Banks should learn from those that are further along the modernization journey
While the cross-border payments market in Southeast Asia is moving quickly, governments and regulators sometimes move at a slower speed than the industry itself, which banks, financial institutions and even fintechs need to understand and for which they need to plan accordingly. Given the enormity of the real-time payments opportunity, all players in the ecosystem need to be aware of each country’s nuances. By doing so, they can ensure they are a part of their market’s real-time payments journey.
Some domestic markets in the broader ASEAN bloc are at an early stage in terms of payments modernization, which allows them to learn from the more mature markets and grow their infrastructure in a logical, step-wise manner. For example, while initially some banks implemented short-term solutions to gain access to real-time payments rails, many are now taking the longer view; planning and innovating services based on consolidating real-time payments rails for high- and low-value payments. To achieve their long-term goals, a more agile approach will also help banks, central infrastructures and payment platforms. It will extend real-time payments and related overlay services across the banking and payments ecosystem, for example into the SME/merchant space.
Modernization is not a one-off cost
Financial institutions and other market participants must also be aware of the continual need to maintain and upgrade their systems to keep their networks compatible with cross-border electronic transfer networks. Although initial implementation typically presents the greatest potential impact on existing IT systems, continual upgrades are essential so that organizations stay on top of payments functionality as well as connectivity.
New competitors are emerging – but so are new revenue opportunities
Finally, the nature of cross-border payments is changing. As competition is increasing, payment fees are decreasing rapidly. Merchant discount rates in many markets are near zero, while cross-border fintech challengers are providing global remittances for similarly low fees.
In the future, payments revenue is not going to be driven by the payment fees themselves, but by the value-added services that banks and other financial providers are able to layer on top of the payment itself. It is of vital importance for banks to understand how their market will change, and how they will stay ahead of the curve to remain competitive and profitable.
Download the white paper “Envisioning a pan-regional, real-time payments ecosystem in Southeast Asia,” from Kapronasia and ACI Worldwide