For the longest time, owning the consumer payments space has been Asian banks’ key focus

However, the shift is likely to change in favor of the underserviced B2B payment segment and right now banks are coming up short in their offering.

The need for banks to lift their B2B payments game is being driven by three trends.

First, consumers’ use of digital wallets has reached an inflection, where more than 50 percent of purchases are now being transacted using digital wallets for the first time. This is requiring consumer-facing businesses to adapt. Second and related, these businesses – especially at the smaller end – are expecting more from their payment providers for their wider operational needs such as virtual accounts. Finally, increasing consumer banking regulation is heating up (including consumer card interchange) in a way that isn’t affecting the B2B space.

B2B payments at a tipping point for banks

Taken together, it’s a space that’s ripe for growth but the competitive pressure and opportunity on banks to offer real-time and flexible B2B payment solutions have never been more immense, and financial institutions that prioritize B2B payments can grab hold of new market share.

For example, in Japan, trillions of dollars of B2B transactions occur annually, yet only 2 percent are processed through card-based systems. This stark untapped potential of card products in the corporate space has created a race among Japanese banks to launch platforms to better serve their clients. A trend that is now spreading throughout the Asia-Pacific region, where traditional payment systems are lagging far behind the needs of modern businesses.

Of course, Japan is a unique case study; the interest rates are going up and not down. For the first time in 20 years, they moved out of negative interest rate territory this year.

Conversely, those who fail to embrace change risk being left behind. Studies have already shown that one in five retail customers globally have left their bank due to inadequate digital services, and corporates are likely to follow the same pattern.

This is not an entirely new challenge, but the stakes are now higher than ever. As global economic uncertainties subside, businesses are feeling more confident in looking further afield in choosing their financial services partners, particularly as nimble entrants with digital licenses cash in on the opportunity to fix the unmet needs of businesses with modern, efficient payment solutions.

Making the move

Global payment giants like Visa and Mastercard are providing strong incentives for banks to adopt and offer B2B solutions. Banks in key markets including Thailand, Indonesia, Hong Kong, and Singapore are exploring these options to stay competitive.

This leaves Asia’s banking sector at an interesting juncture.

The quandary for banks in recent years has been balancing the reliability of legacy systems with the hyper customization that their customers demand, including those in the B2B space.

However, the solution doesn’t have to be a binary choice between the retention of stable but unsuited legacy or a courageous IT overhaul.

Instead, a middle ground can be forged where technology infrastructure is updated incrementally to enable building on existing strengths while introducing modern platforms that work seamlessly with legacy systems.

Embedding

Beyond updating their technology infrastructure, banks must also focus on integrating their services within the ecosystems that their clients use.

Embedded finance, which is expected to account for up to 15% of bank revenues by 2030, offers a pathway for banks to plug their services directly into the platforms their business clients are already using. By embedding financial services within these distribution networks, banks can tap into new revenue streams and provide greater value to their corporate customers.

This approach is already gaining traction in several markets across the region. Forward-thinking institutions are positioning themselves to offer Cards-as-a-Service and other embedded financial products to meet the evolving needs of their corporate clients. By enabling these seamless financial integrations, banks are not only improving the user experience but also opening substantial new business opportunities.

The time for action is now. Asia’s banking sector is at an inflection point where the adoption of modern platforms and a focus on B2B payments will determine its future competitiveness. Banks that embrace these changes will find themselves well-positioned to thrive in an increasingly digital economy, while those that cling to outdated systems risk being overtaken by more agile, tech-savvy competitors.

The opportunity for B2B payments in Asia-Pacific is huge, and financial institutions must move swiftly to capitalize on it. The future of banking in the region will be defined by digitalization, personalization, and embedded finance. For banks across Asia, the message is clear: adapt to the changing landscape or risk falling behind.

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