In the "Insider Insights" series, we delve into the dynamic and intricate world of cross-border transactions through different perspectives. Today, Southeast Asia's payments landscape is booming, fuelled by local and regional digital wallets, as well fintech innovation. With financial inclusion on the rise, grasping the nuances of this vibrant and diverse market is crucial for businesses aiming to succeed.  

Cross-border Payment Complexity in Southeast Asia

In the rapidly evolving realm of cross-border payments within Southeast Asia (SEA), the landscape is marked by unique challenges and rapid technological advancements. Sujinun Jutakorn (Fah), former senior leader at Xendit, brings a panoramic view shaped by her extensive experience across the APAC region. She dissects the complex world of cross-border payments into C2C, B2B, and B2C segments, each pulsating with its own rhythm and pace.  

The remittances from migrant workers are a significant force in the SEA economy, underscoring the vibrant C2C segment and reflecting the deep cultural and economic ties that bind the region. “This migration also has significantly boosted cross-border payments within the SEA and APAC regions,” Fah explains.  

Overcoming Technological and Regulatory Hurdles

Technology presents both opportunities and challenges. While the Philippines stands out as a technologically mature market driven by the needs of overseas works, other countries in the region face instability requiring substantial investment to maintain performance.  

Fah points out the stark contrasts: “Many countries in SEA still face instability, requiring substantial investment to maintain performance and necessitating individual integration with each bank separately.” This technological disparity, coupled with regulatory discrepancies among regulators, payment gateway providers, and other regulatory institutions, create gaps in data requirements and compliance that must be aligned to make cross-border payments seamless.

“There’s a tendency for some regulators to impose overly strict rules that might not be efficient to enforce or scalable. This creates additional hurdles, complicating the process and impacting the seamless experience for customers,” she adds.

Streamlining Cross-border Financial Flows with Technological Innovations

Over the years, significant changes have transformed the cross-border payments landscape, especially in emerging markets. Fah highlights the widespread adoption of QR codes by central banks in SEA, stating, “This innovation has greatly benefitted customers, fostering a shift towards peer-to-peer payments and personal overseas remittances through bank apps.”  This shift has led to an increased focus on B2C and B2B payments, with providers helping banks improve cross-border payment processes, moving away from the clunky and expensive SWIFT system.

“Today, a lot of banks do not have the foreign exchange (FX) API except the key major regional banks. The goal is to streamline operations, reduce reliance on human-heavy communication like chats and calls, and improve cost efficiency and traceability for B2B transactions,” Fah notes. This transition marks a significant leap forward for the cross-border payments ecosystem, signalling a departure from outdated systems towards a more fluid and cost-effective future.

Cultivating Ecosystem Collaboration for Seamless Payment Solutions

The power of collaboration within the ecosystem has been instrumental in overcoming challenges and fostering innovation. Fah emphasises the role of treasury and product teams in this process: “Usually, the driving forces come from treasury, focusing on optimising costs. Product teams also play a crucial role, especially when serving platforms that cater to other businesses.” The ultimate goal is to enhance speed, reliability, and cost-effectiveness of cross-border transactions.

Looking ahead, Fah anticipates a focus on local collection in underserved countries and optimising treasury FX, particularly in markets with restricted currencies. “Providers are seeking solutions to refine these processes and maximise their profitability,” she explains. This trend reflects the ongoing efforts to improve the efficiency and profitability of cross-border transactions in the region.

While the notion of a world without currency borders may seem like a distant dream, Fah acknowledges the strides made by blockchain and cryptocurrency in moving closer to this vision.  

In her closing thoughts, Fah advises businesses to remain vigilant and collaborative when navigating the complexities of cross-border payments. “Cross-border payments can be very complex, requiring multiple players in the ecosystem. We’ve made progress, like the QR shopping initiative for C2C payments, but there’s still a long journey ahead to achieve a truly seamless solution,” she emphasises. Fintech players such as M-DAQ Global are at the forefront of this journey, working to simplify the process for merchants and providers, making international money movements more manageable and efficient.  

For more information on how M-DAQ Global supports businesses in seamless cross-border FX and payments, visit here: www.m-daq.com.    

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