- Karin Flinspach
- Head of Cash Products, Transaction Banking, Standard Chartered Bank
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.[[[PAGE]]]
What is interesting as well is not the use of mobile devices themselves, but the diversity of solutions that have emerged to meet the demands of different user groups. Mobile-to-mobile payments and mobile wallet solutions are becoming key areas of innovation and expansion that are transforming the experience of consumers and businesses in both developed and developing countries. Asia is already the biggest region globally for both mobile banking and mobile money adoption. The bank of tomorrow will require new skills and some familiar existing ones. Standard Chartered is playing a crucial role in delivering existing solutions and combining our expertise and network across both retail and corporate customers to harness the enormous potential that still exists. For example, large-scale mobile money solutions in Bangladesh, Indonesia, Pakistan, the Philippines, Thailand, Vietnam, Kenya, Nigeria, Tanzania and Zambia simplify payment transactions for corporations, bringing safer, faster and more efficient services to clients that need them most.
From diversity to cohesion
The mobile banking and payments revolution that is spreading across Asia is not a single force, however. Indeed, our experience of working closely with consumers and businesses in each country, and with the local telecoms operators has emphasised that digital transformation will only take place if solutions meet the specific needs of users in each market. From the highly sophisticated user base in Singapore to fast-emerging countries such as Indonesia where around 20% of the population have a bank account (and fewer still in rural communities) digital solutions need to reflect the functional and financial inclusion needs, regulatory demands and payment culture in each country. At the same time, however, multinational corporations are seeking to standardise their payment and collection processes and information flows across the region to optimise operational and financial efficiency.
The need to support diversity on one hand, whilst providing cohesion on the other, is having a considerable impact on transaction banking strategy, and corporations’ criteria when selecting their banking partners. Working with a global bank that only targets large multinational clients significantly restricts the value of transformative technology. These companies are intrinsically connected into a wider financial ecosystem. If payments and cash conversion is inefficient in one part of the ecosystem, then the ability to achieve cash management and process efficiency in another will be limited.
Conversely, a bank such as Standard Chartered whose network extends across the entire spectrum of payment users, has the ability to leverage its relationships, depth of local understanding in each market and risk appetite to deliver innovation across the ecosystem. This is essential in accelerating the cash flow cycle and providing transparency, security and confidence at each point in the cycle: from an individual paying a retailer, to the retailer paying a distributor, to the distributor paying the producer, to the producer paying its suppliers. Secondly, in addition to connecting the ecosystem, we deliver corporate cash, trade and working capital solutions seamlessly through a single channel and integrated platforms, providing timely, accurate and standardised transaction and information flows. Therefore, treasurers gain the benefit of an efficient, secure cash flow cycle on one hand, whilst achieving process automation and visibility and control over liquidity and risk on the other.
Treasurers are increasingly recognising that the combination of local expertise and solutions with a cohesive approach to liquidity management and cash and treasury management processes is essential to harness the regulatory and digital opportunities that are emerging. This is changing their approach to the way that they select and work with their banking partners. Increasingly, we are seeing the transaction banking market adapt to these changing demands, through digital innovation, depth of network and specialist expertise, areas in which Standard Chartered is leading the way.
