The payments industry is taking notice of Asia Pacific in a big way. But what trends, challenges and opportunities await those looking to enter this exciting geography? Here Chris Hughes of TNS Asia Pacific explores the pain points and big breaks awaiting payments players in this rapidly expanding region.
Asia Pacific is an incredibly exciting region for payments these days. What trends are you keeping an eye on in 2016?
Cross border keeps us busy, but maybe not in the traditional sense. Large multinationals are relying on TNS to help them expand into Asia and roll out their standardised POS operations, while staying compliant with local regulations and accepting local forms of debt and other payment types.
One trend we’re watching is the way that national debit schemes are emerging and innovating, taking back ground by providing open platforms for integration into new form factors like transit, parking, unattended — places where more traditional schemes have had a head start.
Efficiency and legacy are also interesting points to watch. As technology marches on, the people left in organisations who understand POS/EDC’s and payments are getting rarer, while service quality is more important than ever. In-house teams don’t have the expertise — nor the infrastructure — to run POS at scale during peaks, nor handle the complexity of new security and PCI requirements.
How has this market changed in the last five years, and how do you see it evolving further in the coming decade?
At one time Card Present was the sole remit of the banks. Now there’s a definite trend towards non-bank acquiring, and it’s gaining momentum. Five years ago if I said you could go to a non-bank and get acquiring in four markets you would have said I was crazy; nowadays it’s a reality.
Conversely, banks and processors are being driven into more complex services around ecommerce, so they’re either augmenting their own platforms or rushing to partner with the best-in-class-providers of whatever key pieces of functionality they’re missing.
In the longer-term, I think that payments will be embedded — there are companies like Stripe addressing this space already. Where TNS fits in is providing the most secure, reliable rails to authorise any type of assertion of value to every host in the world. We might be under the hood — unsexy, so to speak — but we’re a very necessary enabler of this payment future.
TNS has made huge strides in the Asian ATM market, not least with a big product launch last year. Looking at the market as it stands, what impact do you think your organisation has had?
When I started we had a handful of dial-up ATMs in one country. Now we have more than 11,000 ATMs in seven countries, and demand is growing every day. We’re leveraging our experience to expand and tailor our network to suit the local dynamics of the growing and maturing Asian markets — Malaysia, Thailand and others.
What pain points are your team looking to address next?
The opportunities in the developing markets are enormous; cash hasn’t been displaced anywhere near as much as it has in developed markets. So, while credit vs debit still duke it out, ATMs meet the cash economies and cultural practices of these growing markets.
In terms of pain points, keeping up with forward migration and innovation is a big one — we were only recently talking about 4G, and now we’re talking about 4GX, 5G and so on. It’s tough for OEMs and 3PP providers to keep up with. What does that mean for ATM and POS fleet owners? What roadmaps should they adopt, which technologies and partners should they be counting on to help them maintain and grow?
2G end-of-life is real, and it’s going to cause a lot of pain and drive a lot of investment and upgrades in a very short timeframe. This transition is good for the industry and consumers in general, but it’s a lot of hard work to get there.
What are some of the greatest challenges of operating in the Asia Pacific geography?
There’s a lot of complexity between regional telcos. Supplying that functionality seamlessly to our customers is a challenge we’re facing.
There’s also a challenge in the differing banking regulations and standards across each region — they vary greatly. Encryption standards also vary between markets, with government regulators mandating in in some geographies while others let prevailing global standards apply. PCI-DSS is poorly implemented and enforced — or not enforced at all — in developing markets and even mature markets like Taiwan, which is typically held up as a poster child of electronic payments adoption and cashless society, but where PCI isn’t even known or pushed by the relevant actors.
This makes our role as one of the very few PCI-DSS certified independent payment networks for POS and ATMs to get traction, as opposed to banks cobbling networks together in-house.
What big, untapped opportunities do you see there for FinTech providers of all kinds?
As far as opportunities go, there are several megatrends I would call out.
The first is acceptance of non-traditional hardware: think iPads, Thinkpads, Think Mobile and Think CBA’s Albert platform here in Australia.
Payments as a service and managed services generally are also gaining momentum. Where banks and merchants used to invest millions of dollars into capital projects, with compliance and security concerns mounting increasingly smart operators are turning to their partners to come up with ways to share the risk and return on a per-authorisation basis. Traditional players are re-inventing themselves from simply selling hardware in the thousands to building recurring, scalable, managed services businesses. This is a tough challenge and requires a completely different skillset and attitude to address customers and the market.
There’s also opportunity in cloud services. We’re increasingly seeing customer infrastructures scale down to fit in the cloud. This trend will accelerate as traditional payments find their way to the cloud and unlock economic opportunities.
The cost of start-ups is reducing by orders of magnitude, especially in terms of the time and cost it takes to get a new service up and running and to capture a market. TNS has taken an early view; by virtualising our own infrastructure we can ‘spin up’ services ten times faster than we could previously. We make sure that we’ve laid a path for our customers to follow – by looking at emerging markets we’ve expanded our business into 16 countries in Asia. This is where card transactions are either happening or about to, so we’re there to get our global customers going and convert the hearts and minds of the local players, too!
Other macro-trends I would pick out include the Internet of Things. Payments and transfer of value — securely, with integrity — will be critical to this space. TNS has built a great, worldwide platform for customers to wirelessly enable POS devices, wherever they want to operate.
It’s no small feat managing telcos and government regulations along with the technical and commercial complexities of this business. We’ve set some ambitious goals to widen our worldwide footprint for all of our service offerings. Ask me in a year how it went!
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