THE PAYMENTS CHAMPION

Standard Chartered is actively working with alternative payments providers to operate in its franchise markets. Anurag Bajaj explains why the bank is a flagwaver for paytech

In Asia, the Middle East and Africa, predominantly young, mobile-first populations are powering an explosion in non-cash retail payments.

Propelled by changes in behaviour during the pandemic, McKinsey predicts volumes in those regions will continue to increase by 15 per cent every year between now and 2026. No wonder so many paytechs are queuing up to enter them, while local companies are keen to expand their reach into neighbouring territories, too.

That puts Standard Chartered in an enviable position. It has a wealth of experience working in these markets and, navigating their financial regulations –and it openly welcomes third parties to use its digital rails and infrastructure to move money.

“Standard Chartered covers a very significant proportion of the world’s population through our franchises,” says Anurag Bajaj, Standard Chartered’s global head of banks and fintech.

The bank’s model for capitalising on the growth of digital payments is one of partnering and working closely with fintechs that, Bajaj says, are seeking help with the ‘last mile’ in providing financial services to consumers. It’s especially in this leg of the journey that automation is needed to drive customer growth and financial inclusion.

“[But] we mostly stick to our knitting – we advise fintechs on operating within the rules and regulations and we provide digital connectivity to the local payment infrastructures. The fintechs stick to their strengths by innovating and facing off to the end clients.”

Bajaj notes that around 40 per cent of adults in low- and medium-income countries transacted digitally for the first time in 2022, pointing out: “This is only possible if you have companies focussed on automating the experience, end-to-end.”

Despite the heightened pace of activity in Asia, the Middle East and Africa in recent years, he believes there is still plenty of unchartered territory to cover.

”In large markets with big, dispersed populations and large rural areas, there is significant room for further penetration of financial services. India, Bangladesh, Indonesia, Pakistan and Nigeria are prime examples,” he says.

Meanwhile, what Bajaj describes as ‘national champions’ in digital payments are maturing and spreading their wings.

“Fintechs operating in UAE, for example, would like to operate in markets such as Saudi Arabia and Egypt. We are being approached with propositions for these countries. If a fintech wants to operate in Asia, they don’t want to deal with six or seven different banks across the markets they want to launch in. They probably want to deal with one bank, and our footprint lends itself very well to being that bank.

“We may not have the nimbleness of a small local player, but we have invested heavily in infrastructure to deliver a fairly seamless experience for digitally native companies. If we can’t originate the payment, we would like to intermediate it, because this gives us a whole lot of add-on value which, over time, becomes quite significant.”

An example of such a collaboration was the launch of a cross-border remittance service for AlipayHK and GCash, so Filipino workers in Hong Kong could wire money to their families back home and make it available instantly. The system used blockchain technology and Standard Chartered provided the underlying banking infrastructure.

“The exciting bit is that the remittance wasn’t even delivered into a bank account, it was delivered directly to digital wallets,” explains Bajaj. “So it was instant and cross-border, and the infrastructure was completely bespoke.”

Other tie-ups include an investment by Standard Chartered in Singapore’s blockchain-driven clearing and settlement platform Partoir. Under a deal struck last November, the bank will use Partoir’s blockchain expertise for its wholesale payments and settlements network worldwide. The bank also has a 10-year partnership to help Atome Financial deliver buy-now-pay-later services in Asian markets, including Malaysia, Singapore, Indonesia and Vietnam.

Beyond these bespoke products for specific clients, Standard Chartered has moved into services delivered via API – for example, its Payouts-as-a-Service solution, which was also launched in November and is proving useful for marketplaces.

It allows businesses in the UK, UAE, India, Malaysia and Singapore to manage (among other features) one-to-many payments efficiently. Clients provide details of transactions as they occur, such as a purchase or sale made on an e-commerce marketplace, alongside preferences around who, when, how and how much to pay.

The bank then executes these payments without the need for separate instructions from clients or their counterparties, saving time and money.

Bajaj explains that the bank’s fintech strategy was adapted from its global subsidiaries arm, which provides banking services for the foreign subsidiaries of multi-national corporations. So scale is important, and, likewise, Standard Chartered primarily works with fintechs that are international, or regional and national champions in its footprint. One key reason for seeking the more established players, he believes, is that they ‘are there for the long run and therefore understand the importance of staying within regulations’.

“We've seen firms for whom compliance frameworks and money laundering responsibilities are seen as potential constraints to innovation, but we always emphasise the importance of innovating within the sandbox of rules," he says.

“For example, we worked with a large international household fintech, and helped them revamp their whole know-your-customer (KYC) processes, so that their standards could match those that the local regulators expected, to the come back from past missteps and become a leader in shaping security for the banking system.

“With sanctions or financial crime, the more data you have, the better you are likely to get at pinpointing breaches,” says Bajaj. “By intermediating different types of payments from various channels, we can build knowledge bases necessary to conduct far better surveillance to protect the banking system.

“All these tools don’t necessarily exist today, but through advances in machine learning, we can use the data to deliver trained models that are better equipped to find the needle in the haystack.” extent that almost any bank would now be delighted to bank them.

Looking ahead, Bajaj believes fintechs and banks will stay in their lanes – fintechs innovating use cases for digital technology around payments, and banks providing the underlying infrastructure.

He says: “New use cases and the growth of existing ones will be for fintechs to address, because banks have indeed ceded some ground to them. But we [as banks] need to ensure our infrastructures are suited for fintechs to operate on.

“We have many examples like this where we have worked with fintechs that are not naturally active in our markets and enabled them to operate and compete in our footprint.”

There are clear advantages in a fintech partnering with a bank, but what’s in it for the bank? Bajaj says that, once payments partnerships are in place, banks benefit from the flow of transaction data.

One application could be to improve anti-money laundering detection – which is particularly significant for a bank that has made public its determination to

“That includes investing in exporting more services digitally, linking to real-time payment infrastructures, keeping track of the innovations such as blockchain and central bank digital currencies to assess and decide on which areas to participate in.”

He highlights particular opportunities for growth around digital media and gaming, as the in-game and in-app purchase space has grown dramatically. But keeping track of all these potential payment streams is not without challenges.

“There is huge potential for innovation for both fintechs and banks… but we must avoid becoming distracted, so choosing specific areas and excelling at them is most important.”