The Need for Integrated Cards and Expense Management in SEA: Are the Banks Listening?

Small Businesses Need Cards and Expense Management Solutions
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Rapid digital adoption is transforming the micro, small and medium enterprises (MSME) segment in Southeast Asian (SEA) market. The SEA internet economy is expected to grow to USD 360 Billion in terms of gross merchandise value (GMV) by 2025. The six key markets of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam are home to an incredibly diverse sector of over 71 million MSMEs, with a steadily increasing propensity for digital payments and digital operations.

With 84% merchants expecting 50% of their business payments to be digital in the next 5 years, corporate cards and expense management solutions are an emerging need for SMEs in this market. While challenger fintechs are currently targeting this white space, banks are well-placed to capture the revenue as well as improve their onboarding of and engagement with SMEs. 

A Growing Market for Cards and Expense Management in SEA 

B2B payments are growing rapidly in Asia on the back of strong growth in B2B e-commerce. As per findings by Frost & Sullivan, the broader Asia Pacific region is expected to double revenue from B2B payments between 2018 and 2025, growing at an over 10% compounded annual growth rate (CAGR). Indonesia shows the most promise, with B2B payment revenues expected to grow at 54.2% CAGR in this period. In Vietnam, revenues are expected to grow at 40.2%.

An independent estimate by DBS Bank finds that revenue from corporate cards is the fastest growing segment in B2B payments. In Singapore alone, revenue from corporate cards is expected to account for 7.9% of total B2B payments revenue by 2025, touching USD 1.31 Billion.

But despite the evolution in B2B commerce and payments, expense management processes are still largely manual for most MSMEs, who account for 97% of businesses in the region. Over the past few years, wide adoption of real-time payment infrastructure, interoperability and open banking APIs across the region has opened up avenues for integration and automation of business payments, expense management and reconciliation workflows. Such integrated corporate cards and expense management solutions can help SMEs manage business expenses, pay bills, track financials, enable employees to make controlled business spends, monitor and analyse expense activities, do monthly bookkeeping, all in one place.

Volopay, in Singapore, is a well known challenger card player in this region, offering businesses a platform to issue virtual and/or physical prepaid multi-currency corporate cards in their local currency, and an expense management software that helps track and control all expenses in real time.

Singapore is the leading market with highest credit card and digital payments penetration but Indonesia has ripe growth conditions for B2B transactions and expenses, and Thailand is not far behind (Exhibit 1).

Cards And Expense Management Growth In Southeast Asia

More Than Interchange Revenue At Stake for Banks

SMEs have typically used business cards as a means to access ready cash flow while building up their credit history. But the newer fintech-led capabilities like card-level controls on authorisation and spends, ability to issue virtual cards for specific vendors or spend categories, and automated reconciliation, are fast making corporate cards the preferred means of managing spends even for businesses that may not be looking for a line of credit.

Banks recognise the opportunity and the threat here. As discussed in our previous blog, newer fintech capabilities built on top of traditional corporate cards are offering SMEs compelling alternatives. Moreover, challenger fintechs target specific niche segments within MSMEs—business cards and expense management solutions for SaaS companies is a very successful use case—making it harder for banks to compete on the basis of vanilla offerings. For example, Plate IQ, based in India, offers a corporate card product linked to expense management for hospitality firms. The corporate debit card can help automate transaction reconciliation and reporting, digitising transactions that have historically relied on physical cash, including tip payouts for workers.

For banks, however, a lot more than the revenue pool is at stake. With fintechs targeting more and more of the value chain arising from the digitalisation of MSMEs business and financial operations, banks find the current account becoming further isolated from monetisation opportunities. Exhibits 2 and 3 illustrate the competing propositions available to MSMEs from banks and fintechs. Moreover, they illustrate how an integrated cards and expense management offers the solution provider a gateway to more engagement and downstream opportunities based on business’ overall payments, accounting and operations data footprint.

Sme Business Banking Opportunities Arising Out Of Cards &Amp; Expense Management Solutions

Source: Easing Friction In the Commercial Cards Experience


Cards And Expense Management Capabilities Offered By Fintechs

Banks Should Partner with Fintechs for Cards and Expense Management and Beyond

Banks have been taking note of the changing landscape in B2B payments, and therefore cards and expense management. Several banks in Southeast Asia have already launched digital cards and expense management solutions for business banking customers. Bangkok Bank, leader of corporate banking in Thailand, offers Visa Intellink System to manage expenses and view reports via electronic channels. Customers receive mail alerts for key events, approvals and programme thresholds. It offers a sourcing tool to analyse entire AP spend, including import of non-card activity for a holistic view.

Similarly, Malaysia based RHB also offers an integrated expense management based corporate card for SMEs in partnership with Visa Intellink spend management.

However, B2B payments continue to evolve, and fintechs continue to drive greater and greater integration up the procure-to-pay value chain, unlocking newer revenue opportunities. Banks can position themselves better for the future by looking for a holistic business finance solution, which includes competitive cards and expense management capabilities. For example, India’s third-largest private sector bank, Axis Bank, recently partnered with Open Financial Technologies to launch a complete digital current account proposition for businesses. In addition to enabling businesses to effectively issue virtual cards, manage payments and expenses with automated reconciliation, the account also bundles in capabilities for payroll, bookkeeping, e-invoicing and more.

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