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08:00 AM
Michael Araneta
Michael Araneta

Are Trade & Transaction Solutions the Way In for Asia/Pacific Fintech Vendors?

The transaction banking business will clearly pursue the theme of Asian regionalization in 2015.

Intra-Asia/Pacific trade is already significant in world trade, second in magnitude only to Europe. Further, as of 2013, intra-regional trade already corresponded to more than half of Asia/Pacific exports and imports. (In other words, Asia trades with itself more than with the rest of the world.)

And then there is the imminent creation of the ASEAN Economic Community (AEC), which intends to integrate the 10 economies of the Southeast Asian market, lowering trade barriers among their 700 million people beginning in 2015. Transaction banking propositions will consequently focus on the Asia/Pacific region.

Asia/Pacific banks are refashioning themselves as preeminent players in trade and transaction banking. Malaysia's CIMB and Maybank, for example, have launched cash management systems and trade finance platforms that cater to local corporations, standardizing these solutions across their holdings in Southeast Asia. These solutions offer clear local elements such as multi-currency and Asian language capabilities, alignment with local reporting guidelines, and support for ratio calculations mandated by Asian regulations. Meanwhile, Thailand's Kasikornbank has spearheaded an Asian Alliance that seeks to bring together about 40 banks under a record correspondent banking arrangement.

These and similar initiatives by leading domestic players will have an unintended benefit for local vendors and systems integrators: These domestic players will go regional, too, since they now suddenly have regional references and a regional footprint. A few Asia/Pacific vendors like Malaysia's Silverlake (No. 71 in the IDC Financial Insights 2014 Fintech Rankings) and Indonesia's Aprisma are gaining credibility to push their own propositions for corporate treasury and cash management. In fact, these efforts might lead to greater prominence for Asia/Pacific vendors in our rankings. We need to mention, of course, the growing credibility of Indian players like TCS (No. 3), Infosys (No. 7), and Polaris (No. 39) in all things banking, including activities in the trade and transaction space.

Meanwhile, the global players in transaction banking are aggressively building their teams. Their focus is not just on numbers, though. They can now go very deep into customer segments -- bringing solutions that cater to specific industries or specific segments of the corporate market.

In general, the competition will still be about comprehensive solutions for the ever-expanding Asian corporate market. The ultimate objective is to align with corporate clients' roadmaps for more sophisticated working capital solutions that link web-based cash management, trade finance, corporate payments, investments, and treasury. Here, we cite the efforts of several vendors to help treasurers execute online corporate payments (both domestic and overseas) and monitor/manage liquidity (i.e., cash) levels via a single portal.

Furthermore, we have seen new trading solutions specifically tailored for Asia from Deutsche Bank. Its Asia Accelerator solution enables efficient flows between multiple jurisdictions, including the United States and Europe. It does this by prioritizing flows when Asian markets are closed but US and European markets are in full-swing operation. Deutsche Bank's FX4Cash platform allows cash management and payment in multiple currencies from a single platform and has recently been launched and marketed to clients in Asia who stand to benefit from such seamless forex tools.

The advantage for global players and the vendors that serve them is that they are years ahead of Asia/Pacific institutions in optimizing their data infrastructures. Forced by regulation (Basel III, Sarbanes Oxley, Dodd Frank, and so forth) and the pressures of the global crisis, these players had to standardize data for their risk management and reporting activities. A significant amount of work has been completed to this end, and base data can be provisioned for other functions, such as finance and treasury.

This "data efficiency" makes corporate treasurers confident in the quality and the soundness of the data they are using internally and for their clients. Aided by analytics, global players can be much more credible in pricing, what-if analysis, and other predictive analytics capabilities that are increasingly crucial in transaction banking.

The functionalities in global transaction banking solutions are expanding impressively. Solution providers will continue to enhance their treasury tools across payments, collections, liquidity management, clearing, and settlement. One common characteristic of such enhancements relates to allowing corporate clients to centralize information through consolidated account balances. This aids in cash forecasting and driving inefficiencies out of the financial supply chain -- and it lends itself to a big data use case in the near or medium term.

Furthermore, as banks see their treasury offerings mature and become increasingly commoditized, the corporate client experience has been identified as an important differentiator. Banks and service providers will invest in advanced corporate customer-centric tools such as single sign-on, mobile authorization and digital signatures, multi-entity and real-time reporting, information aggregation, and customized treasury dashboards. This set of tools serves as a counterpart to the user-friendliness mandates for retail banking channel initiatives.

With the growing sophistication of requirements from the Asia corporate market and trade and transaction banks, global financial technology vendors will have much to bring to the bustling Asia/Pacific region. However, competition for relevance in this space will also come from homegrown players that aim to keep Asia theirs.

Michael Araneta is Research Director for IDC Financial Insights. Araneta's work for IDC and the Insights team has proven that he is the go-to analyst for a broad range of strategic and tactical issues for Asia/Pacific institutions, including banks and insurers that comprise ... View Full Bio

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