Usually, when the topic is cross-border payments, the geography attached to the conversation is the UK and EU. However, as Bottomline’s head of the APAC region, Eli Shoshani says in this installment of the “5Qs With …” series, cross-border growth and unique complexities extend to the east as well. In the region, digital transformation and more cooperation between countries have made APAC prime for cross-border growth. In fact, a recent report from Deloitte claims that the region “is expected to enter a golden age for digital trade over the next three years.” Infrastructure and payment interoperability will be part of that growth, as Shoshani explains.
Bottomline: You’ve been working in the financial services business for more than two decades in APAC. How does it compare to other regions in the world in terms of adopting new payment methods and platforms?
Shoshani: Depends on the country; depends on the technology. For example, when faster payments started in the UK, it depended on outdated architecture. Then Australia came along faster. But in APAC, they’ve been much faster. Singapore took only three years to implement faster payments. China and Japan have been doing it years before anyone else.
Bottomline: There are so many more countries with so many different financial cultures in APAC. Is there any level of interoperability from your perspective between countries like Japan, Australia, Singapore, Korea and China.
Shoshani: The huge difference is in currency. The EU has just one. APAC has ten. The region has made progress in creating systems where people and goods can move from country to country with minimal interference. Not so much with money. There was a time when APAC was trying to create a central bank with one currency to make cross-border finance easier. That didn’t work. However, there are corridors of payments accessibility, such as between Singapore and Thailand, and Cambodia and Thailand. Faster payments have taken off here much faster than a move toward a cross-border system that relies on one central bank.
Bottomline: Which brings us to the progress made among payments networks and progress made in digital transformation. Can you talk about that progress?
Shoshani: You have several dynamics in play right now. The SWIFT network with its gpi service is expanding as the ISO 20022 standards come into play in November. But there are alternatives growing at the same time. For example, the Visa B2B network and exchange takes away the need for a correspondent bank to complete a transaction, and also simplifies the liquidity requirements. So, for example, if a bank in Cambodia wants to trade in U.S. dollars, it would need to have a correspondent bank in the US and it would need to hold in this bank a certain liquidity all the time in order to do the trading. Not so with Visa. Bottomline operates a cross-border payment tracker in APAC that extracts selected information from in-scope SWIFT MT Payment messages and sends the data to the tracker. It enables our customers to leverage our technical connectivity to update and engage with the tracker.
Bottomline: What do you think China's move is next within the region, and how much do you feel they will play a role in controlling cross-border transactions?
Shoshani: It has its own internal network, called CNAPS 3 for processing and tracking all transactions and it’s more advanced than anything else in the world. But the competition for third-party cross-border platforms is an interesting play to watch between the government and its control of financial processes. For example, SWIFT has been allowed to operate in China and handle cross-border transactions. The Chinese move all their exports and all their money through Hong Kong. The problem is that the yuan and the renminbi (currencies) are international trading currencies. They must be converted. Do I expect that to change? Yes.
Bottomline: Final question: What are the top three issues you focus on in APAC as the region and its relationship to the rest of the world changes?
Shoshani: The first issue is the multicurrency ecosystem. We're dealing with a lot of different currencies in different countries. The second issue is that we are seeing internal networks in many APAC countries including India, China and Japan. So, each one of them is building a private network and then trying to get them to communicate with each other. Third-party platforms need to find a way to play within those networks. And the third issue is the potential for Asia to be flooded with digital currencies, as we know China has been aggressive about developing its own CBDC.
Bottomline on 2022
To read more about the trends that matter to financial institutions and companies, visit Bottomline on 2022 and hear from 12 Bottomline team members across fraud and financial crime, banking, and B2B payments.