Why B2B Payments Is The Next Big Domino in APAC’s Fintech Innovation Waveby Rohit Narang, Managing Director of APAC at Currencycloud June 1, 2022
In the midst of the Covid-19 pandemic, a 2020 McKinsey report projected that Asia’s payments sector would be well positioned to exceed US$1 trillion in annual revenue by 2022 or 2023, despite also forecasting a temporary 1-8% decline in Asia’s 2020 payments revenue.
Fast-forward two years later, and it looks like US$1 trillion may be on the lower side of expectations for digital payments in Asia. The accelerated migration online across all services was also reflected in the digital financial services. In the B2C payments space, mobile-first customers in emerging Asia Pacific (APAC) countries are leapfrogging those in more mature markets, driven by e-commerce and fueling multiple fintech unicorns such as India’s Paytm, Singapore’s NIUM, and the Philippines’ Mynt.
It’s now a familiar sight for your roadside snack stall to accept e-wallet payments via QR codes, but not credit cards. With Covid-19 continuing to fuel social distancing, cash is on the downswing. Market research firm Kantar found that the average number of cash transactions dropped by 11% during the pandemic. In response to the rise in digital payments, the firm has increased its 2025 global online transaction value estimates from US$$1 trillion to US$$1.2 trillion. With rates in 2020 reaching previously forecasted levels for 2025, Kantar believes Southeast Asia has achieved five years of consumer adoption in a single year.
While innovation has continued apace in the B2C space, cross-border payments have emerged as a niche for new challengers – often marketplaces – who cut down processing times, reduce costs, and cut through red tape. With the proliferation of APIs (application programming interfaces) and embedded finance, new marketplaces can quickly offer a multitude of payment options on their apps.
However, these same missed opportunities remain largely unaddressed in the B2B space, where trust remains a major barrier to digitalising cross-border B2B payments. Many SMEs are still willing to put up with exorbitant fees and wait times largely due to fear of losing out on a good deal.
Solving the Compliance Puzzle and Navigating Different Regulatory Frameworks
Across APAC, the growth potential of B2B cross-border payments is huge, largely due to region-specific issues such as how much bank and card penetration in most APAC countries remain lower than North America or Europe.
In countries where branch-based banking is cost-prohibitive such as archipelagic nations (Indonesia and the Philippines) or with rural micro SMEs abound, online-to-offline, e-wallets, and mobile wallets are often complete alternatives to traditional branches and bank accounts. These include India’s Paytm (20 million merchants and 300 million consumers), Indonesia’s GrabKios (formerly Kudo, two million agents), and the Philippines’ GCash (46 million users) and PayMaya (40 million users).
Digitising B2B payments solutions and cross-border payments is a mountain many fintechs – with small agile teams that lack on the ground market expertise – are wary of scaling due to the high cost of compliance with around 32 different regulators across APAC.
For instance, when U.S. companies try to first scale outside their home bases, the European Union would often be the first pit stop because with one license, they are passported to 36 countries (including the U.K.). They would then expand to large Asian markets, Australia or Japan – and the journey often ends there.
Digitising B2B SME payments across APAC as a whole is difficult even for local payments players with on the ground know-how. However, regulators understand the importance of cross-border collections especially as it pertains to exports, and have made strides by working together to enhance cross-border payment infrastructures.
Singapore, for example, has announced three bilateral fintech cooperation initiatives with Thailand (Promptpay), Malaysia (DuitNow) and Australia (Fintech Bridge Agreement) in 2021 and 2022.
In April 2021, the Monetary Authority of Singapore (MAS) announced the linkage of Singapore’s PayNow and Thailand’s PromptPay real-time retail payment systems, through which customers in participating banks in both countries will be able to transfer funds using just a mobile number.
In September 2021, MAS announced the phased linkage between PayNow and Malaysia’s DuitNow. By Q4 2022, customers from participating banks will be able to make real-time fund transfers using just a mobile number, as well as make retail payments by scanning DuitNow or NETS QR codes at storefronts.
In April 2022, the Australia Treasury and MAS signed the Australia-Singapore Fintech Bridge Agreement that sets out a framework for deeper bilateral and multilateral cooperation, support the establishment of fintechs looking to expand into Australia/Singapore, strengthen regulatory and policy linkages, and explore innovation on emerging fintech issues.
These are good first steps, and bode well for fintechs that wish to serve the wider APAC region. However, due to slower innovation in the B2B payments space, fintechs and traditional financial institutions alike may look to Currencycloud’s decades of expertise to build a low-risk, efficient global payment network.
Enterprise-Grade Cross-Border Payments
B2B and enterprise-level progress has been slower, perhaps arguably in part due to the large sums of money, higher security requirements and inherent risks involved.
However, Currencycloud is constantly innovating and building out our global partnerships to deliver and accelerate towards delivering enterprise grade, cross-border payments.
Using the right fintech solutions to digitise B2B payments will streamline processes, provide time and cost efficiencies for businesses, improve cash flows for vendors and provide unique insights as well as transparency to payment flows. SMEs and merchants will also be able to deliver improved shopping and transactional experiences for the customers, building loyalty and generating new revenue streams.
Incumbent banks are often a costly, opaque and time-consuming option for both SME merchants and fintech challengers, thus partners like Currencycloud have flexible and modular solutions to help fintechs expand globally with speed.
Why Now? 1.4 Trillion Reasons
Frost & Sullivan predicts Asia Pacific B2B payments revenue will double to US$1.4 trillion by 2025, at a compound annual growth rate of 10.5%. Thus, the clock is ticking for payments service providers looking to set themselves apart in the burgeoning fintech space.
However, the width and breadth of payment options and providers available globally calls for a targeted approach – be it by jurisdiction, target user, or type of service – to crack the Asia Pacific B2B payments puzzle.
From neobanks, foreign exchange brokerages, remittance platforms, payment gateways, issuers, wealth managers to lenders, payment players need to find the right option for their B2B cross-border money management needs.
For payment service providers who need to get ahead of the competition and leapfrog larger and more established players while continuing to develop key products, the key is going to market earlier and scaling faster by leveraging on a modular approach, through APIs, or white label solutions.