In 2021 we’ve seen companies like PayPal set up local wallets in China, with a greater focus on cross-border payments. In the future we are likely to see more companies do the same as the finance sector evolves and embraces technology, (e.g. automated processes). Entering new markets is another step businesses, specifically PSPs, can take.
Asia and especially China, offers a vast opportunity for businesses. China currently has great prospects with 4.8 trillion USD TAM. Unfortunately however,many PSPs are not entering new markets due to a lack of knowledge around other countries’ landscapes, rules and regulations. This is an opportunity that should not be missed. With digital payments continuing to develop and improve, PSP’s should prepare to learn about other regions in order to expand their reach around the globe.
With the steps below, PSPs can ensure they are ahead of the curve and ready to enter new territories.
Learning how the Asia Pacific region works
In order to provide the best possible service, businesses must know their client like the back of their hand – and this is the same for PSPs. To ensure you know this, you must research your markets rules/regulations, payments space and competitors.
Businesses entering new Asian markets must first know how payment transactions differ. China and other Pan-Asian markets make local consumer payments directly from cash into an E-Wallet. This differs from states within the US or the EU where cash is often converted into credit first, and then an E-Wallet or neobanks. This is because Pan-Asian countries experienced a rapid shift to online payments and the digitalisation of the financial services industry. It is because of this that PSPs need to understand the different cross-border transactions in the country they’re entering.
PSPs must also understand local rules and regulations when entering new territories. In a Pan-Asian context, this means being aware of the on-shore and off-shore policies. As Pan-Asian countries are restricted when it comes to foreign exchange and cross-border funds flow, some have an onshore and offshore foreign exchange market, with different conversion rates and market mechanisms to aid with cross-border transactions. Service providers should ensure they know how business payments between different countries operate.
Finally, awareness of the different types of existing trade (e.g. Goods trade or Services trade) in Pan-Asian countries and the different documentation requirements for each is very important. These types of trades also have their own sections, for example, within Goods trading there is eCommerce trade, border trade and market-purchase trade amongst other types. Businesses must know the regulations for each of these different trades and have the documentation required before building new solutions there.
Knowing what a local partner can offer
It can be difficult to understand a new market, but this can be made easier when working with someone who already knows the country or area you wish to work within. There are several benefits for PSPs to consider when building their solutions.
A key function of a local partner is to have an already established network. As payment solution platforms have continued to innovate, they have become
more open to collaborating; this means they’re open to working more with other financial institutions such as banks. By working with a local partner, PSPs can save the time of forming new connections with local banks and, instead, leverage their partners’ network giving them faster access to a new market. Businesses can also save money as the resources that would be spent learning about new markets, will already be known by your partner.
Furthermore, working with a local partner helps ensure PSPs quickly gain a wide understanding of a new market. Learning about regulations and documentation requirements from local PSPs is useful as they have direct experience working in that market and could share the practical knowledge they have.
Finally, together with a local partner, PSPs can even co-create products and services. As a partner would have a deeper understanding of competitors, product standing and consumers, a more comprehensive solution could be built.
The list of things to know before entering a new market can feel endless, but understanding the country you wish to grow in is key. PSPs should be prepared with a strong strategy when entering new markets, especially if they are moving into regions with as high potential as the Asia Pacific region. With expansive knowledge and a willingness to learn, PSPs can enter new markets confidently in a globalised world.