Risk & Regulation Working Group | Transaction banks must take a more advisory approach to increase revenue opportunity

Transaction banks must take a more advisory approach to increase revenue opportunity

The Asian Banker Annual Transaction Banking survey found banks delivering highly customised and integrated solutions as corporates increasingly seek better visibility of their working capital.

July 29, 2013 | Research

*The following is an extract of The Asian Banker’s Annual Asia Pacific FI Cash Management and Trade Finance Trends and Satisfaction Report 2013. The entire report is available here.

Given the persistently low-margin of today where interest-based revenue remains depressed, transaction banks are adopting a more advisory-based approach to increase their fee income. This is one of the dominant themes that have emerged from The Asian Banker’s Annual FI Cash Management and Trade Finance Satisfaction Report 2013, which is based on a survey of 40 banks in 12 countries, aimed at identifying best practices and key developments in both cash management and trade finance for banks.

Three key themes worth paying attention to

The need for highly customised and integrated solutions as clients’ with diverse multi-locations requirements are driving a more advisory based approach by transaction banks.
Requirements for greater automation and connectivity are driving banks to provide an automated multi-channel banking platform which can integrate with customers’ enterprise resource planning and treasury management systems.
Emergence of Rmb as an increasingly accepted trade currency is driving the development and delivery of a full suite of Rmb based products and solutions.

Regional corporations and financial institutions are expanding their businesses across and outside of Asia, resulting in the increasing fragmentation of supply chains and offshore sourcing. This has created a demand for more efficient and seamless solutions in a wider range of locations. A growing number of banks are seizing these opportunities to offer highly customised and integrated cash management solutions. One size-fits-all transaction solutions are no longer fit for purpose to meet the needs of corporate and SME customers whose increasingly cross-border requirements have evolved.

Helping corporate and FI clients to better maintain and manage funding and controlling FX risks is also one of the top priorities. There is greater need than ever for cash pooling solutions as corporates diversify their banking providers across core cash management operations and investments, and more actively manage their FX positions.

Transaction banks are seeing concurrent trends towards integration of global treasury and cash management structures with a local focus on customisable executions according to market-specific requirements. There has been increasing demand for more efficient and integrated treasury operations that provide flexibility in an economic landscape where regulations have become exceedingly complex and consistently changing.

A leading US bank introduced a service which allows clients to consolidate balances held at third party banks while continuing to maintain their local bank relationships. The service combines the bank’s cash concentration and notional pooling services for single or multi-currency and implemented them as part of a reference pool structure.

Corporate and FI clients are also seeking greater connectivity and integration between their enterprise resource planning, treasury management systems and banks’ electronic banking platforms. In response, banks are also making significant investments to create an ecosystem where different channels can be accessed via a single platform for a more efficient and streamlined customer experience.

A major European bank introduced the industry’s first app-format electronic client offering. Through this platform, the development, enhancement and integration of new products and solutions could be delivered in a more seamless way according to the evolving requirements of clients without additional cost.

Finally, transaction banks have also extended the scope of currencies and countries for their products and services, including the launch of Rmb based liquidity and treasury products to capitalise on its increasing use for international trade and payments.

Trade settlement in Rmb has accelerated with the increasing internationalisation of the currency, driven by the strong support of the Chinese Government. It is now increasingly important for banks to be able to support businesses that trade with China. A majority of banks surveyed have also recognised the increasing importance of the Rmb for funding, liquidity and risk management purposes.

An international US bank offered Rmb demand deposit accounts, time deposits, remittances liquidity management solutions, foreign exchange advisory and trade finance and settlement services. In addition to offshore Rmb accounts, clients are offered Rmb non-resident accounts with the bank’s China branches to meet their Rmb cross-border settlement needs.

With the increase in intra-regional trade, the rise of Rmb and a deeper focus on capturing the entire supply chain flow, it is imperative for banks to adopt an advisory based approach in order to provide a customised and integrated suite of products and services to support the diverse cross border requirements for corporate and FI clients in the Asia Pacific region.