The Business Case for a New Generation of Electronic Banking Systems in Asia Pacific
by Helen Sanders, Editor
As TMI reported in March, 2015, cash management solutions provider Cashfac Technologies recently conducted a market survey, the Cashfac Operational Cash Index, with research company East & Partners Asia on corporate treasurers’ experience and confidence in their banks’ electronic banking systems. As the survey highlighted, only 35 percent of respondents had timely, accurate visibility over more than 55 percent of their cash. This article explores the findings in a little more detail.
Scope of research
The Cashfac Operational Cash Index included data from interviews with 364 chief financial officers and corporate treasurers from top-ranked corporates in Singapore, Hong Kong, Malaysia and Australia, with an average turnover of USD 1.43bn. There was some correlation between the turnover of the corporation and the number of bank accounts, with an average of 5.6 banking relationships amongst Hong Kong businesses, which had the highest turnover on average, while Malaysian businesses, with the lowest average turnover and typically a more domestic focus, maintained 3 bank relationships.
Lack of cash visibility
One of the most significant challenges identified by respondents to the Operational Cash Index was the inability to achieve a real-time consolidated view of bank account balances and transactions. Alastair McGill, Managing Director, Global Business, Cashfac explains,
“While ‘real time’ for the purposes of this survey does not refer to the dynamic update of data on-screen, treasurers expect to be able to look at reliable data at any specific point of time, within a 5 – 15 minute timeframe. The more timely this data, the more quickly that payments and collections can be reconciled, and the more responsive treasurers can be to potential problems or surprises.”
On average, only 35 percent of respondents had real-time visibility of more than 55 percent of total cash. These figures were notably lower amongst Malaysian corporates, at 28 percent and 44 percent respectively, potentially reflecting that these corporations are more likely to bank with local banks that lack the sophisticated electronic banking tools of some global banks, and the complex and highly regulated nature of the countries and currencies in which they operate.
Corporate confidence in cross-border transactions
An interesting finding which is not commonly included in research amongst corporate treasurers is their level of confidence in the security and reliability of cross-border transaction processing across different banks. This differs widely across locations, with the highest rating amongst corporations in Australia and Singapore at 2.54 and 2.62 respectively (where 1 reflects the highest level of control and 5 the lowest). In contrast, Hong Kong corporates expressed a confidence rating of 2.78 and Malaysian corporates 2.88.
These figures are surprising for a variety of reasons. Firstly, while it is logical that Australian treasurers would have the highest level of confidence given that they also have the greatest visibility over cash, with sophisticated systems and a highly efficient domestic clearing system, it is less logical that treasurers in the remaining locations should have concerns over transaction control. This is clearly an area on which banks and technology vendors need to focus. By increasing transparency over the transaction lifecycle, treasurers are likely to have greater confidence in the reliability and security of transactions, and be able to resolve payment failures caused by incomplete or inaccurate payment instructions quickly, therefore avoiding delays.
Obstacles to cash visibility
Limitations in electronic banking systems and the high costs to upgrade were identified as the biggest obstacles to visibility over balances and transactions. Internal systems issues and the challenges associated with decentralised treasury organisations were also cited, but these were less significant.
Given that most participants had multiple cash management banking relationships, shortcomings in multi-banking arrangements (referring to proprietary bank tools rather than independent platforms such as SWIFT) were also major reasons for lack of cash visibility and transaction confidence. Patchy workaround solutions (23 percent) low self-service functionality (22 percent) and network coverage (17 percent) were amongst the most commonly cited problems. However, as Darryl Ye, Senior Analyst, East and Partners Asia notes,
“Corporates find that most solutions in the market are well-designed for a specific purpose. However, integrating them into their own technology ecosystem becomes a nightmare for corporates with a patchwork of workaround solutions that are insufficiently flexible to adapt to future changes.”