The Payments Podcast transcript

John: Hello, and welcome to The Payments Podcast. My name is John Gaffney. I’ll be your host today for this episode, on the changing scene in a region that has 28 countries and more than a dozen different currencies. According to a recent McKinsey report, the region is also the largest contributor to global payments revenue generating over 900 billion in 2019, nearly half the global total.

Role of payments in the Asia Pacific regions overall banking landscape has expanded as well. Now representing 44 percent of aggregate banking revenues compared with just a third as recently as 2007. The region will exceed one trillion in annual revenue this year, and next year. It is a region that has been well ahead of the curve in terms of consumer digital payments, and the past few years have seen a revolution on business payments as well.

We’re talking about a region that’s heavy on diversity and travelling at a speed and scale that make it a dynamic region for digitalisation of payments. To discuss the issues and dynamics of the finest region, I’m joined by my friend Eli Shoshani who heads up the APAC region for Bottomline.

Eli, thank you for joining us, and welcome.

Eli: Thank you, John.

John: I’d like to start out with what has been one of the region’s strong suits, which is instant payments. Now an APAC emerging technology, coupled with the pandemic, have accelerated digital adoption, leading to some astounding usage numbers; 41 million instance payments in India in 2020, 38 million in China.

That strength now is helped by new messaging standard ISO 20022 that will improve data, efficiency, and security. Eli, my question to you is, what are some of the issues that are specific to APAC and ISO messaging?

Eli: Okay John, we must understand that in today on the market, that we are having, and as you mentioned, this is a very dynamic one, bank and financial institutions need to get a move, and to migrate, and also to remain competitive. ISO 20022 is the clement transformation for them. The universal rollout of its leads, and enhance and centralise between countries and industry, is a migration instant messages in standards.

You must use it as a standard to all if you want to communicate, and to actually transfer money between different countries, and do it in a high volume of the course order payments. Many countries in Asia, have their own domestic instant payment schemes and infrastructures and they’re processing billions of them on a daily basis that they want to do.

However, there is still a huge amount that needs to be improved between countries. When we’re talking about trying to work between different countries, we need to have one common language. One common standard. ISO 20022 will be the one that actually will help them to communicate it and allow them to process the instant cross-border payments to where they are.

Try to imagine that in Asia, as you mentioned, there are too many different currencies, too many different languages, we need to bring all of them into one common. An ISO 20022 is the one that will bring them into one single platform to talk about it.

John: So, if there’s changes in cross-border payments, Eli, so many countries in the region, I mean we were talking about this earlier, I was just amazed at the complexities here, but with so many central banks involved as well, this is bound to be a complex issue. Could you kind of make sense of that for us?

Eli: Today the environment and especially here, we’re talking the banks and even consumers, looking for what they want instant payment immediately. People cannot be waiting for 24 hours or three days until the payments will come around, especially under cross-border payments. We need to use a kind of enhanced technology, and especially today after we experienced in COVID 19.

In particular, we know there’s people so far away. We need to give them a platform, that actually they can use - a QR code, contactless payments, mobile wallet. When instant payment for them to expect them to immediately, and not just locally. Not just the Faster Payment that we know. For example, we know the UK Faster Payments or in other countries, here we’re talking about doing cross-border payments, instantly, and the timed things at the same time, to be able to provide them all the information that’s needed in order to be compliant.

If we took for example the SWIFT GPI or what we call SWIFT Global Payment Initiative this has improved automatically how the things to do. It’s like, you have a package with DHL, in the past, when you send the payment you didn’t know where it arrives, where it’s stuck, whatever it is.

With a SWIFT GPI, we know exactly when the message left the banks. Where the message is. Where are things we can do, and we actually can make a payment within 30 minutes, not in two days, so about 40% of today’s cross-border payments can be done in 30 minutes, and if we’re talking about Bottomline say capitalise about this one.

Bottomline news in 2021, we use our API based payments to do the tracking type of things, so we actually help banks and financial institutions to track the payments for where they do but despite the significant improvement in cross-border payments, pinch points remain and the landscape is still fragmented.

Country with the region, not all of them in the same standards and we need to do it, and everyone has to do it at their own pace. Country like Cambodia is different than a country like Hong Kong. Different like country like Australia, Singapore, Malaysia, Thailand and United Emirates. There are quite a large number of countries in South East Asia as well as in Asia and Africa also.

John: It must be hard to manage. It’s amazing that we’re actually making some progress here. I also understand that there’s collaboration within APAC that are forming, to speed the momentum on cross-border payments and instant payments. Let me read you a quote, Eli, as a report from PWC said recently, ‘the establishment of a common platform, can provide tremendous value when applied in a regional context as the digital payments in South East Asia is expected to reach an astonishing $1.5 trillion by 2030.

Obviously, China, India, Australia, Japan are the biggest players. Tell me about how some of these other markets are emerging and how they’re working together.

Eli: We know that [quite the 0:08:06] largest country have been adopting the ISO 20022 as a domestic payment as a Faster Payment in the country. They tried to leverage it, to do it within the region, how to be able to connect. We start to see, like Singapore connected into the Philippines or Singapore connected into Thailand using MAS, Money Authority of Singapore, connected BOT, the Bank of Thailand.

They’re using PayNow in Singapore or PromptPay in Thailand. These are the two infrastructures that are being used. Now you will be able to move money in two different currencies, Thai Baht, or Singapore Dollars, between those countries using the platform of ISO 20022, in both of them, instantly. Of course, there are the limitations on the amount of money that you can move, but you can do it within 15 seconds, move money now between countries.

Not only within the country, also between the countries. We can see this is going to be [among this 0:09:08] also between Singapore into India, and Singapore into Australia, and in the future, we will live to see it more in Singapore with UK and other countries. We will move from regional places into global places, global transformation that we are going to do it in that ones. All of it John, cannot be done just because of a decision of money authority of each country, or central banks. This needs to be done by using the same common language, same platform, and the same messaging type.

ISO 20022 is the one that’s needed. We know that most of the countries by November 2022 need to finish and be able to adopt, and to receive most of their ISO 20022 platforms from MT to Amex messages. This is a big push that’s done by SWIFT and this is how we move payment much faster globally.

John: Let’s talk a little bit about some of the emerging markets in the region, Philippines, Cambodia, Vietnam, that are actually making a lot of progress in digital transformation, as you alluded to. For example, one of the most cash reliant countries in South East Asia, which is Vietnam, has seen one of the highest cashless payments adoption rates in the region. Does this surprise you, and how do you see some of these emerging markets progressing over the next couple of years?

Eli: Cashless and paper money is start to be reducing dramatically, particularly in Asia. You can see it more commonly in China. You can see it in Vietnam as you mentioned. Paper money, as we know, as a regular type of things, we know that it’s a lot related to fraud, bribery, black money, unreported money. Whatever it is. We can see a decrease in cases of paper money in those countries.

The typical one, we can see what happened in the Olympics in China. China has been using the Olympics, and the Winter Olympic Games, digital money. We can see that more and more are moving out. In order for you to move to digital currency, in order for you to use the CBDCs type of things, you need to have a platform that allows you to do so.

The adaptions of cross-border payments on those markets and this particular one is by using different types of platforms and we can see more and more moving into the digitals. We can start to see that every central bank, in different countries, are adopting more and more the CBDC. That is the main thing that is coming up.

John: Let’s talk about the biggest player. We would be remise not to. China is already making some moves, as you alluded to, with digital currencies. What other moves do you see them making within the region?

Eli: We need to be a little bit more updated right now, and we ask ourself, with the world that we are facing right now, between Russia and China and where SWIFT is blocking Russia, can they use, China, as part of the alternative platform and can we see it. As we know, China have developed this sin app 2, which is a Chinese network application services, and actually is the one they’re driving internally but they cannot use it globally.

It’s not a replacement. China still needs to use SWIFT platforms but at the same time, China is developing the Chinese digital currency and this is something that we saw it really adopting in the Olympic games recently and we can see it more and more driving particularly in the country that will move into Hong Kong and will move into other countries in the regions that we will push in this digital currency.

We know that CNY is not the trading currency like the US Dollars or the Euro but still it’s a major player in South East Asia, so we can-not ignore China or the moves they’re doing. The technology that they’re using is well, well, well adopted. The number of ATM machines in China was reduced dramatically.

The paper, cash money has disappeared. Almost disappeared in the country. Everything is digital. Everything is visible and everything can actually be traced by the government to do so.

John: You expect China to make CBDCs their cross-border currency, is that about right?

Eli: It’s going to be a challenge at this point in time. But as you can see, they’re forcing right now and China is a big market. We’re talking about 1.3 billion people live in China. The domestic market is big enough for them to do it. I don’t see it very quickly because they still rely on the US Dollar and the Euro. I don’t see it so quickly changing, unless it will be an official currency to be trading off.

John: We’ve spent the last 10 minutes establishing the fact that this is a complex market. Now I’m going to be unfair to you, and ask you to try and sum up these dynamics in APAC. If there are three top issues, what would they be, and how does the company like Bottomline play in the region?

Eli: Let’s start with what started our discussions. 28 countries, move the currency that we have in these regions. Different languages. There is no single. It’s not like we have the Euro zone that so many countries use in Euros, except Switzerland and the UK. We’re talking about different currency as there isn’t any dominant currency in that region.

There is a challenge here. The other stuff is how we make the whole international payments, and the network connecting them together to be able to do it. We need to have a platform, and not only SWIFT. Also recently Bottomline is playing very strongly with Visa B2B, which is also another alternative, to do it for the cross-border payment.

The reason that Visa is such a strong player here, is because of the fact, there’s a lot of what we call exotic currencies with the exchange rate. Also, less dependency on correspondent banks because we’re talking about in Asia, for large amount of banks that rely on a lot of cross-border payments, and depends on a lot of larger banks that will provide for them the nostro and the vostro accounts that’s needed.

This is another thing. Let’s put on top of it, certain banks digital currencies. Banks are moving. There is another alternative for our money and we can see it in every country they’re building and digitalising. That is something that definitely will become a stronger player. We saw it on the virtual currencies coming up and a different Bitcoin Atrium and all other stuff that’s happening, and the government wants to have its own currency to be able to control it and monitor it as well.

We can see other players that’s coming up. Bottomline is the one whose aggregators are taking all of this, that I’ve just mentioned, and build it up in the platform and be able to host it for them. To host it for the banks and be able to use all their relevant platforms in the world and definitely in our regions, to be able to provide these kinds of services, using Bottomline API, Bottomline connectivity, Bottomline secure payments.

I will use the Bottomline slogans, ‘We’ll do it simple. We’ll do it smart and we’ll do it very secure for them to do it in our region and where we are’.

John: All right, you made sense of it, that’s a wrap. I want to thank you Eli. Eli Shoshani leads the APAC region for Bottomline. Eli thanks for your time, it’s a tough job you have.

Eli: Definitely, and thank you John for giving me the time.

John: Tune in next time to The Payments Podcast wherever you download your podcasts. This episode was ‘scoping the payment scene in APAC’ and I want to thank you for listening and see you next time.

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