Growth fuelled by a fast emerging middle class, extensive cross-border supply chains, cash-intensive economies with a big appetite for cashless transactions, a booming FinTech scene and some of the world’s most innovative banks. The stage is set for automating cross-border payments in Asia Pacific.
Indeed, Mastercard is one player that has identified Asia Pacific as cash economies ripe for automation. In March, it was in the limelight with an announcement that it is expanding its presence in the Asia Pacific B2B payments market via its partnership with Singapore-based FinTech Eko-Pay. The Eko-Pay B2B solution will now integrate with Mastercard’s inControl platform to automate accounts payable processes.
In launching the solution, the partnership aims to overcome one of the biggest hurdles to a B2B payment programme; supplier acceptance and enablement. In line with best practice, the new solution will include both supplier and buyer portals to boost supply chain visibility and seeks to streamline supplier on boarding. Moreover, the partnership is critically focused on cross-border payments, which, given the multiple currencies within a regional supply chain that spans Asia Pacific markets (think Australian corporate buying Chinese goods), is absolutely paramount.
This partnership is an example of a global financial institution and Singapore-based FinTech addressing B2B payments in the Asia Pacific region (see also our previous blog on the strides being made by Singapore). It’s a tough act to follow, but local players need not be upstaged. Below, we take a look at the potential for local players to collaborate, with a spotlight on regional considerations and a look at Australia in particular.
It pays to be Asia-Specific
Any collaboration between FinTechs and incumbents looking to solve the pain points of cross-border B2B payments and challenge supply chain perceptions must recognise the specific regional variations in what these pain points and perceptions are.
For example, of the Asia Pacific countries, India suffers most from both domestic and foreign late payments, nearly half of suppliers perceive domestic buyers to be deliberately paying late to finance their own business, with some businesses reporting the highest rate of complexity and inefficiency in terms of cross-border transactions.
In contrast, Japan’s supply chain relationships could be considered more trusting as it has the lowest rate of suppliers reporting deliberate late payments in the region. In addition, Japanese businesses are the least likely to complain of banking system inefficiencies delaying cross-border payments. A B2B payment tool that is positioned as being able to improve supply chain relationships and smooth out cross-border transactions may resonate in India, but could be less likely to capture the attention of a Japanese business.
In addition, collaborative efforts to help solve B2B payment issues could do well to identify commonalities in industries and segments across the region rather than defining target audiences at a country-level.
Spotlight on Australia
One country where FinTech and incumbent collaboration would be very welcome in respect of B2B payments is Australia. The Australian supply chain suffers from Large and Mid-sized buyers throwing their weight around to defer payments to smaller suppliers.
A joint report in April 2017 by American Express Australia and SME accounting platform Xero found that late payment practices are “endemic” across mid-sized businesses in particular, while the Council for Small Business Australia has called out “extortionate” supplier payment practices by major corporations.
It is not surprising, then, that Australian suppliers are more concerned about cash flow than regional neighbours, are more convinced that domestic customers pay invoices late intentionally for financing purposes, and have to pay their own suppliers late due to their customers’ late payments.
Regulators are now putting their foot down to ensure fairer supply chain practices. Might a FinTech -Incumbent partnership be well placed to provide solutions that keep the regulators, the corporates and their SME suppliers happy?
Australian banks seem to be all for collaboration, with 64% pursuing FinTech partnerships, a figure which puts them way above the global average of 45%. In addition, 83% of Australian banks report an intention to increase partnerships with FinTechs over the next 3 – 5 years. Many of these banks are already considered more innovative than some of their international peers, so it’s no surprise they are woo-ing FinTechs to play a role in their continuing digital transformation.
However, whatever the banks’ intentions, Australian FinTechs are apparently less than charmed and are having some difficulty falling for the incumbents. Recent research by Ernst and Young suggests that they view building channel relationships and partnering with banks as the second biggest challenge to growth after customer acquisition. And more than any other player in the industry, incumbents are perceived by the FinTechs to be their main competitor, ahead of other FinTechs even. There’s just not the chemistry…yet.
Could the ‘twist of fate’ to bring these two together be the open banking regulations, due to come into effect by mid-2018 in Australia? Whatever the mindset towards collaboration may be, the move is likely to be some sort of catalyst. FinTechs and incumbents will have to work together in sharing customer data and tapping into each other’s systems, whether they like it or not. Time will tell, however, whether this nurtures a happy ever after.
 Atradius Payment Practices Barometer Australia, October 2016
 PWC, Global FinTech Report 2017
 EY FinTech Australia Census 2016