Change is never easy, but it is a constant. And in Asia, change is opportunity for banks looking to expand their business, if only they would embrace the shifting landscape of technology.
In the latest Data Drivers, Sean Lam, CEO of Jewel Paymentech, told PYMNTS’ Karen Webster that the merchant acquiring business in Asia is one where occupational hazards exist, but successful navigation can bring banks to more lucrative and rewarding revenue streams, along with keeping existing customers happy.
Data Point One: 14 days
This is the number of days it takes a bank to onboard a merchant in order to allow them to accept payments. Much of the onerous timeframe here, said Lam, can be traced to the legacy processes that have been the hallmark of banks and financial institutions in the merchant acquiring business. He noted that the average length of time it takes to get a point-of-sale (POS) or an eCommerce device set up in Asia — “if you look at it from a typical merchant” operating on a small scale in Asia — can be up to a month or more.
Providing data becomes an endeavor that is manually intensive, said the executive, especially when it comes to satisfying “know your customer” (KYC) requirements. Most banks in Asia would require a merchant to fill out a paper form, then fax (yes, fax) that information, or scan it into email. These processes exist beyond the face-to-face meetings that are typically held with salespeople and other professionals, even while business (and transactions) are taking place on a day-to-day basis.
It’s clear that technology must help close the timing gap here, and fast. “That’s what is really changing in Asia,” said Lam, as stakeholders, such as banks, are looking at technology to speed up processes. The overarching theme is to identify what processes must be improved and what processes can be automated, on both the front and back ends. These automated processes would do KYC and anti-money laundering checks and “connect new data points straight into the back end.”
Easier said than done, perhaps, and, as Lam noted, “there are a lot of things that need to happen … but banks are starting to transition into that whole process … not evolving and not innovating, from a bank perspective, is a problem for them.”
In discussing the differences that may be a hallmark of marketplaces in Asia, versus others such as the U.S., Lam said that in Asia, “most banks that are issuing credit cards also want to go into the acquiring business, and a lot of them basically do not know how to make that money.” And now they are in a pinch as customers are walking away from traditional banks, said Lam, as they choose to go with digital technology companies instead; “2017 and 2018 will be a pivot point for a lot of these financial institutions to [evolve].” It takes time for banks to embrace and effect real change, he explained — roughly a year, or more — from fax-based to wholly digital operations.
Data Point Two: $1.3 trillion
This is the estimated annual amount, in value, of trade in counterfeit pirated goods. The bulk, of as much as three quarters of those goods are sourced from China. Might such sobering statistics make it painful and even fearful for banks to navigate the waters of KYC successfully? Lam said his firm has been endeavoring to make such navigation less painful, through “de-risking the merchant acquisition space.” The risk here, of course, is tied to brand or reputation, where the bank takes on a merchant in marketplaces where those counterfeit goods are prevalent.
Manufacturing, of course, has a strong foothold in China. So does IT, said the CEO, and both are tied to pirating efforts. Pirated goods are nothing new in Asia, said Lam, serving the simple needs of supply and demand. But danger lurks where counterfeiting extends into medicine, where people seeking to sidestep the high costs of their prescriptions may, in fact, be embracing chimeras that are dangerous.
Lam said that his own firm enters the equation when a bank is admittedly “not an expert on [who] is selling pirated goods [such as software or bags]. “Our role is to build in all these machine learning models to detect the anomalies in pricing” and, at the same time, assume the risk that may be tied to taking on these merchants. Jewel Paymentech, he explained, pulls data from unstructured sources and from social media to predict when a merchant-centered issue may arise (for example, internet chatter might alert Jewel to counterfeit activity).
Data Point Three: Four
This is the number of channels that Lam and his firm maintain that acquirers must offer their customers — and handle with aplomb — to stay profitable. Those channels include physical point of sale, eCommerce, mobile and QR codes. Of the first three, said Lam, “they are the ones that everybody knows.” As for the last one, QR, he said that it is quickly and widely expanding in Asia, where movement has been well beyond its humble beginnings as a “cheap form of mobile payments.”
Instead of issuing a card, he stated, everybody already has a mobile phone in China, and the phone can be used at the point of acceptance. Noting the emergence of Alipay and Tencent in China, Lam said that, for example, the 450 million users of Alipay dictate that across Asia, “you need to accept the QR payments,” especially among tourists. “The merchants are going to demand that they be able to accept all forms of payments,” he told Webster.
Against this demand, said Lam, terminal vendors have begun to see a dramatic slowdown, except for parts of South Asia where the regulators have mandated a move from chip-based cards to chip and PIN-based activity. The terminal manufacturers are bringing out terminals that have “better displays” and are now able to display QR codes, he said — and these merchants and manufacturers are acknowledging that they must evolve too, though “it is too soon to see” how it is all going to pan out.
But, one thing’s for sure — if QR code-based payments haven’t already eclipsed contactless in Asia, they will very soon.