The Complexity of Payments in Asia-Pacific: A Five-Step Guide for Payments Managers
We delve into the complexities of optimizing payments regionally, including the implementation of least cost routing strategies and navigating local regulation.
Collaboration with multiple payment partners across different regions, channels, and payment types is common in today’s globalized business landscape. However, in the fast-paced realm of modern business, characterized by swift technological advances and shifting market dynamics, managing these partners presents a multifaceted challenge.
Payment managers often grapple with pressing questions such as:
- How do I know if I am overpaying for payments acceptance?
- How can I benchmark provider capabilities in newer regions, or new payment types?
- How can I effectively take advantage of routing opportunities?
- How do I effectively align strategy and accountability across multiple payment partners?
1. Audit and Review Payments Costs Regularly
In 2023, JP Morgan flagged more than 82 distinct fee changes by global networks in the Asia-Pacific region alone.1 The intricacies of interchange rates and services changes can already be overwhelming and difficult to manage but – to make matters more complicated – these merchant fees frequently undergo change throughout the year, requiring merchants to keep up to date with the latest rates and conduct regular invoice audits.
Determining if a business is overpaying for payments acceptance requires a thorough analysis of payment processing costs and an understanding of the various factors (including payment methods, inflation, authorization rates, currency conversion) that contribute to these expenses. These regular audits can be crucial to guarantee precise cost evaluations and pinpoint potential cost savings areas.
2. Understand Local Regulations and Market Trends
Expanding into new regions or adopting emerging payment types opens the door to exciting opportunities, but it also introduces complexities when benchmarking payment acceptance costs, performance, and payment method capabilities.
Over the past few years, many notable developments in payments regulation have impacted merchants. For instance, the Reserve Bank of Australia broadened the routing scope for merchants to include digital wallets, unlocking an estimated annual routing opportunity of $800 million.2 Similarly, the New Zealand Parliament introduced new interchange caps, aiming to generate $74 million in savings on payment processing costs.3 In India, the Reserve Bank issued guidelines on recurring and card-on-file transactions, necessitating that merchants modify processing and storage methods in collaboration with their payment provider.4
Understanding the legal and regulatory framework in a given market protects merchants from failing to meet any compliance requirements, as well as ensuring that they don’t miss out on the benefits of pro-competitive regulation. This analysis can help identify a merchant’s key criteria for payments acceptance in an unfamiliar or niche region and provides a valuable baseline for strategic decision making.
3. Leverage Data Analytics Technology and Independent Measurements
Managing a global, multifaceted payments strategy can become a challenging task – even for a large team – without external industry partners and independent resources. Payment forums and communities where businesses discuss their experiences can serve as a medium to engage in conversations about payment acceptance with other likeminded businesses. Merchant-specific payments experts or consultants can also help collate regional or APM-specific resources and provide independent tailored advice by business sector.
Often, these market experts gather payment data, conduct industry surveys, and publish insightful reports on payment acceptance costs that can act as valuable benchmarks into average cost and local complexities by region and payment type. Some also offer regular, independent audits of the business’s interchange fees, assessment fees, processing fees, and any additional charges to identify unexpected overcharges and highlight opportunities for optimization.
4. Identify Key Service Provider Partners and Assess the Scalability of Local Payment Infrastructure
Identify and reach out to a mix of relevant global, regional, and local service provider partners for a provider overview, considering their business models, service levels, and capabilities including alternative payment methods and routing mechanisms supported.
Some markets like Australia and Singapore often have global providers in operation that allow easy integration for global businesses, while other markets like South Korea and China, primarily dominated by local payment providers, may require additional resourcing to find a suitable localized integration. Assessing the existing payment infrastructure by market – including POS systems, mobile payment solutions, and online payment gateways – can help develop a strategy for global payments acceptance without compromising on the customer experience at checkout.
Processing globally can also result in the complex management of multiple payment providers. To read more about multi-acquiring solutions, read our blog here.
5. Become Familiar with the Routing Options Available and Find the Right Routing Partner
Each geography has its own unique mix of network options, often an aggregation of global and local networks all charging varying fee structures. Availability of multiple payment network options can vary by market depending on the prevalence of co-badging or routing enablement requirements set by the country’s governing authority. In certain countries like Malaysia or Australia, the governing authorities monitor co-badging and routing availability for merchants.
Working with an experienced partner is important to understanding when and how to route transactions through the most cost-effective channels based on different card types (credit, debit, prepaid), authorization rates, and regional differences. Developing a data-driven, informed routing strategy for all routable volume is critical to managing cost, increasing approvals, and ensuring optimal efficiency.
To learn more about enabling least cost routing in Australia, check out our infographic.
Empowering Payment Managers with Sophisticated Payments Strategy
The intricate web of global payment management demands meticulous attention and strategic expertise. For multinational payments managers, a strategic approach is key. Regular audits and reviews of payment costs, staying informed about local regulations and market trends, leveraging data analytics technology and independent measurements, identifying key service providers, and assessing the scalability of local payment infrastructure are all vital components of a robust global strategy. Additionally, becoming familiar with available routing options and choosing the right routing partner play pivotal roles in ensuring efficient and cost-effective payment management on a global scale. By prioritizing these components, businesses can not only optimize their payment processes but also gain a competitive edge in the ever-changing landscape of global payments.
As an independent merchant payments advisory working with some of the largest Asia-Pacific merchants, CMSPI sets itself apart by offering comprehensive and localized insights and measurements for robust, data-driven decisions. CMSPI’s tailored advice and analytics go beyond just reviewing payment processing costs but takes into account market trends, relevant payment regulation, and merchant advocacy. This consolidation of resources helps empower merchants with the tools and data necessary to optimize their multinational payment strategies and make informed decisions – based on accurate and precise insights.
4 Deadlines were extended to September 2024. https://merchantriskcouncil.org/advocacy/reserve-bank-of-india-rbi