Asian banks urged to pull back on tailor-fit services

Asian banks are starting to veer away from heavy customisation and complexity in cash management services.

If Asian banks spent 2015 making sure their cash management services fit their corporate client needs to a tee, then 2016 will be the year when they pull back on tailor-fit alterations. Analysts note this attitude reversal among banks towards simplified cash management systems even as clients in the region grow in size and sophistication, especially among small and medium-sized enterprises (SMEs).

“The anecdotal evidence from bankers and vendors seems to be that there is a focus on limiting the amount of things that need to be changed to serve each client,” says a banking expert from a large multinational bank.

Banks in the region are tapping into digital technology to simplify its payment services. Maybank, for example, established a relationship with a global payment institution and collaborated with financial technology companies to simplify its payment services. This has enabled their clients to experience faster, cheaper and more transparent payments.

“With technology, timely information leads to better understanding of client behaviour which results in better and more efficient business solutioning and cross-selling for clients,” says John Wong, group head, transaction banking at Maybank. “This is in line with our aspiration to enhance customer experience through digital transformation and our aim of being the market leader in the digital payment space including in electronic fund transfers.”

Asian banks that are adopting the simpler and faster operating paradigm are getting assistance from new regulations. Wong reckons that the recently introduced national e-payment system in Malaysia will further improve the efficiency of payment and fund flows in the financial sector. It should also accelerate the development of financial markets in Malaysia. The liberalisation of currency settlement between Malaysia and Thailand also looks to become another catalyst for more efficient systems.

“The introduction of the liberalisation of currency settlement between Malaysia and Thailand allows for greater efficiency in accessing local currencies and managing exchange rate risks (which previously had been reliant on the US dollar) arising from trade transactions,” says a Wong. “With the framework, Malaysian and Thai businesses will be able to effectively source ringgit and baht from the respective banks in their home countries to settle trade transactions.”

“With technology and digitisation, clients can have real time access to information at their fingertips to make meaningful business decisions, while cash can be moved across borders in a timely manner, at a lower cost and with better optimisation of cash flow,” says Wong.

Growing with SMEs
The agility and efficiency themes in cash management will be driven in part by the growing needs of SMEs in the region. While global growth has decelerated and dragged down prospects in many banking areas, there have been pockets of bustling activity among emerging market SMEs.

“The growth in small medium enterprises (SME), commercial and entrepreneur-owned businesses in emerging markets is one of the main drivers for growth in transaction banking revenue despite the slowdown in global growth. In addition, rising trade and commerce in emerging markets have led to a surge of non-cash payment volume,” says Wong.

Wong reckons SME companies in emerging markets are growing rapidly and expanding overseas, and domestic banks that can forge relationships with these high-flying SME customers will be able to follow their clients’ ascent to become regional or global banks.

Kasikornbank, for its part, plans to expand to Asian emerging markets mainly through local bank alliances due to the numerous benefits these will bestow to corporate clients. The bank already has a strong network in Thailand and will be looking to cement tie-ups with foreign banks to strengthen their cash management services in neighbouring countries.

“We seek to grow our business into this region’s emerging markets through partnerships with local banks, for clients’ corporate group and their subsidiaries to benefit from the accessibility, reliability and lower transaction costs,” says SilawatSantivisat, executive vice president at Kasikornbank. “On the global corporate deal where the businesses of the corporate group are booked in Thailand, we are also open to partner with foreign banks to work with any specific requirements for better cash management capabilities and opportunities.”

Opportunities are increasing in emerging markets but these require Asian banks to spend time getting familiar with the local operating environment and corporate client needs. “In many emerging markets the options are limited for corporates. Banks can do well by having a presence on the ground and a real understanding of the risks in these countries,” says the multinational banking expert. “In Myanmar, for example, the country is beginning to liberalise and a handful of banks have applied for licences to operate so they can serve corporates looking to explore the potential of the country.”

Nurturing relationships
The ability to nurture relationships will be a key theme to succeeding in emerging markets, according to analysts and banking executives. Asian banks will need to create systems that are simple and efficient, but also flexible enough to accommodate more solutions if and when their clients require them. Banks that can keep up with the tumultuous change in banking needs of SME clients all while minimising bulk and disruption will earn their long-term business.

“Corporate treasurers are certainly more sophisticated in their demands, and are also more sophisticated in their knowledge of transaction banking products. The emphasis will continue to be on the relationship with the client, being close to them, understanding their business and delivering solutions they really need,” says the multinational bank executive.

At Kasikornbank, a core strategy for emerging markets is to understand client businesses and develop integrated services as a comprehensive solution, not only in cash management, but also trade finance and credit products. The overarching goal is to optimise the working capital cycle of clients.

Integrated services are often intricately linked with digital business technology, so Kasikornbank recently established the Kasikornbank Business-Technology Group (KBTG), which comprises five companies that will focus on innovation, research and increasing the bank’s competitive advantage in the field of financial technology.

“The KBTG establishment is intended to enhance the bank’s information technology management, raising its potential in dealing with any form of disruptive forces and enhancing greater competitiveness amidst constant changes in financial technology in the global market,”saysSantivisat.

Meanwhile, Maybank believes that customers in emerging markets are looking for banks that can provide more facilities with real time visibility and higher efficiency, and this is guiding the bank’s strategy in the region.

This led Maybank to launch a regional cash management system called Maybank2E-Regional Cash, the first of its kind in Malaysia. It spans Malaysia, Singapore, Philippines, Indonesia, China, Hong Kong and other countries under the Association of Southeast Asian Nations. “Leveraging on the regional capabilities of our state-of-the-art web-based cash management platform Maybank2E-Regional Cash, we engineered innovative solutions that cater to client needs in the area of information, payables, receivables and liquidity management,” says Wong.

“We are confident that we can be the partner bank to unlock greater opportunities for clients’ business working capital flow across the region with our strengths in providing multiple delivery channels, in-country business experts, established regional infrastructure, and extensive physical touch points across the regions,” he adds.