heavily relying on correspondent banking relationships. This dependency limits visibility into payment statuses, costs, and certainty, with the traditional payment process lacking predictability regarding arrival times and final amounts after currency exchange calculations and deductions. Businesses grapple with fluctuating exchange rates, compliance with international regulations, and the need for swift, secure fund movements across borders.
Optimizing Efficiency with ISO 20022 Data in APAC
Maintaining numerous nostro accounts in APAC results in higher costs due to exotic currencies. However, the issue of visibility into payment statuses is less of an issue in APAC where only 20% of survey respondents listed it as their main pain point for cross-border payments efficiency compared to 51% in North America. This difference may stem from earlier deadlines for adopting ISO 20022 connectivity in domestic market infrastructures in APAC and higher Swift gpi usage, which incorporates ISO standards. Concerns about trapped liquidity are less significant in APAC, possibly due to multi-lateral cross-border platforms such as Visa B2B Connect.
Strategically implementing multi-lateral payment rails like Visa B2B Connect addresses challenges and costs associated with managing multiple nostro accounts in regions with diverse currencies. These platforms streamline cross-border transactions, reducing reliance on multiple nostro accounts and enhancing operational efficiency through standardized protocols. Integrating real-time domestic payment connectivity not only injects agility and immediacy into fund movements but also aligns with the G20’s speed target, emphasizing the importance of rapid financial transactions.
Forging Strategic Partnerships for SaaS Transition in APAC
Navigating APAC’s dynamic financial landscape demands agility and adaptability from banks and FIs. To sustain a competitive edge, they must continuously assess global and regional standings, aligning strategies with evolving customer preferences and market shifts. Modernizing infrastructure to support real-time processing within a customer-centric banking model is essential, where ‘always-on’ banking is crucial.
Hosted environments provide institutions with secure platforms for scalability, agility, innovation, and potential cost savings. Cultivating strategic partnerships with experienced solution providers like Bottomline is vital to navigating the path toward SaaS adoption. Collaboration facilitates a smooth transition to a hosted model, offering streamlined access to multiple payment networks via a single API connection, ensuring uninterrupted connectivity.
Ultimately, a SaaS-native bank emerges as a resilient institution, equipped to innovate and adapt proactively to the ever-evolving APAC landscape.
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