Dig Deeper: Uncover Near-Term Opportunities for Global Banking


The banking sector in Asia-Pacific is full of opportunities in 2022, while facing increased competition. Rapid infrastructure development and emerging technologies associated with the pandemic have accelerated digital adoption across the region.

Industry-wide initiatives, including the migration to ISO 20022, aim to improve the efficiency and security of real-time and cross-border payments.

Many banks are already adopting ISO 20022 for all their payment infrastructures, including SWIFT, BahtNet, RENTAS, RITS, CHATS, PhilPaSS and MEPS+.

In short, regulations, deadlines and new technologies combined make this year a year of breakthrough proposals.

Any financial institution taking a casual approach to flexible deadlines, like ISO 20022 and digital transformation, is playing with fire. 2022 will be the year you compete, or regret not having done so.

Bottomline recently took the temperature of financial institutions globally in our report “The Future of Competitive Advantage in Banking & Payments.”

It shows that financial institutions mainly focus on the fundamental issues; digital transformation, regulation and evolution of financial messaging.

When we dug deeper into our thinking about urgency, five key points emerged:

1. Digital transformation appears to be a top priority

This was by far the most important concern globally, with 64% of respondents prioritizing digital transformation, which is linked to concerns 2 and 3, real-time payments and cross-border payments.

In Asia, this figure has risen to 78%. No digital transformation equals new payment rails and cross-border innovation.

While digitization has been a key objective for many financial institutions over the past decade, the Covid-19 pandemic has accelerated digital transformation developments.

For example, the surge in the contactless user base (estimated at 20% in Asia) and the increased threat of fraud have required banks to react quickly, encourage innovation and ensure compliance and security at the within their infrastructure.

Some insiders will tell you that the potential problem with this implementation isn’t the technology. It’s people. Finance managers who are most responsible for the fundamentals (money in and money out) have no problem with legacy technology.

If finance leaders prioritize legacy technologies, it’s difficult to implement everything in their payment program.

Overall, however, the big banks understand that the infrastructure needs to be modernized, so membership issues at all levels of the organization need to be resolved quickly.

2. Regtech as a growth engine

Asia-Pacific in particular has seen a rapid increase in regulatory requirements over the past decade, leading to an explosion in the use of regtech by financial institutions to stay compliant.

In our research, 64% of global respondents said regtech will become even more important over the next 12 months, with that figure rising to 76% if we isolate respondents based in APAC.

Each country in the region has its own constantly changing regulators and requirements.

This presents an opportunity for innovation and regtech solutions to help financial institutions comply with regulatory differences and streamline internal compliance processes.

We believe that financial institutions therefore see regtech as more than a deadline for business continuity.

They see it as an engine for growth, an opportunity to improve customer service and protection against the growing threat of fraud.

3. Financial institutions need to lace up when it comes to implementing ISO 20022

The findings here are a little concerning. Our report revealed that 13% of banks and financial institutions have started to implement ISO 20022, 15% are midway through and 13% have completed integration.

These numbers drop further for APAC, where only 5% of organizations have already implemented ISO 20022.

The SWIFT CBPR+ deadline of November 2022 is fast approaching and many APAC market infrastructures have already migrated (PhilPaSS – 2021) / are starting to migrate (MEPS+, RENTAS, BahtNet – H1, 2022).

Every real-time system has ISO 20022 as its messaging standard. You can’t take full advantage of Big Data without ISO because you’re using analog messaging.

This means you can’t get the insights that build better customer experiences and new revenue streams.

Universal deployment will lead to better interoperability and standardization between countries as the region migrates to a single messaging standard.

It will be nearly impossible to compete in 2022 without ISO 20022.

4. Industry addresses existing cross-border issues

In our survey, 31% said the biggest obstacle when sending cross-border payments is the cost of “nostro” accounts.

A nostro account is an account that a bank holds in a foreign currency with another bank.

In Asia Pacific, for example, the cost of frozen cash in nostro accounts and other fees burdens the average bank with $1.7 million a year.

Some stakeholders have suggested that the proliferation of central bank digital currency (CBDC) could help address issues associated with nostro accounts.

But that won’t come in the short term. Financial institutions rely on collaboration and coexistence.

“Lack of visibility into the status of payments” and “slow or unknown speed of arrival” were also identified as major issues.

The good news is that we are seeing greater collaboration between central banks in APAC to offer seamless and secure cross-border payments.

For example, in April 2021, the Monetary Authority of Singapore (MAS) and the Bank of Thailand (BOT) launched the PayNow and PromptPay link that allows consumers in both countries to send payments instantly.

Plans are also in place to expand the link to facilitate business transactions across ASEAN.

In November, MAS and Bangko Sentral ng Pilipinas announced an enhanced fintech cooperation agreement to facilitate the linking of real-time and QR payment systems in Singapore and the Philippines to provide instant, low-cost cross-border payments.

The SWIFT Global Payment Initiative (gpi) also addresses these concerns.

The initiative improves the efficiency of cross-border payments, enables end-to-end tracking and provides payment confirmation to the recipient’s account.

SWIFT gpi is used by more than 4,000 financial institutions worldwide and payments are made in more than 150 currencies on more than 2,500 national corridors.

Collaboration between central banks, along with industry-wide initiatives such as ISO 20022 and SWIFT gpi, pave the way for frictionless cross-border payments and the vision of a pan-regional payment system in ASEAN becomes more feasible.

5. Real-Time Payments Hampered by Adoption Barriers

The future of payments is real-time. But it’s prioritization within an already crowded roadmap that will be the biggest barrier to global adoption, according to our research.

Banks and financial institutions have a lot to do from a regulatory and industry compliance perspective, with ISO 20022, SWIFT CSP, and more.

Additionally, COVID-19 has led to a rapid increase in the use of digital payments, putting customer education front and center since 2020.

It’s a little less of a challenge for APAC, which has led the way in terms of contactless technology, apps and QR codes.

Real-time payment technologies have long existed in the region, with Japan launching its Zengin system in the 1970s.

There are now many national payment systems in the region, including Hong Kong’s faster payment system, Singapore’s fast and secure transfers, and Thailand’s fast payment.

However, according to our research, many barriers to adoption still exist, such as restrictive access models and legacy infrastructure.

The good news is that existing national payment systems (such as those in Malaysia, Singapore and Japan) are being updated as efforts are made to improve the speed and reliability of instant cross-border payments, while other payment infrastructures in the region are being developed. .

Migration to ISO 20022 will of course support these efforts.

The result

There’s a difference between driving innovation and feeling compelled to do so. There is also a difference between improving the customer experience and being mandated to do so.

It will be the financial institutions that understand the need to harness innovation to be competitive in 2022 who will be the winners.

Download Bottomline’s benchmarking report yourself and see how you stack up against your competitors.

Featured image: edited from Unsplash

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