In terms of digital readiness, 45% of Singapore’s corporates have a well-defined strategy – the highest proportion in APAC, overtaking Japan’s pole position in the bank’s 2019 Digital Treasury Survey. This was followed by Hong Kong (44%) and Japan (41%).
This is a key finding of a poll of around 1,700 corporate treasurers, CEOs, CFOs and business owners across the region – in the 2020 survey conducted by DBS. The survey also revealed that businesses in the Philippines (10%) and Vietnam (8%) were the least digitally-ready.
Comparing businesses in APAC to their global peers from the US and UK, it seems that both of these mature markets had a significantly larger proportion of businesses with a well-defined digital strategy. Almost half of businesses in the US and UK have a well-defined strategy, as compared to two in ten in APAC.
Amid a more competitive landscape characterised by supply chain disruptions and with Covid-19 hastening the pace of digitalisation, almost all businesses in the region (99%) indicate that they are facing external pressure to transform digitally.
Key pressure points driving the need to change include changing consumption patterns from their customers and key markets, competitors, and growing supply chain complexities. While businesses surveyed understood the need for change, the same companies are also facing obstacles in adopting new technology with the top three challenges cited as the speed of change (80%), execution complexity (75%) and lack of digital talent (64%).
This is vastly different from the US and UK where nine in ten businesses cited that their main challenge was to keep up with the regulatory environment, supporting the perception that both markets have easier access to a pool of digital talent.
In terms of digital spend, cash management (33%) and trade/supply chain financing (30%) represent the two biggest investment areas for APAC businesses. This mirrors the preference of businesses in the UK where six in ten (60%) are focusing their investments on trade and supply chain financing-related technology, while in the US, corporates are dedicating the bulk of their spending to risk and compliance reporting (34%) and cash management (26%) solutions.
Banks remain the most popular partner for businesses in APAC to keep abreast of fintech innovations and identify the right solutions, with 70% of businesses citing this preference – in line with last year’s survey findings (69%). This is especially prevalent in Vietnam (90%), Indonesia (84%), Thailand (82%), Malaysia (80%), and South Korea (76%) where businesses tend to be more dependent on their banking partners for strategic guidance. In the UK, the level of preference for bank guidance is 69%.
Banks are less preferred in the US (47%), however, as businesses prefer to engage with fintech companies directly (89%). This trend is also prevalent in developed APAC markets such as Singapore (80%), Hong Kong (73%) and China (69%), where businesses prefer regular contact with fintechs.
The use of APIs and enterprise cloud solutions in bank connectivity is expected to continue gaining traction among businesses large and small across the region. APIs remain the most popular mode for bank connectivity with almost half of APAC businesses (48%) using it in their current operations as compared to cloud-based solutions (31%). But a big shift to cloud is expected in the next three years as it has proven to be a useful tool for businesses to migrate data seamlessly.
Some 59% of businesses in APAC are looking to implement cloud-based solutions in the next three years – as compared with 50% and 68% in the US and UK respectively – with close to three in ten (29%) businesses planning to implement cloud infrastructure in the coming 12 months.
Commenting on Singapore’s digital lead, John Laurens, Group Head of Global Transaction Services, DBS Bank, told TMI that Singapore is home to a well-established FinTech community, with an extensive ecosystem of startups, investors, accelerator programmes, mentors, and advisors.
“This diverse fintech ecosystem comprises individuals from a variety of industries, functions and professions, who help accelerate the understanding of digital knowledge and its strategic importance to businesses across the broader market, driving greater acceptance and adoption of digital solutions in Singapore.”
A large number of regional headquarters (RHQs) of companies operating across Asia tend to be located in Singapore to, he noted. “These RHQs are typically at the forefront of driving digital change across their business units and often use Singapore are a starting point and/or pilot and/or beta site due to the city’s advanced digital infrastructure, global connectivity, politically stability and digital talent.”
The Singapore Government’s Smart Nation initiative is another driver, with digital adoption a key element thereof. “Singapore has world leading national payments infrastructure, such as FAST, providing immediate settlement round the clock, seven days a week,” says Laurens. “Such market infrastructure, combined with widespread use and acceptance of e-wallets, is essential to creating ‘network effect’ and widespread digital adoption.”
Given that some APAC territories (especially Philippines and Vietnam) are well behind their US and UK counterparts in terms of digital strategy and roll-out, Laurens “definitely sees potential” for developing markets to leapfrog the market leaders.
“Vietnam has made significant digital progress in recent years, and has since put in place a national digital payments infrastructure that functions in real-time and covers consumer and business flows, he comments. “Vietnam also has a growing fintech start-up community, not the size of London or Singapore, but vibrant and growing.”
Progressive banks have also invested into Vietnam, he adds. “DBS Vietnam has a suite of cash management and trade finance products and services together accessible through its platform of corporate banking APIs, RAPID. These ingredients together provide fertile ground for digital adoption to take root and flourish at a healthy pace.”