Future of Payments:
From opportunity to reality in Asia Pacific
Asia Pacific Region Head, Domestic Payments & Receivables, Treasury and Trade Solutions, Citi
Asia Pacific Emerging Payments Lead, Treasury and Trade Solutions, Citi
From opportunity to reality in Asia Pacific
Current momentum, scale and pace of digitization in the payments industry can feel bewildering and overwhelming to treasurers, finance and commercial managers. In this period of rapid transformation, effectively identifying and implementing the most relevant treasury solutions can help corporates to further optimize existing treasury management and unlock new business opportunities. In this article, we look at some practical ways in which digital payment, collection and ancillary solutions are providing new opportunities and additional value to companies across Asia Pacific.
Fast and digital account opening
The elapsed time and resource required to open and manage bank accounts can be a major frustration for many companies, risking delay to expansion plans and causing friction with customers and local partners.
Digital onboarding has emerged as a compelling opportunity to accelerate and streamline account opening, signatory management and the rapid adoption of additional bank services over time. For example, now available in 42 countries*, CitiDirect BE® Digital Onboarding now takes only two days. We have replaced hard copy, mailed documentation with electronic signatures and simplified documentation, removing >97% of documentation clauses and >65% of signature requirements. All companies expanding their business into new territories, establishing new entities or consolidating their organizational and banking models following mergers or acquisitions.
Seamless collections and payments
Many companies were rolling out eCommerce offerings before the pandemic, but have subsequently ramped up these initiatives. While the use of cards for consumer payments is prevalent in markets such as Singapore and Australia, it is imperative that companies also support collections through instant payment methods and mobile wallets in many markets across Asia Pacific.
The challenge is that many companies have refined their collection processes over time, and introducing new methods – which differ between countries – risks fragmenting these processes and potentially reducing automation.
To overcome this, we enable clients to accept a wide variety of payment methods such as bank transfers, instant direct debits, request to pay, alternative payment methods and cards, together with consistent bank account settlement, reconciliation and reporting, creating a cohesive and scalable solution to meet evolving collection needs. BMW Group Financial Services have demonstrated the benefit of this approach automating collections through Direct Debit e-Mandates in conjunction with Citi and PayNet to achieve its mission of ‘Making Mobility Easy, Flexible and Affordable’1. Furthermore, the ability for customers to make payments as an integral element of the buying experience, such as through social media accounts or scanning QR codes, creates not only a convenient experience for customers, but also provides the rich transaction data that companies require for reconciliation and customer analytics.
Comprehensive and automated reconciliation
As the example in Box 2 illustrates, receiving payments instantly is only of benefit if the flow can be identified, reconciled and posted to the customer account quickly. Furthermore, at a time when optimizing working capital is a high priority, every company, whether receiving instant or e-wallet-based payments or any other method of payment, need the ability to make use of incoming funds as quickly as possible.
This is the principle behind Citi’s Smart Match, as described in the previous chapter3. Bridgestone India (Box 3) was the first client to implement this solution, which is available and in use by clients across Asia Pacific.
Reducing paying friction with supplementary features
In most cases, companies will aim to pay their suppliers through credit transfers, replacing the use of manual instruments such as checks wherever possible, particularly since the start of the pandemic. However, there are many instances where companies need to pay individuals or SMEs. Where these are regular payments, and where the beneficiary holds a bank account, the use of instant payments may be an efficient, costeffective and faster alternative for both payer and payee.
However, there will also be payments – whether regular or ad hoc – where the company does not hold or wish to collect bank account information, or where the beneficiary may not hold a bank account at all. The tools available to streamline this process are rapidly improving. As the last chapter4 described, the use of proxy addresses, such as mobile phone number, can be a useful way to channel payments to beneficiary accounts instantly without the need to hold or maintain bank account instructions, increasing convenience and security, and reducing administration.
For digital companies operating in the gig economy, this could include drivers, accommodation providers or restaurants participating in delivery schemes. More widely, it could include casual staff or contractors, media content providers, consumer refunds or claims payments to insurance policyholders.
Alternatively, particularly given that 1.7 billion adults globally remain unbanked5, payments to mobile or e-wallets may be the most convenient, timely and secure option. Even for those with bank accounts, e-wallets are closely integrated into the customer experience for online purchases, so are preferred by many consumers and small businesses. As a result, the ability to pay to – and receive from – mobile wallets is becoming essential for any business operating B2C or B2SME.
To leverage these opportunities, the payment process across all payment methods needs to be as straightforward, consistent and integrated as possible. To achieve this, at Citi, we enable our clients to make payments via a single channel, including to mobile phone numbers or other proxy addresses, and to e-wallets. This approach is also essential for companies operating in multiple jurisdictions who need to support different payment and collection methods in each country through using consistent processes and a single channel.
An example is mobile transportation platforms and other digital platform operators, which need to make fast, secure payment to drivers, accommodation providers, restaurants etc. in every country and currency in which it operates. Host-to-host and APIbased connectivity allows the real-time exchange of data and transactions. Citi’s global multi-currency payment capabilities allows these providers to make these payments drivers in a consistent and convenient way, standardizing and centralizing processes without the need to maintain foreign currency accounts or incur FX risk.
Integrated bank connectivity
Underpinning many of the dynamic payment and collection solutions that are driving the digital economy and enhancing both customer satisfaction and process efficiency is the use of APIs (application programming interfaces).
As described more fully in the previous chapter7, APIs enable to access and integrate tailored banking data directly into corporate applications. The use of APIs creates the opportunity to offer entirely new, enhanced services to customers in an automated way, as the experience of Stashaway illustrates in the Future of Payments: ASEAN8 article.
As well as integrating bank services directly into clients’ internal applications, clients are also connecting payment services directly into customer portals to enhance the customer experience. One such example is providing instant loans to retail customers at POS to provide a more cost-effective financing solution for customers than using cards and immediate settlement for the seller without merchant fees. By using APIs to deliver real-time data updates across the value chain, from customer, distributor, bank, credit reference and clearing house, loans can be approved and completed rapidly.
Evolution of use cases
Individual use cases and examples of digital payment, collection and connectivity solutions are useful in illustrating their benefits, but they are essentially ‘static’ rather than reflecting the course of each corporation’s digital journey. The value proposition for these solutions continues to develop rapidly as companies across industries seek innovative ways to digitize their business and operating models, and delight customers and supply chain partners.
We also expect to see the demand for accelerated, integrated payments and collections increase as corporations seek better control and dynamic management of working capital. The challenge is often to accommodate new processes, controls and working practices that this acceleration of payment and collection demands of key business functions. In the article that follows, we look at the implications of an increasingly instant, digital payments landscape on treasury and shared service centers.