Future of Payments:
Navigating New Payment Opportunities: Why it Matters for You



Rajakumar Ramalingam,
Asia Pacific Region Head, Domestic Payments & Receivables, Treasury and Trade Solutions, Citi

Nick Howden

Nick Howden,
Asia Pacific Ecommerce Market Management Lead and Treasury and Trade Solutions Head, New Zealand, Citi

Arafat Sheik Jabbar

Arafat Sheik Jabbar,
Asia Pacific Digital Channels Head, Treasury and Trade Solutions, Citi

Companies in all industries are forming integrated ecosystems connecting partners, suppliers and customers to provide a cohesive, end-to-end customer experience1. Efficient, frictionless payments and collections play an essential role in achieving this.

New payment and connectivity opportunities have emerged quickly across Asia and beyond, including national instant payment schemes and mobile wallets. In conjunction with these innovations, however, we have also seen new ways of integrating these payments into the customer experience, effectively making it easier to pay suppliers and make refunds to customers, and receive payments from customers.

While payments and collections have accelerated to create an ‘on demand’ customer experience, the same convenient, dynamic and on-demand experience needs to be replicated at a corporate level. This has led to the rapid growth of connectivity through application programming interfaces (APIs), both in treasury and shared service centers (SSCs) and to integrate payment services directly into customer channels.

The scale and pace of innovation in payment methods, payment mechanisms and connectivity for the exchange of data and transactions can appear bewildering. As a result, it can be difficult to identify which opportunities are most relevant and offer the greatest potential for the business. In this article in the Future of Payments series, we aim to demystify some of these opportunities to help treasurers, finance managers and sales teams develop and support new and emerging payment types and business models.

Navigating new payment and collection opportunities

Credit and debit cards remain a convenient and costeffective payment method, both for point of sale (POS) and online transactions.

Increasingly, consumers are choosing to connect cards to smartphones, as opposed to carrying physical cards, therefore enabling card transactions to be integrated closely into both the POS and online purchasing experience. However, while the use of cards is prevalent in mature economies such as Australia, Hong Kong, Japan, New Zealand, Singapore and South Korea, they are less widely adopted in other Asian economies. There are various reasons for this, not least a lack of consistent access to data required for credit scoring in some countries. Lower levels of financial inclusion, specifically access to credit products is another, as well a high costs associated with card payments to merchants where interchange is not capped.

Consequently, the plethora of new opportunities to pay and collect more efficiently (figure 1) that have emerged, including instant payments, digital and mobile wallets, complement the need for cards and overcome some of the challenges in markets with lower financial inclusion.

Fig. 1

Using digital payments to enhance customer experience

Encouraging customers to use efficient, secure and instant payments is a major step in helping the company to pursue its digital business strategy, optimize its operations, and ultimately creating the experience that customers expect.

Making it easy to pay – key components

A range of opportunities have emerged to integrate payments more closely into the overall consumer experience, making it easier and more convenient to make payments, whilst providing rich data to the company for rapid reconciliation and analysis. These include:

QR Codes

In China, Hong Kong, India, Singapore and a growing number of other locations, buyers can purchase and pay instantly from bank accounts simply by scanning a static or dynamic QR code with their mobile banking app. The buyer’s address and shipping details can be stored in the seller’s app, so customers benefit from a more frictionless check out experience. At the same time, the seller’s bank account details and reconciliation data can be stored in the QR code in order to enable faster reconciliation of the transaction for order fulfillment, shipping and improved customer service QR codes linked to instant payments can be a fraction of the cost of credit cards to process with a similar payment experience, achieve real-time access to working capital as settlement happens within seconds, do not require a PCI license, and provide automated reconciliation.

Proxy addresses

The need to set up payees’ bank account details in order to push a payment can be an obstacle to the use of digital payments, and can be a perceived disadvantage compared with paying one-off payments via cash, checks or cards. In countries such as India, Singapore and Thailand, the ability to use mobile phone numbers or national identification details to easily route payments to bank accounts overcomes this issue.

Proxy addresses encourage digital peer-to-peer payments, but also enables companies to pay more securely and cost-effectively than cash and checks, but without the need to request or store bank account details. Customers have a better experience, as they receive refunds and insurance payouts etc. more quickly, while temporary workers and contractors avoid the need to receive and bank cash or cash checks.

Supporting the ‘instant’ customer experience

Having made a payment to buy goods or services, customers expect immediate fulfilment of orders. To do this, the company needs to be able to identify, reconcile and post these flows to match a sale to the payment automatically. While these activities have always been important in avoiding delay or friction in supply chains, many treasurers and finance managers are now dealing with a higher volume of lower value (or ‘micro’) payments than in the past as they adapt their business models to deal more directly with end customers rather than invoiced bulk flows with a distributor or reseller.

Consequently, automated reconciliation and account posting has become business-critical in creating an instant experience for customers, accelerating supply chains and driving competitive advantage. Best in class reconciliation solutions relies on four elements:

Fig. 1

Driving dynamic transactions and data processing

As flows increasingly take place 24/7, and in real-time, companies need to adapt their organization, processes and systems accordingly. This starts at the first point of interface with customers, such as through mobile apps, right through to the exchange of data between internal systems and with banks.

Increasingly, companies are using application programming interfaces (APIs) to connect across their ecosystems, from customers through to suppliers across the value chain, and across internal systems. While there is a great deal of ‘hype’ around the use of APIs, they do not replace existing forms of connectivity methods. Rather, they complement web-based, host-to-host or SWIFT communications to exchange data and transactions on demand, and/ or in real-time.

The value of APIs will depend on the problem that the company is looking to solve. For example, if internal processes and systems are batchbased and housed in a shared service centre environment that is operating within normal business hours, then APIs will not offer any benefit beyond the file-based data exchange in place already. Or, if payments are released to a batch clearing system (e.g. BACS in the UK, ACH in the US) then sending the file to a batch clearing system via API doesn’t add a great deal of value because the on-demand and instant payment delivery through an API is massively slowed by the local clearing anyway. In this case, a host to host batch file is probably as effective as an API with some added capacity and processing advantages.

Fig. 1

At Citi, we have put together our comprehensive range of APIs into ‘bundles’ around specific industry sectors and business models to address specific pain points and achieve objectives. Insurance companies, for example, are often looking to use APIs to identify and reconcile incoming customer flows to allow policies to be issued instantly, and streamline the process around claims management and payment. They also like to verify a claimants details via API before payment to speed up claims processing.

Our clients are also developing their own APIs based on our services. Citi’s Institutional API Developer Portal accelerates onboarding and technical testing by providing a fast, convenient and secure sandbox environment.

New payment innovations have the potential to transform the way that companies do business and engage with their customers and suppliers. Likewise, there are complementary developments taking place in parallel to enable treasurers and finance managers support the changing needs of the enterprise and the wider ecosystems in which they operate.

In the next feature in this series, we drill down into some of the implications of the shift towards increasingly instant, digital payments and collections in more detail, and how they are being used in practice to support new and emerging digital business models.

1 https://www.citi.com/tts/insights/articles/article126.html