The fallout from the crisis in Ukraine brings alternative payment networks front and centre

From an economic standpoint, there’s much more to the Ukrainian crisis than sanctions. The entire system of payments and the efficient flow of commerce globally has been disrupted. Existing evidence ranges from oil price spikes to supply chain issues to displaced populations. As a recent IMF blog opined: 'The war may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings'.

The prediction that 'payment networks fragment' is already coming to the fore. Businesses still need to pay and get paid and the financial systems of entire countries rely on these networks. As the crisis plays out some surprising flexible alternatives are emerging. To get a sense of what it’s like on the ground, we asked Bottomline’s head of financial messaging in APAC, Eli Shoshani, to give us an assessment of the current situation and his predictions for the future of alternative payments networks. 

Eli, your region has been ground zero for financial disruption. Can you describe how payment networks have been affected during the last six weeks? 
With sanctions in place, we found individuals, companies and indeed whole countries have been looking at their options. And I am delighted to say that we have been able to stand--up and deliver.  But the crisis has certainly created unparalleled activity to try and move money and goods. Early on we saw a lot of Russian companies and individuals unable to send or receive money. This led to an increase in the buying of property and the exchange of money, gold, and diamonds in the markets, mainly in Hong Kong and Singapore. However, the sanctions although being aimed at the Russian economy had a much more far-reaching impact that has created wider collateral damage. For example, we’ve heard from many banks in this region that perceive payments networks as a financial lifeline. Other  local economies globally have inadvertently been frozen and the ability for people to send money, even within their own country, has been impacted. There is therefore a need to seek alternative ways to connect to key payments networks. 

Can you describe one of these outreaches? And how did you help these banks find alternatives?
Let me first say that the banks that have, and are currently, reaching out to us are not limited to this region. European banks asked for consultations as well. But to answer your question, the first approach was from a consortium of Mongolian banks that used Russian institutions as their correspondent banks. Essentially, those Russian banks were the intermediary for Mongolia’s banks. So, they looking for immediate lifelines to receive and send payments outside of the current infrastructures, whilst still complying with the sanctions. Our payment rails were able to accommodate this ambition. This has been the case with banks from Uzbekistan and Kazakhstan too. This will continue to be a required need until this conflict has been resolved and potentially in the immediate aftermath.  

So, in retrospect, you've had to work through COVID in your region, and now you've had to work through this. Probably not the last crisis, right? As somebody who's been in this business for a long time, what does this tell you about the nature & pace of change of global payments networks?
Well, first it shows the importance of cloud-based infrastructure. Second, these crises show that you need to work with networks and not depend on just one of them. COVID proved that in a very dramatic way. When the pandemic started, we managed to engage banks by leveraging our own payments ecosystem, and where applicable, connecting them to alternative payment rails. And we were able to help them with several issues resulting from being in a remote environment without being on site. The future of payments networks – in totality – has been defined by the pandemic. 

What has the Ukraine crisis clarified about payments networks?
That the alternative networks have an important place in the global economy. If you’re a company that can work remotely and make multiple rails available, then this crisis has proven that there’s a way for Bottomline to be indispensable to our customers without requiring them to make massive investments in hardware. 

So, networks will have to coexist. What are some of the key collaborations and components of these new relationships? 
They will be complicated, for sure. And this is even before you factor in Blockchain payments and Central Bank Digital Currencies (CBDCs). If you want to see evidence of how several networks can coexist, look no further than China which is building its own payments network and investing heavily in the digital yuan. For instance, when they hosted the Olympic Games, the digital yuan was the primary payment method. In fact, the future of payments lies in the co-existence of new, innovative cross-border channels with the updated correspondent banking model. This is a view supported by Jerome Powell, Chair of the Board of Governors, Federal Reserve System in reference to multi-lateral platforms: 'one of the keys to moving forward will be both-improving the existing system where we can, whilst also evaluating the potential of and the best uses for emerging technologies', in the recent G20 Report. 

When I speak to banks that are asking Bottomline for advice, I make it clear that they are joining a new network not signing up for a new technology. Coexistence will result in banks having the confidence and the ability to continue to serve their clients without dependencies. That confidence will withstand a global crisis or even a catastrophic pandemic. 

To find out more, view our latest podcast: Digitization & Diversity: Scoping the Payments Scene in APAC or click here to set up a 1:1 strategy workshop directly with Eli.

About Eli Shoshani 

Eli Shoshani is the Head of APAC at Bottomline. Based in Singapore for the last 18 years, he spearheads the strategy for financial messaging and fraud & financial crime across the region. With more than 25 years of leadership experience in the financial technology industry across Asia, UK, and South Africa, Eli has participated in numerous industry events as a public speaker and is a contributor to key financial publications discussing the growing market trends in the Asia financial landscape. Prior to Bottomline, Eli held several senior management positions in other financial technology firms such as Finastra, D+H, and Fundtech. 

About Bottomline

Bottomline delivers a single SaaS platform for payments, securities and messaging that helps financial institutions and corporates to achieve lower costs, wider reach, speed-to-market, industry compliance, greater security, and improved risk management.