Smarter payments for a smarter business

Making payments conveniently, efficiently and securely is a universal objective, and the opportunities for individuals, businesses or government departments to do so are being transformed. As economies in Asia, such as Singapore, Hong Kong, India and China seek to digitise their payments landscape, there is an impact on every consumer and business. By understanding and taking advantage of these emerging opportunities, treasurers can reduce costs, improve controls and ultimately contribute to the sales and supply models that will drive commercial success.


Innovative payment schemes in Asia

Regulators have been increasingly proactive over recent years in driving new, efficient payment developments domestically, with a view to reducing the cost and risk of processing manual payments and cash, improving economic productivity and enhancing security. The value proposition for doing so is considerable; for example, according to a Monetary Authority of Singapore/ KPMG report published in December 2016, the social cost of processing cash and cheques amounts to 0.5 percent of Singapore's gross domestic product (GDP), equivalent of SGD2 billion per annum, emphasising the scale of opportunity. As a result, FAST (Fast and Secure Transfers) was launched in Singapore 2014, while India has introduced Unified Payment Interface (UPI) for instant fund transfers, Thailand introduced a mobile payments system PromptPay and the Hong Kong Monetary Authority is planning to introduce a faster payment scheme next year.

It is not only regulators who are driving or encouraging the adoption of instant payment schemes. The emergence of third party platforms in Asia, such as Alipay, WeChat Pay etc, have also challenged the status quo by introducing both new payment methods and behaviours, particularly for consumer payments. Banks too play a critical role, firstly as enablers of new payment initiatives, but also as innovators in their own right. For example, by developing and leveraging application programming interfaces (APIs) they are facilitating new payment mechanisms and promoting innovation, transparency and automation.

Payments innovation is taking place in conjunction with the shift towards e- and m-commerce, and as a result, a wide range of organisations, from small and medium enterprises through to multinational corporations and government departments, are increasing their use of electronic channels and payment instruments, and exploring the opportunities that these present to develop new business and treasury models. While some industry segments are quicker to adopt new payment opportunities than others, no business can ignore the widespread shift in both consumer and corporate behaviour, and the way that they interact with customers and suppliers.



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Cross-border payment innovation

The growing number of national instant/ faster payment schemes is also raising expectations amongst users of cross-border payments. Emerging technology entrants are challenging the existing cross-border payment model, and are prompting innovation and creativity across the industry. SWIFT's global payment innovation (gpi) is one such example. The aim of SWIFT gpi is to address the cross-border payment challenges experienced by corporate and institutional payment users in particular, initially using existing bank and market infrastructure, whilst also establishing a roadmap for future digitisation and transformation of payments.

The first version of SWIFT gpi went live in February 2017 following an extensive pilot phase with selected banks in all regions. The scheme includes a multilateral rulebook and service level agreement (SLA) to which participating banks sign up. This includes: faster, same-day use of funds (within the time zone of the receiving gpi member); complete remittance information transferred between banks; transparency of fees, and end-to-end payments tracking.

"DBS continually aims to be ahead of the curve in the design and adoption of payments innovation, with focus on improving the customer's journey. DBS was a pioneer in SWIFT gpi as one of the initial pilot banks, and the first bank to process a gpi transaction in both Hong Kong and Singapore."

Atul Bhuchar, Group Head of Payments, DBS


Optimising payment efficiency, security and convenience

While there is significant value to be derived from new initiatives such as FAST, UPI and SWIFT gpi, the priority for treasurers and finance managers is to ensure that their core, day-to-day payment processes are handled as efficiently, accurately and securely as possible. The resilience, capacity and security of a payment banks' systems, processes and controls are critical to achieving this objective. In addition, even within a relatively commoditised payments industry, there remain opportunities for banks to differentiate their products and services through competitive cutoff times, capacity, depth of in-country and regional expertise, responsive service and innovative solutions such as DBS PriorityPay.  

"DBS PriorityPay is a key illustration of the way that bank has differentiated its corporate payments proposition. When a DBS client makes a cross-border payment to another, within the DBS network, funds are credited immediately (as permitted by country regulations).

The ability to make immediate cross-border payments is particularly important for clients operating internationally, with working capital benefits for both payer and beneficiary"

Atul Bhuchar, Group Head of Payments, DBS

In addition to the speed, efficiency and accuracy of payments, security of transactions and information is a top priority for every treasurer and finance manager. Protecting the business from the risk of fraud, whether internally or externally initiated, has always been a crucial driver of treasury processes and controls. Digitisation of payments has been a highly effective way of minimising payments risk, particularly risks relating to cash and cheques, but digitisation inevitably brings its own risks, particularly with the emergence of new cyber threats. However, with the right processes, operational controls, security standards, staff education and bank advice, treasurers can mitigate these risks significantly and take advantage of the benefits that digitisation offers.


From 'disruption' to solution delivery

Many of the current and forthcoming innovations in the payments space leverage existing, proven technologies, but there are also new technologies taking shape. These include distributed ledger technology (DLT), often referred to as 'blockchain', which is the technology behind the virtual currency, bitcoin. There has been a great deal of talk about the potential for DLT to create an entirely new payments paradigm, but as yet, DLT projects are typically still at analysis, first or second pilot stages. At the same time, it is important to adopt a broad-based approach to innovation based on various technologies and adoption models, rather than relying on a single, as yet unproven technology as the basis for future innovation.

DLT development is often encouraged and undertaken by financial technology ('fintech') companies, which are becoming more significant participants in the payments space. While technology companies have always had a major role to play in payments, they have typically been involved in facilitating the process around the payment, such as initiation, approval, formatting, transmission, reconciliation etc. Today, however, we are seeing fintechs focusing on the exchange of value itself, particularly for consumer payments, but increasingly for corporate payments too. Some commentators have described this as a threat to banks, but this is not the case in reality, as payments still originate from and are credited to a bank account, so banks remain instrumental to the process, even if the payments channel itself may differ. Furthermore, there is the opportunity for banks to partner with fintechs in these innovations to deliver a more convenient experience for companies and create opportunities for both sales and supply.

"DBS continues to be closely engaged and motivated as both participant and leader in DLT-related proof-of-concept and pilot projects, and in time, we are likely see a variety of new opportunities emerge that have the potential to enhance or transform existing payment processes.

For example, we are playing a major role inSingapore's project for the next-generation of cross border payments and securities settlement services that uses DLT. These engagements places DBS in a good position to drive and influence the development of frictionless payment solutions in Singapore and throughout the Asia Pacific region, transforming the future to cashless economies."

Atul Bhuchar, Group Head of Payments, DBS


Embarking on a digital payments journey

Developing a new or enhanced payments strategy can be a complex and potentially daunting undertaking, particularly for companies operating in multiple jurisdictions with diverse payment and collection needs, or those that have not embraced digital payments or electronic bank communication channels so far. Centralising payments into payment factories, shared service centres or regional treasury centres can be a valuable way of centralising skills, resources and technology to achieve this. While payments centralisation has been a trend amongst large multinationals for some years, a wider spectrum of organisations is now recognising the opportunities to support international growth, optimise cost and operational efficiency, and increase consistency of payments and reporting.

New initiatives, such as the Central Addressing Scheme (CAS) in Singapore and UPI in India, allow instant payments to be made using only a recipient's mobile number or national ID in the case of Singapore or virtual payment address in India.

Customer behaviour is also changing, so companies' ability to support convenient payments and collections is becoming increasingly important in maintaining their competitive position, both for B2B and B2C payments/ collections. At the same time, however, some business owners will continue to prefer to sign and receive cheques, so payments transformation is not necessarily a simple or linear journey. By providing an experience that is as convenient and intuitive as possible, whilst recognising payment users' needs and challenges, our aim is to facilitate a smooth digital payments journey for our customers.

"Making the best use of digital payments brings significant cost, efficiency, security and commercial benefits to corporations of all sizes. While introducing digital payments and collections may appear more challenging in Asia than regions which are more cohesive in currency and regulatory terms, the speed of change and adoption of new payment innovation is significantly faster in Asia than many other parts of the world.

Therefore, with the help of DBS' proven expertise and solutions, companies can adapt to their business to embrace digital payments, derive its benefits, and position their business to take advantage of future innovations."

Atul Bhuchar, Group Head of Payments, DBS

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