Future of Payments: Readying for a treasury revolution in Asia

New technologies, coupled with an ever-greater need to embrace and apply them, look set to redefine how treasury platforms and teams operate in the not-too-distant future.

Amid the rapid adoption of digitalisation and automation within all sectors, corporates across Asia Pacific must ensure their payment infrastructure and processes can keep pace with the new landscape.

“The focus of the treasury function is increasingly shifting from being reactive to being proactive,” said Parampreet Thind, head of Asia Pacific Digital Channels and Transformation, Global Transaction Services, Bank of America.

This is a logical next step to the treasury journey proposed in our two earlier articles in this series:

• The five drivers of Asia’s burgeoning payments landscape (Read more here)
• The four components of future payments solutions (Read more here)

Key considerations for tomorrow’s treasurers

In line with solutions in the pipeline, treasurers must pre-empt the various ways in which data and the accelerated digital experience from the pandemic will reshape roles and objectives – both for themselves and their teams.

In particular, three trends stand out that will influence their future:

1. Real-time payments
2. Alternate payment mechanisms
3. Emerging technologies

1. Real-time payments have become a reality

Many countries in Asia Pacific have already launched real time payment services or are in the process of doing so, making cross-border payments in real time next on the agenda for many regulators.

Notably, the region is also driving the international aspects of these payments. Facilitated by the Monetary Authority of Singapore (MAS) and the Bank of Thailand, Singapore's PayNow and Thailand's PromptPay created the world’s first linkage of real-time payment systems in April 2021 to allow rapid international fund transfers between the two countries with greater transparency and at lower cost¹.

Then, in July, the MAS published a blueprint with the Bank for International Settlements on integrating domestic payment systems onto a single cross-border network to enable instant and secure customer transfers across borders².

A month later, Indonesia and Thailand introduced a cross-border pilot using QR codes to make a real-time payment between merchants in each country³.

“We expect these types of initiatives to expand across ASEAN initially, and possibly even more widely,” said Venkat ES, head of treasury product for Bank of America's Global Transaction Services business in Asia Pacific.

This potentially follows the journey of peer-to-peer payments in the retail sector – with real-time payments now becoming increasingly relevant for business-to-consumer and business-to-business transactions as treasurers can begin to apply a consumer lens to their corporate role.

The expansion of real time payments both domestically and internationally not only opens up new opportunities for treasurers to enhance existing business flows. It also potentially creates new business opportunities and associated revenue streams which were hitherto just not possible. It highlights the increasingly strategic importance of the treasurers’ role in business development and expansion, especially in the ecommerce space.

2. Digital wallet and alternate payment mechanisms will be the norm

The proliferation of alternate online payment channels – especially digital wallets – is an unstoppable shift that corporate treasurers need to prepare for.

Released in August 2021, for instance, the “Asia-Pacific Online Payment Methods 2021 Post COVID-19” report pinpointed an increasing acceptance of alternate payment channels. In South Korea, mobile wallet payments surged by 46% from 2019 to 2020. In China, meanwhile, third-party mobile payments rose by 18% from the third to the fourth quarters of 2020. And in India, the value of mobile wallet transactions is expected to leap by over 80% from 2020 to 2021.

“These countries are far along their digital payments journey,” added Venkat. “As digital wallets and other alternate payment mechanisms become commonplace, this enhances the ability for companies to collect and make payments, even to unbanked populations.”

As these alternate payment channels continue to grow and gain acceptance among the wider population, they present many new opportunities for treasurers to enhance their existing payment flows. It is important that corporate treasuries have a nimble technology infrastructure that can be easily adapted to incorporate these new payment channels into their existing and new business flows. This will help unlock new efficiencies in the payment flows and reduce costs further.

Having the right banking partner who can facilitate this transformation and tap into these alternate payment channels is a key consideration for treasurers.

3. Treasury systems will adopt new technologies

From application programming interfaces (APIs) and blockchain to artificial intelligence (AI) and machine learning – it seems inevitable that corporate treasuries will integrate these emerging tools and technologies into strategies to achieve key objectives of managing working capital and reducing payment costs.

“This is the evolution of the treasury function that we expect to see,” said Param. “In addition to increased efficiency, it will also enable better risk management architecture.”

For example, in a Bank of America study released in October 2020, “Treasury Themes and COVID-19 – APAC Survey”, 49% of respondents (from the 64 corporates researched) pinpointed the need to “adopt new technologies (AI, Big Data, APIs, etc.) and implement more digitisation" as a priority for treasury system improvement.

To achieve this internally as part of the bid to build resiliency, however, will require corporates to marry existing and new infrastructure, as well as transform cultures.

It needs to be seen in sync with the push towards digitalisation, explained Param. “The traditional treasury perspective must be redefined by a new type of interaction between banks and corporates in the future.”

A key part of this is harnessing the new technologies to provide data that can foster meaningful insights. New machine learning and AI-based tools can help automate and facilitate processes like cash forecasting, which even today tend to rely on manual excel-based worksheets. These are cumbersome to use and prone to errors.

Accounts reconciliation is another area which still tends to manual and labour intensive. Here again, many new tools use machine learning to automate the end-to-end process.

One of the key changes over the next few years will be on how corporates engage and interact with their banks. As real time payments start becoming the norm, corporates will move away from their existing file-based, host-to-host connections to real time connectivity with their banks. APIs will drive this, added Venkat. “Real-time collections and payments on the clearing side can only happen when connections between banks and their clients happen in real time.”

Managing uncertainty

Yet with innovation comes risk. Plugging the gap between where many treasury functions are at today amid this evolution, and where they need to be, will rely on greater awareness of the benefits that can come from embracing new ways of working.

“Some corporates need to upgrade their knowledge of new and emerging technologies, otherwise they risk falling behind,” said Venkat.

Addressing the real concerns over security issues is an important step, too. And cybersecurity has become top-of-mind for all corporates.

According to the “CSO Global Intelligence Report: The State of Cybersecurity in 2021”, which surveyed over 2,700 security, IT, and business professionals globally in May and June 2021, 62% of respondents anticipated that a financially driven attack on their organisation. Meanwhile, 71% of organisations said they expect to increase their security budget this year – with attack prevention the top priority, followed by cloud security, data privacy and network security⁴.

It will be essential for treasurers to mitigate these and other risks by leveraging cutting-edge security approaches and solutions. These include end-to-end network monitoring, threat detection/analysis and event containment.

“Bank of America utilises innovative technologies and leading industry frameworks to safeguard every aspect of our business operations,” added Venkat.

Transitioning to a new level of treasury management

By integrating such technologies within treasury operations, corporates will increasingly be able to migrate some of the more process-oriented payments tasks towards automation.

While this will make certain aspects of the treasurer’s role simpler, at the same time it will raise expectations by enabling human capital to be invested in strategic objectives.

“We expect to see a future of the ‘techno treasurer’,” said Param. “This is the path of evolution given the role of technology going forward. Treasurers of the future will be expected to have a better understanding of the various technologies that are available and how they can leverage them to not just streamline the treasury function, but also integrate and provide strategic direction to the rest of the company.”

Ultimately, banks are helping to drive this change by sharing knowledge and technology to make sure clients understand the trends, as well as how they can leverage them to link up to the organisation’s wider strategic goals.

How can Bank of America help make your business easier, smarter and more secure? Watch this video to learn more.

For more information, please visit Bank of America Global Transaction Services
 

Sources
1 - https://www.mas.gov.sg/news/media-releases/2021/singapore-and-thailand-launch-worlds-first-linkage-of-real-time-payment-systems
2 - https://www.mas.gov.sg/news/media-releases/2021/bisih-and-mas-publish-proposal-for-enhancing-global-real-time-retail-payments-network-connectivity
3 - https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_170821.aspx
4 - https://www.csoonline.com/article/3627274/cso-global-intelligence-report-the-state-of-cybersecurity-in-2021.html
5 - https://www.theatlantic.com/sponsored/kpmg-2016/cyber-security-a-failure-of-imagination-by-ceos/912/
6 - 2018 BDO Cyber Governance Survey
7 - https://www.ic3.gov/Media/PDF/AnnualReport/2020_IC3Report.pdf