Understanding the Adoption of Open Banking APIs in Southeast Asia and Their Effect on Merchant Gateway Fees

Understanding the Adoption of Open Banking APIs in Southeast Asia and Their Effect on Merchant Gateway Fees

Southeast Asia is one of the world’s most dynamic digital finance regions, with a young population, strong smartphone penetration and fast rising online commerce. In this context, open banking has transitioned from a policy notion to a real world technology that is transforming how money changes hands between customers, banks and businesses. Open banking is where application programming interfaces are used to give licensed third parties access to account information or to initiate payments with the consent of the consumer. Regulators in Singapore, Thailand, Indonesia, Malaysia, the Philippines and Vietnam are adopting diverse courses but all have the goal of promoting competition and financial inclusion. The most urgent question for businesses is the expense of taking payment as a consequence of these developments. “Understanding the technology, the regulatory environment and the cost structures allows businesses to make better decisions about their payment strategy.

Open Banking APIs and What They Mean for Payments

Open banking APIs allow secure, standardized connectivity between banks and authorized service providers. For merchants, two features are particularly important: account information services (which enable providers to read financial data with consent) and payment initiation services (which allow a provider to activate a transfer straight from a customer’s bank account). The payment is made from account to account, which can avoid the card networks that usually serve as middlemen between the shopper and the business. This modifies the structure of the transaction and takes away some of the layers that have traditionally contributed expense. With more banks publishing dependable APIs, merchants get a legitimate alternative to cards and wallets that can be inserted right into checkout flows.

How Southeast Asian Markets Are Addressing Adoption

So there is no one model for the region and acceptance is patchy yet interesting. Thailand has championed real-time payment infrastructure that allows for large-scale direct bank transfers, whereas Singapore has opted for an industry-led strategy focusing on shared norms and common standards. Indonesia has set a national standard for open APIs through its central bank, and Malaysia has promoted involvement through pilot projects and gradual data sharing. The Philippines and Vietnam are developing frameworks that blend regulatory and market incentives. This kind represents relative levels of banking maturity and digital preparedness. Merchants operating internationally, therefore, have to keep track of the rules in every country, because the technical specifications and the consent requirements are not yet entirely harmonized.

The Role of Instant Payment Rails and QR Codes

Open banking does not exist in a vacuum. Its value increases when integrated with rapid payment systems and standardized QR codes currently present in numerous marketplaces. Consumers are conditioned to scan a code and approve a transfer in seconds to pay, such as in Thailand’s PromptPay, Singapore’s PayNow and Indonesia’s QRIS. These rails will be the foundation on which open banking APIs sit. Merchants will be able to dynamically request payments and get immediate confirmation. Cross-border connections between national QR schemes are also developing, aiding regional business. It is this mix of APIs and fast rails that is the tech backbone for cheap, real-time merchant payments across the region.

How Traditional Merchant Gateway Fee Structures Work

Merchant gateway fees typically consist of a number of different components. Card transactions are charged interchange fees to the issuing bank. Network assessments are imposed by the card scheme and a markup is added by the acquirer or payment gateway. Gateways may also impose flat fees per transaction, monthly service fees, and chargeback or currency conversion fees. In total, these fees can represent a significant portion of every sale, particularly for small merchants that have little leverage to negotiate. Cross-border and international card transactions are usually even more expensive. That is because these layers are constructed on top of card technology, so any payment method that does not use that infrastructure might change the fee equation dramatically.

How You Can Use Account-to-Account Payments to Save Cash

If a customer pays directly from a bank account with an API-initiated transfer, the merchant completely avoids interchange and scheme costs. The cost is usually a small flat fee or low percentage by the payment initiation provider, and in some regions instant transfer prices are capped or very low. You can save a lot of money on high-value purchases, subscriptions, utility bills and marketplace payouts. Better cash flow with faster settlement. Money arrives in seconds, not days. Merchants also enjoy less risk of card-related chargebacks, as authorized bank transfers are more difficult to reject. These considerations make account-to-account payments appealing to enterprises with narrow margins.

Competitive pressure on gateways & card networks

Even merchants who do not move to open banking may gain indirectly. As payment initiation services take off, established gateways are under pressure to justify their pricing and improve their offering. Many are fighting back by adding bank transfer options, negotiating better rates, or bundling fraud tools and analytics into their bundles. Competition may result in more transparent pricing and more flexible contracts. But fee cuts are not automatic as new entrants still have to pay for technology, compliance and customer acquisition. Merchants should look at the whole cost of ownership, not just the headline rates, taking into account the effort to integrate, the reliability, the quality of support and the percentage of consumers that truly want to pay via bank transfer.

Challenges, Risks and Consumer Confidence

Still, there are serious hurdles to adoption. Quality of Bank APIs vary. Some banks have limited functionality or unpredictable uptime. Without explicit explanations of how their data will be handled and secured, consumers may be reluctant to allow third party access. Fraud attack vectors such as social engineering and account takeovers require effective authentication and monitoring . Cross-border expansion is more complicated because of regulatory restrictions and smaller merchants may not have the technical resources to immediately integrate. You need clear consent processes, strong security standards and well-defined liability regulations to generate confidence.” If people don’t trust the system, even the cheapest way to pay won’t catch on among regular buyers.

What merchants need to do next

Merchants should begin by examining their existing payment mix and figuring out how much they are paying in gateway and card fees. They can then trial bank transfer solutions in specific markets, concentrating on client demographics and transaction types where account-to-account transfers make the most sense. Working with respected, licensed providers that span many nations lessens the cost of integration and the risk of non-compliance. By accepting bank payments in addition to cards and wallets, consumers can pick their preferred payment method and the firm has some influence in fee negotiations. You can tell if the plan is working by tracking legislative changes and monitoring conversion, cost and settlement speed. Early, intentional experimentation can transform open banking from a trend into a meaningful cost advantage.