Thursday, 23 May 2024

Pursuing digital enhancements a top priority among regional banks

5 min read

By Siddharth Chandani

Global and regional cash management banks across Asia-Pacific are making substantial investments in digital initiatives to enhance the overall transaction experience of their clients.

  •  Changing role of corporate treasury from basic cash management functions to more complex and centralised functions have driven banks to offer products that are designed to enable greater automation and efficiency
  • An increasing interest rate environment demands efficient working capital performance
  • Global financing and payment needs are ever complex, requiring application of innovative solutions to optimise transaction turnaround times and lower costs

In the latest Asian Banker annual survey of transaction banking trends across Asia-Pacific, continuous investment in digital channels and focus on client needs, emerged as dominant themes. The nature and structure of cash management services has continuously evolved with the proliferation of new digital innovations such as APIs, distributed ledger technology etc. With greater thrust in digital transactions, banks are identifying various ways in which they can drive innovation for their clients. Changing role of corporate treasury from basic cash management functions to more complex and centralised functions have driven banks to offer products that are designed to enable greater automation and efficiency.

From doing tactical improvements in order to make clients day-to-day life easier and migrating clients from high-cost payment to low-cost payment channels, banks listed timely access to cash flows, managing transactions on the go, optimising account structures and offering better visibility and control of working capital functions as major client imperatives in 2018.

Earmarking substantial investments to grow digital channels

An increasing interest rate environment demands efficient working capital performance. Corporates are responding to offset the higher costs of borrowing by improving the flow of their cash. In response to gradual tightening of monetary conditions and demand from corporates, banks have re-focused attention to optimise cash flows for their clients by tapping into new digital solutions. On the top of the chart, Asia-Pacific banks have listed continuous investments in end-to-end digital functions as their top priority.

Commonwealth Bank of Australia (CBA) recognised the need for an online platform and a mobile app interface as key drivers to help clients to remain competitive.

Bank of Communications (BoComm), China identified cooperation and collaboration with leading technology firms from the region’s emerging markets, while China Mingsheng Bank stepped up on initiatives to offer innovative deposit products.

With extensive client base comprising corporates and multinationals, Bank of China Hong Kong (BOCHK) leveraged new payment infrastructures like QR codes introduced in Hong Kong to develop mobile applications and actively engaged with the SWIFT global payments innovation (gpi) to enhance transparency in transactions for its financial institutions (FI) clients.

India’s thrust to push digitisation in banking transactions post demonetisation encouraged local banks to explore news ways of transacting. Kotak Mahindra Bank beefed up its product offerings and solutions with quicker turnaround features and real time updates. The State Bank of India (SBI) invested in a number of app based solutions while Yes Bank propelled the use of Application Programing Interface (API) based banking for its collections and validation processes.

Banks in South East Asia leveraged regional market footprint to bolster their cash management capabilities.

Indonesia’s Bank Mandiri focused on industry specific solutions, embedding its own system to client’s business processes, while Maybank supported growth of clients through greater cross-border accessibility in major currencies. To help clients manage their accounts efficiently, RHB bank invested in an integrated platform for cash management. BDO

Unibank and Metrobank from Philippines cited partnerships, alliances and agility in collection aspect of cash flows integral to a bright future in cash businesses.

Taking advantage of Authorities push for e-payments, Singapore based banks OCBC and UOB launched customer-focused initiatives in business mobile banking to offer seamless transaction services on the go. Thai banks Kasikornbank and Krungthai laid strategic focus on customer centricity and strengthening transaction ecosystem through partnerships with emerging fintech players.

The key to achieve operational and service excellence

Banks and FIs can no longer survive by offering simple products and services built on the primary elements of interest, duration, and quantum of funds. Banks must strive to draw parallels between product development and customer development to not only deepen existing client relationships but to also tap into new subscribing customers while actively continuing to withdraw from customers with higher reputational risks.

Superior service or customer value, consistent brand experience at each point of contact, understanding client behaviour and continuous investment in developing products to satisfy and pre-empt customer needs, were identified as key best practices in managing cash needs for clients.

Singapore’s UOB Bank designed flexible cash management solutions to integrate its interface with clients’ internal processes and systems. Based on client’s requirements, SBI provided a Customised management information system (MIS) service to support reconciliation and offered advanced tech integration with clients’ server and configuration of virtual account numbers.

Vietnamese banks BIDV and Vietcombank implemented web-based user friendly products for 24/7 support and effective management of financial control and expenditure plan, keeping up with demand for e-banking services in Vietnam.

BoComm, China applied advanced cash management tools to build variety of cash pool management models, based on different customer needs while BOCHK set up a dedicated customer solutions team with emphasis on post implementation review based on client feedbacks.

Identifying the changing role of corporate treasurer, Deutsche Bank leveraged on technology to drive operational efficiencies and streamline treasury functions. As a value-added function for clients, the bank switched to electronic treasury workflow to cut through manual processing. The bank further collaborated with a large IT corporate to streamline the KYC documentation process across banks.

Sri Lanka’s Hatton National Bank identified adherence to regulatory compliance & risk mitigation, automated collection reconciliation and efficient liquidity management as key client imperatives.

Strengthening cross-border and regional cash management services

Global financing and payment needs are ever complex, requiring application of innovative solutions to optimise transaction turnaround times and lower costs. Banks in the region have been heavy proponents of building integrated digital platforms to conduct cross-border transactions smoothly.

Bank of America Merrill Lynch (BofAML) launched a payment collection service supporting mobile and card payments through China UnionPay Merchant Services Company (UMS) to streamline the process of payments collection.

Hang Seng Bank in Hong Kong concentrated resources in managing cross-border cash management needs of clients by bulking up on its online products. The bank initiated automation in cross-border reconciliation process via various e-channels.

By improving working capital and trapped cash through automated forecasting receivables and schedule of payables, Kotak Mahindra Bank minimised the idle fund flows and created the cash pooling system to deliver higher interest products for clients. ICICI bank enhanced its liquidity structures to develop sophisticated cash forecasting process to improve its liquidity management.

UOB Singapore and Deutsche bank’s initiatives with SWIFT to connect several intermediary banks and facilitate cross border payments via a standardised manner marked an example of industry collaboration to improve efficiencies within the market.

With rapid development in the cross-border cash management businesses, banks also face new challenges and uncertainty from impending regulations around KYC and AML/terror financing. To sum up, while digital innovations have improved Asian banks’ transactional efficiencies and client experience, costs for doings so have been far from cheap. To overcome these challenges collectively, banks are expected to adopt a standardised set of protocols that deliver greater flexibility and convenience in meeting client requirements through their digitally powered platforms.

Keywords: Cash Management Services, Digital Innovations, API, Distributed Ledger Technology, Digital Solutions, Technology, Fintech, Cross-border Transactions, KYC
Institution: Commonwealth Bank Of Australia, Bank Of Communications, China Mingsheng Bank, Bank Of China Hong Kong, State Bank Of India, Yes Bank, Bank Mandiri, Maybank, RHB Bank, BDO, Unibank, Metrobank, OCBC, UOB, Kasikornbank, Krungthai Bank, BIDV, Deutsche Bank, Vietcombank, Hatton National Bank, Bank Of America Merrill Lynch, China UnionPay Merchant Services Company, Hang Seng Bank, Kotak Mahindra Bank, ICICI Bank
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