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Copyright The Asian Banker 2011. All rights reserved Copyright The Asian Banker 2011. All rights reserved 1/39
Asian Banker Research & Consulting
The Asian Banker’s Survey on Benchmarking & Assessing Asia’s Transaction Banking Industry
8 April 2011The Asian Banker Summit 2011Hong Kong
Copyright The Asian Banker 2011. All rights reserved Copyright The Asian Banker 2011. All rights reserved 2/39
Today’ Agenda
Assessing Cash Management Services for International and Domestic Banks
Assessing Trade Finance Services for International and Domestic Banks
The Future of Transaction Banking
Cash Payment Service Scope
Distribution
Product and Technology Enhancements
Survey by International Banks on their Preferred Domestic Peers
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Assessing Cash Management Services for International and Domestic Banks
Source: Asian Banker Research
We assess transaction banks on a balanced scorecard approach across 6 key dimensions in cash management
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Assessing Trade Finance Services for International and Domestic Banks
Source: Asian Banker Research
We assess transaction banks on a balanced scorecard approach across 6 key dimensions in trade finance
Copyright The Asian Banker 2011. All rights reserved
Fragmented transaction services
Integrated comprehensive suit of Transaction products
Service Integration
Infrastructure Integration
Characteristics
Strong price competition, Single digit growth in transaction revenue that too backed by cost cutting
Product innovation being considered as key competition driver
Domestic banks still working on fragmented services on cash, trade and payments
Separate Touch points for client interaction in Cash and Trade
IT investment focused towards processing improvisation
Selected banks looking at processing centralisation
Banks increasing risk mitigation measures, adding visibility and controls
Characteristics
Single global platform to meet all transaction needs
Transaction processing completely centralised. Real time transaction processing
Intra-Asia Trade forming a large component of trade transaction business
Service quality a key competing factor. Whitelabelled technology and Internet enhancements provide competing propositions
Customised and consultative approach, collaborate closely with Corporate, FI client & provide integrated product service
Supply chain financing to become a significant revenue generator for banks
2009/2010 2011/12
Source: Asian Banker Research
Future business model looks at globally integrated suit of products for transaction banking backed by IT investments for service innovation
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60
80
100
Cash Pooling Cash Netti ng AccountsReconciliation
AccountsReporting
OutsourcedCash Mgmt
Payments Invoice Mgmt Lockbox Salary accounts Liquid ity Mgmt
SME Corporate
Cash Management Services Scope of Domestic Banks to Corporates and SMEs (2009/2010)
% o
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is s
erv
ice
Cash consolidation solutions, liquidity management to corporate and payments are at the forefront in domestic banks’ service profile currently
Source: Asian Banker Research
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Cash Pooling:•Inter subsidiary funding and Interest reallocation which includes a fixed slab tier structure.•Notional cash pooling facility offering a tailored account structure for the Institutional Bank and Top Tier Corporate client •Tailored interest disbursements back to individual accounts at rates set by the client.• Intraday Virtual Transfer among Group Company Account•Unlimited number of layers of companies
Accounts Reconciliations•Virtual account structure to assist customers with a/c reconciliation.•SA/P & A/R Reconciliation-Integrated to Customer’s ERP.•Customized designed reporting for customer account reconciliation
Account Reporting•Full range of liquidity management reports: interest scale report, interest reallocation report & sweeping reports.•Zero balance, Target balance, and Range
balance.
Distinguishing Features of Competitive Advantage
Outsourced Cash Management•Strategic tie up with Cash-in-transit providers.• Dividend Payments Service•Cheque Issuance service with variety of advice's template.•Tailored solution based on customer’s specific requirements.
Payments
•Complete suite of payments ranging from local and cross border . Both electronic and paper based payments.•Online business banking platform allows consolidation of cash positions into a single portal, reporting of balances & transactions, movement of funds at any bank, around the world•Guarantee Credit within 6 a.m. Of value date-Payroll on Holiday- Real-time and post-dated payment via card solution,
Invoice Management:•Electronic Invoice Presentment &•Payment solution with ASPs.•Bill Placement and Invoice capturing for debt setting.
Lockbox:• Positive cheque matching & exception
reporting.• Intelligent matching of multiple document and
automated reconciliation of payments against the customer’s Accounts Receivables.
• Invoice data capturing service is provided by all branches nationwide
Salary account:• Guarantee Credit within 6 am of value date.• The web-based payroll application service for
the companies to do payroll calculations e.g. tax, social securities and generate payroll payment instruction file.
• Electronics self-service web application for employees to view their payroll transaction details with SMS alert.
• Salary Benefits Solution where special Retail products (e g Home Loan, Personal Loan, Credit Card, Investment, Mobile Banking) are provided.
• Life insurance policy for employees.
Liquidity Management:
• Inter subsidiary funding and Interest reallocation which includes a fixed slab tier structure.
Cash management services scope of domestic banks to SMEs and corporates
Source: Asian Banker Research
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Relationship management between banks and of banks with their customers are the crucial components grow mandates and create loyalty
Branches, ATMs Relationship with FI, service providers
Electronic channel
Domestic branches and ATMs
Dedicated SME and Corporate centers
Dedicated RM and specialist team
Follow the clients.
Pan Asian Branches
Relationship with correspondent banks/FI
Relationship with domestic clearing systems
Exclusive partnership arrangements with integrated technology
Non traditional partners- Post office, mobile service provider, convenience stores
Online banking platform
Web portal and web service, customised direct service
Mobile devices
Straight through connectivity with SWIFT
Physical distribution Alternate Channels
Level of advancement in distribution
Commonly used distribution channels by leading Domestic Transaction Banks
Best Practices
•Online targeted for more visibility and control to clients
•Real-time reporting
•Sophisticated analysis and user generated report
•Fully flexible E commerce facility
•STP rate of over 90% via direct internet service
•Mobile used for instant verification, alerts and reporting
Key consideration
•Clearing capability•Reach of branch network•Existing relationships of bank•Business objectives•Standards of service quality•Fee sharing negotiation
Source: Asian Banker Research
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Most leading domestic banks are offering basic transaction services online but very few have integrated it for real time information and customized services
Transaction Banking Services on the Internet of Leading Domestic Banks (2009/2010)
Source: Asian Banker Research
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Banks focus on same day clearing and consolidation of global multicurrency payments in service innovation in payments business
Consolidation of multicurrency global payments
Real time reporting of balance, payment
Enhanced electronic payment, replace paper based processes
Intraday exceptions and investigation
STP cross border, Same day settlement
Extend bill payment thru phone, internet and convenience stores
Integrate bulk transfer through SWIFT
Clients can use US $ account to initiate local payment
Electronic payment system
Payment Volumes in Asia
Technical Advancement
Bank A
3.7 Million in 2009
Bank B
USD 21.42 Mln,( 27 % share Asia)
Bank C
4.3 Million in 2009
International Payments
Bank D
37% market share in domestic
Bank E
25% market share in domestic
Bank F
6 % market share in domesticBank G
3 % market share in domestic
Domestic Banks
• Leading Domestic banks are targeting same day clearing and reporting
• SWIFT Connectivity low (less than 20%) among domestic banks
• Sought by international banks for their local network and relationships
International banks
• SWIFT connectivity good. SWIFT traffic is 47% intra Asia currently and likely to increase.
• Better service capability
• Intraday turnaround on exceptions
• Strong packaged relationship
• Compressed margins but target high volumes with value added services
Source: Asian Banker Research
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Trade solutions have been targeted at supply chain financing, improving working capital availability and risk mitigation
Product and Technology Enhancements in 2010
Trade transaction Technology
Electronic channel
application
Trade products Account
receivables financing with limited recourse
Innovative LC & export financing solution
Supplier financing, WC needs and immediate payment
Bilateral risk participation program and offerings
Receivable financing without recourse
Factoring solutions
Document management, digitization of paper in Open ac.
Seamless end to end trade finance solutions
Online trade inquiry
Online trade transaction reporting system
Trade origination, online or web portal
Real-time transaction tracking and alerts
Multiple product offering, customized reports
Centralised trade processing
Hub and Spoke model with disaster recovery
> 80% STP, 24* 7
Risk audit. Authentication matrix improved, risk reporting
Document Imaging and management
Integrated platform for multiproduct, cash, trade, reporting and payment services
Areas where domestic banks are focusing on
Source: Asian Banker Research
Advances in technology products and online application in trade finance
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“What is your primary domestic client bank, accounting for more than 40% of the total international volume (as rated by global FI’s)? (2009/10)
Source: Asian Banker Research
Note: Ranks were compiled from the input of 6 international transaction banks. For every rating as #1 primary client a score of 3 was given
Country Rank 1Strength
ScoreRank 2
Strength Score
Rank 3Strength
Score
Australia CBA 5 Westpac 5 N.A
China ICBC 8 BOC 5 CCB 4
Hong Kong Bank of China 10 Hana Bank 4 HSBC 3
India SBI 15 IDBI 4 N.A
Indonesia Mandiri 10 BNI 5 HSBC 4
JapanSumitomo Mitsubishi
5 N.A N.A
South Korea KEB 10 Shinhan Bank 5 Woori 4
Malaysia Maybank 15 Bangkok Bank 4 RHB 3
Philippines Banco De Oro 9 Metropolitan Bank 5 BPI 5
Singapore DBS 5 UOB 5 N.A
Taiwan Mega International 10 Bank of Taiwan 5 First Commercial 4
Thailand Kasikornbank 10 Bangkok Bank 3 N.A
ICBC and Bank of China are the primary banks in China in the area of trade finance with international banks
Copyright The Asian Banker 2011. All rights reserved
Source: Asian Banker Research
Note: Ranks were compiled from the input of 6 international transaction banks. For every rating as #1 primary client a score of 3 was given
Currency clearing strength of large domestic banks in Asia rest with Chinese, Indian and Australian banks