With the implementation of the new Payment Services Act in Japan this year, for example, non-banks can enter the market more easily and start towards offering services that could reduce costs and increase convenience for fund transfers. In a shift that law firm Baker & McKenzie said “could bring about remarkable changes in the fund settlement and the fund transfer businesses”, non-banks are now allowed to send remittances up to ¥1m. While the limits are relatively small at this point, companies and individuals alike can use non-banks to send funds during longer working hours and at a lower cost. Travelex has been one of the first to take advantage of this new market opportunity.
Japan is hardly the only country in the Asia-Pacific region making significant changes in non-bank payments. In China, non-banks have enabled online payments and the market has reportedly been growing more than 100% per year. In contrast to Japan, there has been little in the way of regulation up to this point. In June, however, the People’s Bank of China said that new regulations effective on 1 September require companies that provide online payment services to obtain a licence within one year after the new law comes into effect. The new regulation is designed to make payments by non-bank companies safer, and it could well increase confidence in non-banks’ services.
Admittedly, non-banks have been allowed in some of the other markets in the region for quite some time. In Singapore, for example, the Monetary Authority of Singapore (MAS) says that under the Payment Systems (Oversight) Act approved in 2006, “regulated non-banks of systemic importance may also seek approval from MAS to participate in MEPS, the national settlement system.”
There are still some other markets where change is still significantly slower, too. In India, as HSBC noted on gtnews in July, the Reserve Bank of India (RBI) is still simply focusing on working with banks to make more payments electronic.
In addition to regulatory changes propelling the growth, a variety of multinational non-bank companies that enable funds transfers are actively expanding to take advantage of new business opportunities at large companies and small and medium-sized enterprises (SMEs) alike. Custom House, which Western Union purchased in 2009 to expand into the business-to-business market, enables corporates of all sizes to make international payments cost-effectively. PayPal, long viewed as a payments channel for consumers, is increasing its reach into corporate payments and parent company eBay’s chief executive officer (CEO) John Donahoe recently told Bloomberg that PayPal “plans to focus on exports and cross-border trades involving China instead of competing in the domestic market.” PayPal also signed a deal with Taiwantrade in March that it expects will make payments easier for more than 90,000 SMEs.
The changes in the laws in Japan, China and other countries, as well as the business expansion, point to several significant shifts in payments. First, along with the existing players such as Travelex, corporations have even more options for sending payments beyond just using banks. Second, the regulations going into place look set to increase the security of transactions while, in some cases, enabling more competition.
The implication for corporations is that they may well be able to streamline payments processes both for payments between businesses and for payments from consumers. For banks, as Infosys said earlier this year, “non-bank service providers continue to be formidable competitors” for wholesale payments and “banks need to find their differentiating factor to be the first choice”.
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