Payment interoperability in Asia Pacific; Becoming a SEPA indirect participant; Achieving Banking-as-a-Service compliance: Practical considerations;
In this edition of Fintech Wrap Up, we explore the push for payment interoperability in Asia-Pacific, the booming cross-border payments market, and the rapidly evolving digital identity landscape.
Insights & Reports:
1️⃣ Payment interoperability in Asia Pacific
2️⃣ Sizing the cross-border payments market
3️⃣ The current state of the digital identity field
4️⃣ Becoming a SEPA indirect participant
5️⃣ A2A payment services — drivers of adoption
6️⃣ Achieving Banking-as-a-Service compliance: Practical considerations
Curated News:
1️⃣ Tencent offloads stake in British challenger bank Tide
3️⃣ Wise Resumes Signing Customers in India to Tap $32 Billion Remittance Marke
TL;DR:
Hey everyone, welcome to this edition of Fintech Wrap Up!
To kick things off, Asia-Pacific is leading the charge in payment interoperability, with a focus on enhancing cross-border QR code payments. This regional collaboration is laying the groundwork for a global shift towards seamless digital wallet usage, thanks in part to strong public-private partnerships.
On the cross-border payments front, the market is massive, with a staggering $146 trillion in transactions last year alone. While B2B transactions continue to dominate, there’s still plenty of room for growth in the C2C and B2C segments, especially as new entrants challenge traditional banks with faster and more transparent services.
We’re also seeing significant strides in the digital identity space, with digital wallets becoming a key enabler for both identity and payment solutions. The market for digital identity solutions is projected to skyrocket, potentially hitting $116 billion by 2030, reflecting the increasing integration of identity features within digital wallets.
Meanwhile, in Europe, SEPA continues to play a crucial role in the eurozone’s payment infrastructure. For those considering participation, understanding the difference between direct and indirect participation models is key, especially given the complexities around ECB account requirements.
On the topic of A2A payment services, their adoption hinges not just on innovation but on addressing consumer needs across functional, emotional, and social dimensions. Successful examples like Swish and Pix show the importance of meeting these needs to drive widespread adoption.
Lastly, compliance in the Banking-as-a-Service (BaaS) space is becoming more critical as regulatory scrutiny intensifies. Fintechs need to be prepared, not just with robust compliance systems but also with clear business models and proactive monitoring to stay ahead.
In the news, Tencent has sold its stake in the British challenger bank Tide, marking a retreat from its international investments, while fintech startup Tally has shut down after running out of cash despite raising $172M. On a brighter note, Wise is resuming customer sign-ups in India, eyeing the lucrative $32 billion remittance market.
That’s it for this edition. Stay tuned for more insights and updates in the world of fintech!
Insights & Reports
Payment interoperability in Asia Pacific
Upgrades and cooperation in digital payment infrastructure promote payment interoperability and regional integration
Proactive policymakers are quick to catch up with investments in cross-border digital payment infrastructure (‘DPI’) to ensure broader interconnectivity among private endeavours.
One central element in the DPI revolution is government-backed fast payment systems (‘FPS’) where the transmission of the payment message and the availability of final funds to the payee occurs in real time or near real time. According to the World Bank, as of June 2023, some 100 countries had or were implementing a government-backed FPS. 2 Due to the popularity of QR codes in Asia for merchant and bill payments, fast payment arrangements in this region tend to put significant effort into enabling payments through QR codes.
In order to modernize payment systems and promote regional integration, numerous bilateral cross-border QR code payment linkages have been launched in Asia, giving rise to an interoperable QR code payment ecosystem in ASEAN, a first of its kind globally. A few interoperability programs were implemented, highlighting the power of collaborative regional initiatives to fuel the global adoption of digital wallets, including those shown in Figure 8, as well as cross-continental programs such as Project Nexus, which provides payment linkages between the Eurosystem’s TIPS, Malaysia’s RPP and Singapore’s FAST systems.
Sizing the cross-border payments market
The wholesale market amounted to $146 trillion in 2023 and comprises high-value transactions between commercial banks, typically FX trading and related activities.
Non-wholesale cross-border payment flows (sometimes known as the retail market) comprise the following segments:
• Business-to-business (B2B): Dominates the market and includes trade-related payments (open account and trade finance) and the international transfer of funds by multinational corporations. B2B e-commerce transactions also represent a significant share in this category.
• Consumer-to-business (C2B): Includes both e-commerce purchases by consumers and offline consumer payments to businesses, which are largely related to tourism.
• Consumer-to-consumer (C2C): Mainly relates to remittance flows.
• Business-to-consumer (B2C): The smallest segment, this represents business disbursements to individuals including payroll and marketplace payments for sales (e.g., Airbnb paying a host in another country). Most new entrants are focused on low-value transactions, in terms of sizing, in the C2C, B2C and B2B segments, which are currently underserved by banks and traditional payments providers.
Curated News
a16z-backed fintech Tally, which raised $172M in funding, is shutting down after running out of cash
Tally, a nine-year-old fintech that helped consumers manage and pay off their credit card debt, has shut down, according to the company.
