How to make money from India's four-way payment: from Southeast Asia and the Middle East to Japan, Korea and Europe, a new sample of globalisation of a cross-border payment platform

On 11 June 2023, PayerMax, a cross-border payment solutions provider, marked the opening of its Regional Headquarter (RHQ) in Riyadh with a celebratory event at the Ministry of Investment in Saudi Arabia. This makes PayerMax the first Asian fintech company to establish a MENA regional headquarters in Saudi Arabia.

The news has attracted widespread attention in the industry, and PayerMax's focus on B2B cross-border payment services has once again thrust the cross-border payment industry into the spotlight.

Cross-border payment involves the transfer and settlement of funds between different countries. As a representative of B2B service providers, PayerMax provides merchants with comprehensive cross-border payment solutions, including global credit card acceptance, global payment and fund management services, while ensuring a secure and convenient payment experience.

As industries such as entertainment, gaming, e-commerce and new energy continue to internationalise, the cross-border payment industry, which is closely related to financial transactions, is attracting more and more attention from the public and has entered a phase of rapid development.

Unlike the traditional path of cross-border payment platforms that enter Europe and the US before expanding globally, some emerging cross-border payment platforms have taken a different route in recent years. They have followed the rhythm of internationalised companies, taking over emerging markets before expanding into Japan, South Korea and Europe.

Founded in 2018 and originating in Southeast Asia, PayerMax is one such company.

How does PayerMax move forward on this path in the face of complex financial systems in emerging markets and unfamiliar local cultures and market environments? What are the challenges it faces?

Early deployment: building twin engines in Southeast Asia and the Middle East

As a cross-border payment platform, PayerMax has focused on emerging markets since its inception. Its first strategic move was to establish operations in Southeast Asia.

At that time, many Chinese companies were still focusing on developed markets, setting up independent websites and becoming Amazon sellers in Europe and the US. Through frequent communication with international companies, PayerMax quickly realised that customer and market demand was gradually shifting from crowded Europe and the US to emerging markets.

As a result, PayerMax, ahead of its European-focused customers and competitors, began building a local team in Southeast Asia, liaising with local regulators and applying for payment licences.

In 2020, the outbreak accelerated the global digital transformation, making online shopping, social media and online gaming a necessary part of life during the epidemic. Many international companies spotted the opportunity of the growing digital economy in emerging markets, with an influx of tools, games and social media products into emerging markets such as Southeast Asia. Capitalising on its first-mover advantage, PayerMax met this demand and achieved rapid growth.

"Southeast Asia is a typical destination for Chinese companies going overseas due to its geographical and cultural proximity to China. The epidemic was the first wave of growth for our business," PayerMax's business leader said. After the epidemic, Chinese companies entering Southeast Asia and other emerging markets increased in number, size and level of investment as the global economic landscape changed. PayerMax's reach and scale of business has grown exponentially as its customers have become more global.

As a result of the changing economic situation at home and abroad, Chinese companies are showing unprecedented determination and investment in globalisation at an accelerated pace. This has forced PayerMax to work hard to detect, analyse and respond quickly to customer needs, to understand and enter new markets faster than the customer, and to lay the foundations for the customer's payment network and service capabilities before the customer enters the target market.

However, there are differences in financial systems between emerging and developed markets. Developed markets have mature, efficient and stable cross-border payment systems based on international card organisations such as VISA and MasterCard, as well as global banks and global clearing organisations such as SWIFT.

By contrast, emerging markets lack such an efficient financial system. Their infrastructures are extremely underdeveloped, and the ways in which users make online payments are extremely fragmented, with significant differences between countries. In Indonesia, for example, where most users prefer e-wallets, dozens of e-wallets are prevalent in the market, which significantly increases the cost of accessing payment methods for international companies.

This immaturity also means that payment systems in emerging markets are constantly changing. For example, in South-East Asia, in an effort to develop the digital economy, central banks have recently introduced national standard QR codes, such as QRIS in Indonesia and Thai QR in Thailand.

These changes have made it even more difficult for international companies to globalise, and PayerMax needs to be ready with a "three-way" payment network before its customers enter the market.

"PayerMax, as a cross-border payment solutions provider, is the 'back office' for our clients. We need to prepare our clients with local payment-related capabilities, otherwise they can't fight. It can be said that PayerMax's global presence today is the result of our customers voting with their feet, who are our 'North Star,'" said PayerMax's business leader.

It is this keen insight into customer needs and the market that enabled PayerMax to see the market opportunity before Middle Eastern countries such as Saudi Arabia became popular with the internationalised Chinese community.

In order to promote economic transformation and change the country's dependence on oil and the U.S., countries such as Saudi Arabia and the United Arab Emirates have launched national strategies such as Saudi Vision 2030 and Our UAE 2031, embracing new energy and digitalisation with an open attitude. They have embraced new energy sources and digitalisation with an open attitude. At the same time, the Middle East is seeking to diversify its development, and investment and technology exchanges between the Middle East and China are getting closer. Policy opportunities, coupled with high internet penetration rates, GDP per capita comparable to developed countries, and young demographics in the GCC countries, make the Middle East a hugely attractive market for a large number of international companies.

On the other hand, the geographical, linguistic and cultural differences of the Middle East, as well as the religious and cultural taboos of the Islamic world, make it mysterious and inaccessible.

In 2022, PayerMax conducted its first site visit in the Middle East, with senior management and team visits. "At the time, it was difficult to find Chinese restaurants in Saudi Arabia," said PayerMax's business leaders. The differences in habits and cultural practices were so great that many companies that had previously ventured into the Middle East failed to sustain themselves. However, for PayerMax, this also meant that the local market was relatively low-competition and presented a huge opportunity. After meeting with local central banks, investment authorities and bank officials, PayerMax has a clearer picture of the business environment in the Middle East.

PayerMax quickly entered the Middle East market, becoming one of the first cross-border payment companies to do so. In the same year, PayerMax obtained a payment licence for the United Arab Emirates, becoming the first Asian company to do so. Subsequently, it became the first Asian payments company to open a local office in Saudi Arabia.

By the end of 2023, the Middle East has become a hotspot for internationalised communities, with PayerMax building on its first-mover advantage and amassing a large number of leading customers in sectors such as pan-entertainment, gaming, logistics and e-commerce.

Since then, PayerMax has formed a double-engine layout of "Southeast Asia + Middle East", rapidly expanding into emerging markets such as Latin America and Africa, and beginning to rapidly expand into Japan, Korea and Europe.

The rise of mobile payments in South Korea in recent years has provided an opportunity for PayerMax due to the introduction of anti-trust regulations in the country and the official opening of Apple and Google Play to third-party payments. It quickly became one of the first Asian payment companies to partner with a local Korean e-wallet company.

"If we had started in Korea, we probably wouldn't have been able to open the doors of local financial institutions," PayerMax's business leaders say. Looking back, PayerMax concluded internally that its ability to open up developed markets was due to the accumulation of "friends" it had made in the past. At the same time, PayerMax found that many of its customers, including many leading organisations, were not well served in the European market.

For example, if an international company's product payment process fails over the weekend, and the following weekend is a peak period for user activity, when they approach their local European supplier to resolve the issue, the response may be "we'll try to resolve it as soon as possible on the following Monday". This leads them to passively assume two days of lost business over the weekend.

"The payment business emphasises operations with two key points: attitude and competence. Many international companies tend to choose global branded payment platforms when they go overseas, but in terms of service attitude, these big brands may only be average," said PayerMax's business leader. "This is PayerMax's opportunity."

According to the information, more than two-thirds of the companies in the Top 30 social and gaming lists of iOS and Google Play are PayerMax's clients. PayerMax holds licences from regulators in several key markets, including Singapore, the United Arab Emirates, the Philippines, Thailand, Indonesia, and Hong Kong, and has a presence in more than 150 countries and territories around the world, including Southeast Asia, the Middle East, and Latin America. PayerMax operates in more than 150 countries and territories around the world, including Southeast Asia, the Middle East and Latin America. It supports more than 600 payment methods, over 70 transaction currencies and more than 20 local languages. It also has local offices in more than a dozen locations around the world, including Singapore, Indonesia, the United Arab Emirates, Saudi Arabia and Brazil.

"With the licence, PayerMax can quickly expand its business by connecting with local financial institutions and partnering with great merchants. With the growth in transaction volume and the strengthening of our partner merchants' brands, we were able to secure lower prices and better financial products from financial institutions. More favourable pricing and better product offerings also enable PayerMax to attract more good merchants," said PayerMax's business leaders.

This mutual reinforcement, together with the dual engine of "Southeast Asia + Middle East", formally formed the "flywheel effect" of PayerMax's payment business, and also became the accelerator of its global business expansion.

Consolidation of basic capabilities: building matrixed services

In PayerMax's view, companies at different stages of internationalisation have diverse needs.

At the initial stage, the main need is to build awareness of the local market, such as market potential, competitive intensity and the business environment, including how to set up a business entity, who is the market regulator, and data privacy compliance issues.

After crossing this stage, the need for payment services will emerge as businesses face practical issues such as monetisation and payments.

When choosing a payment platform, international merchants first require the platform to hold a payment licence, with compliance and security of funds being their primary considerations. After that, payment method access becomes important, with coverage being the key indicator. This includes regional market and payment method coverage. The higher the coverage, the more attractive the price is for them.

However, as companies deepen their internationalisation, they will find that even if they find a licensed cross-border payment platform with good coverage and competitive prices, they may still encounter many problems in actual operation.

"The payments business is actually very similar to cloud services, with an emphasis on delivery and operations. Is the payment success rate high enough? Are the payment channels stable? Is the risk control done well? Every part of the process can't be faulty," PayerMax's business leaders said. "This industry emphasises operations and service. Connecting with customers doesn't mean one-and-done. It's very brutal. Customers may cut off a deal every day in favour of a competitor."

Unlike mature and well-developed developed market financial systems, where many operational issues can be resolved within international card organisations, emerging markets such as South East Asia, the Middle East and Latin America have very underdeveloped financial infrastructures, which seriously affect the stability of payment services.

"The payments business is embedded in the core processes of a customer's daily business. It includes not only access capabilities, but also service capabilities. Any mistake can lead to the collapse of the entire business. Therefore, we need to weave the payment infrastructure network from scratch in emerging markets, develop standardised capabilities and deliver them to our customers, while providing them with customised services."

Therefore, PayerMax always focuses on two things: product development operations and localisation.PayerMax has a very large product development team, which makes up the majority of the company's team. In addition, PayerMax has established strong local teams in more than ten overseas offices, which are responsible for handling contacts with local government regulators and financial institutions, as well as opening and maintaining local payment channels.

It's a foundational skill for a cross-border payments company. For PayerMax, the characteristics of emerging markets dictate that the development of foundational payment capabilities is a longer, more arduous endeavour that evolves with market and industry trends. However, it also brings with it more solid, hard-to-break barriers to competition.

As the scale of the service clients continues to expand and the degree of cooperation deepens, in addition to continuously improving the basic capabilities, PayerMax has also accurately identified their pain points and needs through long-term communication with clients, and transformed its experience in compliance, marketing, finance, foreign exchange, and risk control into service capabilities, forming a matrix of "beyond payment" service system. The "Beyond Payment" matrix service system has been formed, enabling the business to develop in a more diversified direction.

Taking risk control as an example, PayerMax does not rely on external risk control companies as is common practice in the industry; instead, it independently develops a complete risk control system using data and technical capabilities accumulated over the years, providing customers with standardised risk control products and customised risk control services according to user needs. Through technical means and professional risk control system, PayerMax controls the fraud rejection rate at 1 in 1,000, reaching the industry's leading level.

For example, in foreign exchange, in order to minimise the impact of exchange rate fluctuations on clients' income, PayerMax has introduced a locked exchange rate service, which allows clients to lock in the US dollar for future settlements on the same day as the local currency transaction, thus enabling them to "fill in the valleys and fill in the peaks". As PayerMax has been deeply engaged in emerging markets for many years, its locked exchange rate service covers many countries where it is difficult for international companies to conduct foreign exchange transactions, and helps customers complete foreign exchange risk management in a convenient and cost-effective way.

On the surface, PayerMax's matrixed services seem to be just the "icing on the cake" of a rich product system, but their essence is the inevitable result of the continuous improvement of PayerMax's various basic capabilities.

"Simply put, risk control systems are a combination of algorithmic models and data. Some of the leading cross-border payment players may have very sophisticated algorithmic models, but due to a lack of in-depth research on emerging markets, it may take a while for their risk control data to build up," said PayerMax's business leader.

Adherence to long-termism: a firm embrace of localised development

In 2023, for the first time, China will have more than 600,000 foreign trade operators with import and export records. According to iiMedia Research, 29.5% of large enterprises have already implemented internationalisation, and 19.9% of large enterprises have internationalisation plans. More and more companies are turning their attention to overseas markets.

However, due to the uncertainty of the global economic situation and unfamiliarity with overseas markets, the internationalisation community is full of "noise" about different regional market judgements and interpretations of trends in different industry tracks, which are often inaccurate or contradictory.

An example of this is the judgement of Saudi Arabia. Saudi society is undergoing very radical changes as a result of the "reforms and openness" that have been implemented in recent years, and Tiger Wang, co-founder of PayerMax, shares his experience of watching eSports competitions in Saudi Arabia.

"I've watched a lot of eSports tournaments, including ones from China and Southeast Asia. But the one I watched in Riyadh was the most shocking. The venue was packed with people and the security guards had set up a long security line. The queue outside the security line was so long that you couldn't see the end of it. There were many young people in the queue, as well as parents who had brought their children to the game."

This is unthinkable in the Chinese context, where few parents are willing to watch eSports matches with their children. However, in Saudi Arabia, thanks to the royal family's strong promotion, video games have gone from being unacceptable in the past to a form of entertainment as popular as sports and cinema. In the face of these dramatic changes in Saudi Arabia, we would be making a huge mistake if we continued to look at it the way we did five years ago or even earlier.

"There are saturated products in big markets and hidden players in small markets," Wang Hu emphasised. Instead of being affected by the various "noises" in the market, it is better to return to the market and the product itself, spend more time to understand the local market and customer needs, and perhaps find more opportunities.

It is fair to say that with the increasing popularity of internationalisation, localisation has become a topic of conversation for everyone in the internationalised community. However, implementing it in practice is not easy.

According to Wang Hu's observation, Chinese companies usually go through several stages when they go overseas: the first stage is the trial stage, which is the way of "airborne troops" to conduct overseas business; the second stage is the beginning of localisation, where the business team enters the market to understand the needs of the local users face to face, and to adjust the product R&D according to the local conditions; the third stage is the beginning of globalisation, where the finance, legal, tax and even HR back-office teams are also globalised. With the expansion of business scale, financial, legal, tax and even HR back-office teams also start to globalise. At this stage, companies will face more and more localisation challenges.

For PayerMax, the key to winning localisation is twofold: business competence and organisational culture.

The so-called business capability mainly refers to product strength and user operation capability. This is usually China's strength. Having experienced fierce competition in the domestic market and having a strong supply chain "boost", Chinese companies are still able to win in the brutal global competition.

On the other hand, the soft elements of organisational culture limit the eventual scale of growth of certain offshore companies.