Strategic Treasury

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Driving a Transformation in Transaction Banking What does the increasing treasury sophistication of companies headquartered in Asia mean for treasurers - and how is this trend impacting transaction banking priorities?

Driving a Transformation in Transaction Banking

by Karin Flinspach, Head of Cash Products, Transaction Banking, Standard Chartered Bank

As treasurers attend treasury conferences in cities around the world, key conversations are defining and shaping both treasurers’ priorities and bankers’ responses. One of the most important trends that is driving these conversations is increasing treasury sophistication of companies headquartered in Asia, and the complexity Western corporations face as they expand in the region. What do these developments mean for treasurers, and how are they impacting transaction banking priorities?

Staying ahead in China

Despite softening growth and turbulent market conditions, China continues to be one of the top growth markets, and increasingly the most important market, for both Western and Asian corporations. The ongoing RMB internationalisation, with its implications for trade, liquidity, investment and as a reserve currency is already changing the way that companies do business. For example, the ability to link onshore RMB accounts into regional or global cash pools, not only for entities in the newly expanded Shanghai Free Trade Zone (SFTZ) but across China (in the latter case with restrictions), is a major step forward. This development, amongst others, is giving treasurers greater confidence that RMB is on an irreversible pathway to becoming a cross-border trade and capital currency.

As adoption of RMB as an international trading and investment currency moves from early adoption to the mainstream, companies that have not yet evaluated how they are using RMB should start to plan now to avoid losing out on competitive opportunities. One of these opportunities is to participate in pilot programmes that characterise the RMB internationalisation process. By working with partner banks that work closely with the regulators, treasurers can participate in shaping priorities and take early advantage of initiatives that directly benefit their businesses. For example, Standard Chartered has announced a series of ‘firsts’ over recent months which includes, most notably, its first yuan clearing transaction on China’s recently launched China International Payment System (CIPS) with IKEA.

Adding value to the business

It is not only in China that opportunities for treasurers to drive operational and financial efficiency are increasing. Across Asia, as the use of electronic collection methods increases, and standardised XML ISO 20022 formats become more prevalent, treasurers and finance managers are seeking to harness enriched information to create business rules that allow automated reconciliation and account posting. In particular, companies are addressing the difficulty of identifying incoming payments by working with Standard Chartered to implement virtual account solutions, where customers use individual account numbers that are then routed to the main collection account to enable easy identification. Reconciling account statements quickly and accurately has both working capital and commercial benefits by freeing up credit lines more quickly, and unlocking those customer credit limits to fuel further sales.

A digital transformation

The information revolution that is spreading across the region extends not only to the quality and richness of data that is available, which in turn is driving automation, but also to the way in which transactions are executed in the first place. The uptake and client expectations of digital services will keep rising. The use of mobile devices for payments and cash management is one of the most important digital trends of recent times. For example, mobile banking has now become prevalent amongst consumers and commercial banking customers, allowing them to undertake tasks that they would previously have done in a branch, by phone or via internet banking. This trend also extends to corporate banking, with treasurers and finance managers of all sizes of company taking advantage of the flexibility and fingertip access to information and transaction initiation and authorisation that mobile banking offers.

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