Introduction: We were extremely fortunate to catch up with two of Asia’s leading experts in the banking and payments sector - Balaji Natarajan who is the Industry and Innovation International Lead for Australia and New Zealand Banking Group Ltd (ANZ) and Nicholas Soo, Director, Regional Head of Payment Products for HSBC. We took this opportunity to bring to the table, the most pressing topics facing the industry today – what will the impact of alternative payments have on the industry? Could real-time payments revolutionize global commerce and their predictions for the future of Fintech.
Balaji Natarajan is Senior Banker with experience in Transaction Banking and Treasury Services, covering Payments, Clearing, Cash Management and Digital banking services in Asia and currently leads Industry and Innovation, International at ANZ Banking Group Limited and is extremely active in payments, fintech and web3 communities.
After a very short stint in the luxury car business, Nick Soo is a career transaction banker who is currently Head of Asia Payment Products, for HSBC’s Global Payment Solutions business. He is active in various payments, fintech and web3 communities, including serving as the Hong Kong SWIFT National Member Group chairperson. He “truly believes payments are a critical public good” and wants nothing more than to move the payments industry forward and bring different players together to debate and collaborate, whilst embracing the best aspects of traditional and emerging finance..
Given the astronomical rise in alternative payments in Asia - we’re keen to understand the wider impact on the ecosystem as a whole and wonder if the adoption of alternative payments is indeed a financial inclusion opportunity and could indicate a societal shift in the way we transact by giving the unbanked of developed countries opportunities that were not previously available to them.
What are your thoughts on this Balaji?
Balaji: Payments are a means to fulfil financial obligations, and hence appreciating the context is relevant in understanding the evolution of payment systems as the environment changes. – For example, as we transition from making a payments in person to online, evolutionary and sometimes disruptive solutions emerge. In Asia, the technology adoption has been much faster for uniquely Asian problems, from physical infrastructure, security, and cost to service. Where access to physical branches or literacy (written format) or establishing identity were a challenge, the emergence of digital solutions solving this has also evolved and transformed how payments need to be made – from Instant Payment rails, to overlay services for access – Google pay for UPI. Further the opening of financial services to newer players has enabled implementation and deployment of modern, agile tech stacks with always-on services. It’s also important to mention the critical role central banks play in ensuring the industry is not left to evolve on its own with initiatives like mandatory infrastructure upgrades. Central banks have been a radical force in laying the foundations for innovation and progress
Now whether the under serviced or underbanked in developed markets could benefit from Asian alternatives – say wallets, or instant payments (in absence of carded rails) and industry lead models rather than central banks championing the evolution is critical to the context, it reveals environmental the factors which will have to change if developed countries need to apply and adopt alternative payments from Asia.
And do you think needs to be done to facilitate cross-geographical/border interoperability? Any suggestions how FinTech’s can help in this regard Nicholas?
Nicholas: You raise a very topical question, but one which brings about much more complexity! Why? Cross-border interoperability is a much harder nut to crack, as it introduces more regulatory, legal and data privacy considerations, across multiple jurisdictions. Different countries have different rules that may prohibit the sharing of information of banking data across borders, whilst some may have onshoring requirements for hosting customer data.
We have certainly seen a few notable FinTech’s being successful in tackling this, by being very adaptable to the local market conditions, creative in their approach, and establishing a strong network of partners. It is also becoming increasingly common for banks to partner some of these players, both from the perspective of providing them with banking services / access to domestic clearing, or even leveraging some of the FinTech’s’ services for customer segments or payment corridors.
And what about credit card schemes. Why do you think these remain so powerful? Is it their infrastructure and payment rails, their network, or the global trust they have earned? Or their ability to redefine and develop (e.g., B2B connect)?
Balaji: Card schemes demonstrate the power of networks – a network, which is standard, interoperable (V/M/A) highly throughput and resilient, but most importantly the plumbing to deliver financial products (Credit). It also defines the role or roles each participant can play, and distinct commercial element for each role and lastly playing both the end points – acceptance as well as issuance. It also demonstrates the fit for purpose nature – C2B flows as particular target and specifically for instant fulfilment. Countries have successfully replicated the model for local networks.
Now trying to adopt the same for a different flow – the context again is important - for larger values, lower volumes, would the same network work? Maybe elements especially non tech could be made to, but again the players involved in B2B are different - the environment, the underlying processes and nature are very different. If payment terms are 30 days – what is the most important element in driving this – not the six second payment confirmation, but liquidity and cost of capital for the larger ticket size, as these are not individuals but business entities – who need to have strict processes and controls in place before payment can be made towards fulfilment.
All of this calls for different constructs for solving the problem, the rails, rules and governance alone cannot satisfy the needs of the users, just as football stadiums would not work for chess tournaments. While the organisations operating the rails can be the same, the point is they need to run different schemes – a case in point, NPCI runs Rupay as well as NEFT/IMPS/UPI.
Indeed, an increasing number of partnerships are being formed with Fintech’s, how do you think we should navigate through the complexities of managing customer data?
Nicholas: Let me firstly say that we absolutely welcome partnership opportunities with Fintechs in serving our clients, be it from a distribution or manufacturing standpoint. Fintechs may provide us with new insight and opportunities to deliver enhanced solutions to our clients, or opportunities to leverage their ecosystem to distribute our solutions.
On the point on customer data, it is absolutely crucial, and HSBC applies very stringent controls, guided by our Privacy & Data Protection guidelines. These guidelines outline what information we collect from our clients, how it is to be used, who we can share it with (And under what conditions), and steps taken to ensure it remains private and secure. These guidelines continue to apply if shared with 3rd parties, to ensure compliance to relevant internal and external regulatory standards, and are enforced by audits or 3rd party security reviews, as an example.
What do you both find most valuable being a part of FinTech Connect Asia and what will you be sharing at the event?
Nicholas: We have colleagues from multiple geographies and divisions, which include transaction banking, compliance and asset management. As always, we aim to share our experiences across a range of domains, taking practical yet forward looking views. We will explore how technology and latest market developments present both opportunities and challenges for our clients and the broader industry, and look forward to engaging panel conversations.
Balaji: It’s a very well organised event, and with representation from Finance and Technology service providers it’s an excellent forum to learn about the latest developments in this space. I intend to share observations from exploration and development of CBDC prototype, stable coins, and interoperability with payment systems.
The FinTech Association of Hong Kong is a partner of FinTech Connect Asia 2022 (October 11 - 13, 2022, Raffles City Convention Centre, Singapore).
