Payments

Bringing borderless payments to Asia for smoother e-commerce experiences

Gavin Lock, COO of Senjo Group, took part in a recent interview with Kamran Hedjri, CEO of payment services firm PXP Financial (formerly Kalixa Group). The interview was about the seismic shift and developments in the digital payments industry and how ecommerce is driving change in Asia. This includes the universal move towards cross-border payments and a shift in consumer sentiment that demands “frictionless” payments.

Here are some highlights of the conversation.

Commerce has completely changed over the last three to five years, revamping the ways customers engage with retailers. How has this changed the mix of payment channels that we’re seeing?

Gavin: Ecommerce has been the main catalyst for change. Consumers today are more comfortable buying products and services through e-channels. As the customer experience becomes simpler and personalized, it’s inevitable that people use ecommerce more and more in their daily lives.

Convenience is a key differentiator for online merchants to attract and retain customers. In my mind, this has completely reshaped the way payment channels are set up and delivered.

Kamran: The main change is that customers today expect the same experience across different channels – the Uber experience, which allows you to “book and go” in one seamless step.

There are still variations across regions. The new channels being created tend to be local, which means the payment methods – new cards, wallets, and apps – have to play a bigger role to provide that unified experience. The expectation is increasingly for payments to be instant, which means that there needs to be a more progressive shift from cash to digital and more alternative payment options that the customer is comfortable with.

What have been some of the more interesting developments in payments recently?

G: For me, cross-border payments have been creating a seismic shift in the industry. There’s now a greater demand for merchants to provide services away from their home market. Asian merchants want to access European customers and vice versa, with the ability to move money across borders rapidly and at the lowest possible cost.

Payment companies are creating high-quality, scalable infrastructure to tackle this, which in turn spurs high levels of investment and new market entrants.

K:  I see two major trends emerging. First, the explosion of “wallet solutions” that enable payments at the point of sale. There are numerous examples in Europe, and we saw more of these coming into the fold in Asia. One example is the launch of YouTrip in Singapore in August, a collaboration between EZ-Link, You Technologies Group, and Mastercard.

Secondly, I expect to see more alternative payment methods that work across multiple industry segments, such as digital wallets, vouchers, or prepaid options. We are also seeing a lot of interest in blockchain technology – it’s still in the nascent stages, but it’s certainly a new development we’re monitoring. Its application to payments could be significant.

What can a relatively fragmented market like Asia learn from the likes of Europe, which have adopted seamless cross-border payments?

G: Establishing borderless payments in Europe brought oxygen into the whole payment ecosystem. Standardization removed significant barriers for cross-border ecommerce and created a great deal of value. In Asia, many of these barriers still exist, so there’s still work to be done.

Ravi Menon, Monetary Authority of Singapore’s managing director, hit the nail on the head at the 2018 Singapore FinTech Festival in November when he noted that cross-border payments continue to be a pain point for banks, businesses, and individuals, given the multiple currencies involved.

K: Regulation was the most important part of establishing borderless payments in Europe. Cross-border payments needed supportive regulation there, and it’s the same in other jurisdictions. Once that was in place, it encouraged the growth of e-money and e-banks as well as brought in fintech, which helped boost it further.

Currently in Asia and the US, there aren’t equivalent arrangements where you can transport payment products and services across borders – a missing piece of the puzzle.

We do see some potential for common payments in the ASEAN trade region. At present, it can take six to 12 months to get a local license, and there are challenges transporting the license across borders. The uncertainty isn’t business-friendly.

But there are several players looking at this, such as Grab, Go-Jek, and Alipay, which are challenging the existing payment status quo. We are hopeful that we will start to see progress with these solutions.

What have been some of the more memorable developments in the Asian commerce landscape that you feel will change things globally?

G: Some of the big ecommerce brands are already providing services in more and more Asian markets. For example, Grab partnered with payment businesses like Moca in Vietnam, Lippo in Indonesia, and Maybank in Malaysia.

It’s building payment assets and lowering costs, which then raises a question: how could Grab build these into a point of integration to realize true cross-border payments in the region? Could a Grab user in Singapore send money via their Grab wallet to a user in the Philippines? Will this become a payment method? The potential is enormous.

K:  Stripe’s US$245 million funding in September 2018 was a significant milestone, and it publicly stated that this will help to fund growth in Asia. It will be interesting to see how they develop off the back of this. They announced concurrently that Singapore would become the firm’s engineering hub in Asia Pacific, which makes for an interesting regional play.

I’m also really interested to see how China UnionPay’s agreement with Allied Wallet in Europe will play out and what the penetration will be.

What does the future look like for payments?

G: From my perspective, the future of payments is very promising – payment companies’ valuations look like they’ll continue to increase, and they’re becoming valuable assets. Ecommerce is booming and will continue to grow, which will help fuel the potential of the underlying payment infrastructure.

K: We have spoken about frictionless payments, and I think this is where the future lies. I see a future where payments are so frictionless that they become invisible.

We’ll get to a stage where customers don’t feel the interaction of payments anymore, something you’re already seeing with firms like Honda and Visa partnering to refuel cars seamlessly. AI voice interfaces like Alexa or Google Assistant will be part of this trend, making the whole experience more intuitive. Firms at the forefront of this change will benefit with higher valuations.