A rise in domestic consumption and economic growth has driven the awareness of the importance of transaction banking, making it a vital and exciting business for Asian banks.
September 29, 2014 | Foo Boon PingThe rise in domestic consumption, robust economic growth and increasing intra-regional trade has resulted in an increasing awareness of the importance of transaction banking in Asia. Trade finance, cash management and payment services which have in the past been considered the boring part of the banking business have now become a new “sexy” business for banks. Domestic banks in Asia that are increasing their focus on the business face many challenges and opportunities.
Banks that are traditionally product focused are now becoming more customer focused. Attention is increasingly turned to the liquidity and working capital challenges faced by corporate and SME clients and how banks can tailor the right liquidity structure and facilitate closer collaboration between the physical and financial supply chains for their clients.
The internationalisation of the renminbi (Rmb) is a growing focus with increasing trade and investment flows with China and the pace of change in technology that is transforming the nature of the banking business due to digitisation and mobile technology are some of the issues that top the list of priorities of transaction bankers in the region. The Asian Banker recently spoke to a number of heads of transaction banking of leading banks in Asia and here are some of the key insights that were shared.
On the technology front
Bob Blower, business leader on technology and transaction banking, National Bank of Abu Dhabi, feels their challenge lies in expanding footprint and product services across the region. “This involves the purchase of new technology. It is really tricky in terms of figuring out which technology to invest in and when.” He said.
Maybank head of transaction banking feels technology has changed the banking landscape. “Look at the smartphone, which plays a very important role today. But we can’t apply this across all countries because some countries are still going through their telecommunication transformation. So, you have different challenges – some technological initiatives may work in Singapore and Hong Kong, but not necessarily in developing countries.” said Loo.
… risks and challenges
Iwan Kamaruddin, general manager, transaction banking service, Bank Negara Indonesia, feels that as a state-owned bank, the challenge how to manage clients. “Mostly, we have a sizeable portfolio in transactional business with SOEs, but also have increasing growth with the large private sector corporates. So, in our growth, we ourselves are also trying to address the issue of talent. If we can turn our 26,000 current employees into transaction bankers at one level or another,
it will be hard to stop us.” commented Kamaruddin.
Lionel Choong, acting CFO, Global Regency, feels that banks always return to KYC, but thinks bankers should look at their needs rather than what drives transaction fees. “I hope that bankers don’t merely price us based on our KYC risk profile, but instead drill down to understand our model and where we excel and then provide the right finance solution – and not just be purely motivated by transaction fees.” said Choong.
… areas of focus
Chuah Chin Keat, director, transaction banking Malaysia, CIMB, sees banks moving towards being more customer-centric. “We are also moving towards supply chain, Bank Payment Obligation (BPO) and working capital. We are talking about trade, cash and securities. BPO is actually the first step taken by trade organisations.” he said.
Nancy So, MD and regional head of cash management for financial institutions sales, AP GTB, Deutsche Bank, feels that many discussions will be around compliance-related issues, including how to manage the FATCA registration requirements and longer-term implementation processes.
“I think supply chain and renminbi are top on the agenda – many banks are focusing on these areas. We are talking about liquidity management and how to meet customer cash flow requirements – we must look at these from a market perspective. We are just looking at cash forecasting and supply chains. But how can we really improve the cash conversion cycle?” commented Loo Eng Hock, head of transaction banking, Maybank.
Hendra Lembong, chief transaction banking officer, CIMB Niaga, feels that on the financing piece, the supplier finance side is the easy part. The bit that brings great value is distribution finance. It is potential opportunity for local and regional banks.
“One key area is the rise in the importance of domestic consumption, particularly in China. For global banks like Deutsche Bank, how we build our partnerships with local banks in this market will continue to be pivotal to our success.” said Lisa Robins, regional head of global transaction banking Asia Pacific, Deutsche Bank.
… trends
Robins also noted that there is a growing importance for transaction banking within financial institutions. “This changes the nature of how we carry ourselves. For us transaction bankers, the time is here now.” she said.
“It is very true when it is said that boring is the new sexy. In our bank, transaction banking plays an increasingly important role, so much so that we manage 85% of the banks’ liabilities book today.” commented Victor Khor, EVP, head of group transaction & alternate banking, Alliance Bank.
Categories:
Cash, Treasury & Trade, Trade Finance, Transaction BankingKeywords:SIBOS 2014, Deutsche Bank, Maybank, CIMB, Alliance Bank, Bank Negara Indonesia, NBAD
