By Joshua Bao, Co-founder of SUNRATE

This year, we have already seen businesses such as PayPal create a local wallet in China with a greater focus on cross-border payments. As a pattern appears to be forming, this is likely to be the beginning of a trend in the financial technology sector, supported by modernisation (e.g. the globalising of financial platforms) which has been welcomed in the business-to-business space.

Like PayPal, Payment Service Providers (PSPs) around the globe should be taking advantage of the vast opportunity in Asia, especially China as it has great potential with a 4.8 trillion USD TAM. However, many are unable to, due to their lack of knowledge of the continent’s landscape and financial markets.

This is especially important given emerging trends such as the modernisation of the B2B finance space. As business-facing financial institutions embrace technological innovation, cross-border transactions will be more seamless than ever which should also encourage PSPs from different countries to enter new markets.

As the rise of digital payments continues, PSPs are expected to ride the wave of this growth for their own benefit – and expanding into other markets is a great way to do this.

In order to be able to tap into the continent’s potential, there are key steps Payment Service Providers need to take.

Understand how Pan-Asian markets differs from other countries

To know your clients well, PSPs must understand the markets they’re building products in.This means researching your market’s payment’s landscape, regulations and potential competitors.

Firstly, businesses entering new Asian markets must know how payment transactions differ. Unlike other countries, 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 comes as a result of Pan-Asian countries experiencing a rapid shift to online payments and thus, 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.

Furthermore, understanding local rules and regulations is integral for PSPs 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 therefore ensure they know how business payments between different countries operate.

Lastly, PSPs must be aware 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. 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.

Be aware of what a local partner can bring to the table

Understanding the local market is made even easier by working with someone who already knows the country or area you wish to enter. Doing so has several benefits that PSPs should consider when building their solutions.

One of the most important functions local partners serve is having an already established network. As payment solution platforms have continued to innovate, they have become more open to collaboration than ever, 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 the 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.

Moreover, working with a local partner would ensure PSPs can quickly gain a holistic understanding of a 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.

Lastly, together with a local partner, PSPs can even co-create products and services. As the partner would have a deeper understanding of consumers, competitors and product proposition, a more comprehensive solution could be built.

There are a range of factors that must be considered before entering a new market, but understanding the country/countries you wish to move into is a strong starting point. PSPs must have a detailed strategy ready when entering a new market, especially for countries with as great potential as those within the Pan-Asian region. As markets differ significantly, entering new ones will not be easy, but with the right preparation,knowledge, and local partners, PSPs will be able to overcome the barriers of new territories.