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Cross-border payments have long been a contentious issue across Asia, with the transfer of funds across borders expensive, slow and sometimes impossible.

After being flagged as a priority area by the regulators in several countries in recent years, an agreement was reached between the central banks of Indonesia, Malaysia, the Philippines, Thailand and Singapore to strengthen and enhance cooperation on payment connectivity in November last year, with the aim to enable more inclusive cross-border payments.

With agility and flexibility embedded in their DNA, fintechs are purpose-built to enable speed-to-market, respond rapidly to change, and to foster innovation at all levels of business, and can often beat banks on pricing, speed, convenience, and product range.

So, how can incumbent banks compete with fintechs in the crucial battleground of cross-border payments?

Embrace the opportunities that technology presents

To compete with fintechs, banks must adopt a digital-first strategy and embrace next-generation technologies like cloud, AI, biometric authentication, blockchain and machine learning. These technologies are what make fintechs such a threat in the cross-border payments space as it enables these nimble startups to survive on a super-lean budget and operate with agility.

Banks, which have the significant benefit of deeper pockets than most fintech startups, need to invest wisely in next-gen technology to streamline their operations, reduce costs and, most importantly, improve the overall customer experience.

Adopt a customer-centric approach

Fintechs use technology like data analytics and machine learning to truly deliver what their customers want and need, taking a genuinely customer-centric approach. Banks need to adopt this approach and focus on delivering a superior customer experience across all digital touchpoints, including providing hyper-personalised services, simple and user-friendly interfaces, and fast and efficient transaction processing.

Enhancing cyber-security and leveraging data analytics to gain insight into consumer behaviour can also help banks to meet their changing demands of consumers.

Focus on the needs of the SME segment

Small and medium-sized enterprises (SMEs) - often referred to as micro, small and medium-sized enterprises (MSMEs) in Asia due to the proliferation of one- and two-person operations – are the backbone of the economy yet have not been seen as an important customer segment by many established banks for decades, often deemed too high-risk or not valuable enough to focus on.

However, banks ignore this customer segment at their peril, with the overall SME sector experiencing phenomenal growth in recent years, particularly as the digital economy has strengthened and consumer confidence in online transactions has risen. Fintechs have pounced on this segment, making enormous headway in the SME banking and lending space, with non-bank share expected to rise to 17% by 2024, from just 5% in 2014 (McKinsey, 2023).

As more and more SMEs in Asia look to expand internationally, and cross-border payments become an even more crucial business need, banks should capitalise on the opportunity to offer innovative, all-in-one business banking solutions that encompass not only cross-border payments, but also foreign exchange, lending, and other high-quality solutions. Banks – with the benefit of size, reputation and a large existing customer base - are ideally positioned to capitalise on the SME market by leveraging next-generation technology.

Think and operate more like fintechs

Many incumbent banks across Asia are coming to the realisation that they can’t continue doing what they’ve always done – they need to drastically alter the way they think and operate to compete against fintechs in this new era of digital financial services. Today’s consumers demand speed, agility and convenience from their banks and payment services, and maintaining the status quo is simply not an option if banks are to remain relevant.

Banks need to truly focus on the customer experience – with price and speed central considerations – if they want to retain market share, and actively embrace new technologies and new ideas. Put simply, they need to think and act more like fintechs, leaving old ideas and – crucially - old technology behind.

It is those banks that embrace next-gen technologies and allow evolution in the way they operate that will be able to win the cross-border payments battle against fintechs.

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William Dale
Will is responsible for driving growth of the business across the APAC region. During his career, Will managed large enterprise transformation projects and he now works on technology architecture, business models and consumer product strategy with neo-banks, tier one banks, fintechs and financial brands who rely on the Mambu platform to provide banking, lending and BPaaS services.
William Dale