“What do corporates in Asia want from transaction banks?”
Jason Teo
Head of Treasury SEA
LOGOS Property Group
The key things we look for and evaluate in our transaction banking relationships include the bank’s overall relationship with the company beyond just the treasury team. We also evaluate our transaction banking partners ability to help us open accounts; partners’ KYC processes and escrow account set up and fees. We look for ibanking platforms and the availability of intuitive dashboards to support cash management/visibility and lastly, we consider our banks’ concentration risk, account related fees and availability of interest-bearing current accounts.
As a group, we open multiple bank accounts in different jurisdictions across ten countries with strong focus in APAC for the purposes of land or company acquisitions, setting up ventures, limited partnerships and project SPVs. We are seeing more stringent requirements from banks in areas of compliance due to respective in-country regulatory issues they must adhere to, particularly around enhanced KYC/UBO/source of funds. We do often find the regulatory challenges of doing business conflicts with the ease of opening accounts.
We have more than 40 transaction banking relationships and would like to rationalise moving forward for ease of operation. We do hope our transaction banking partners could offer platforms around consolidating KYC, compliance and support us in mitigating regulatory issues. We also need international banking partners that are prepared to bank with us regionally, going into new uncharted territories which may potentially present more risks. Cognisant of the fact not all banks are prepared to step foot into every market, we still wish for a holistic advice from our banking partners in new frontier markets as the company expands further in AI (ASEAN + India).
At LOGOS Group, we have a high-performance lean treasury team and we speak to most of our bankers on a daily basis. Not all correspondence is formal, some communications could be on WhatsApp, where we might have conversations around waivers or discounts, or pre-emptive approvals. In the past, we haven’t looked for specific support around cash management and liquidity from our transaction banking partners, but this will change as treasury centralisation has its benefits for the entire group. In previous treasury roles I’ve held, cash management/liquidity was a priority, hence the capabilities of banking partners supporting cash/notional pooling, yield enhancement products, payments gateways and technology integration to company’s ERP are some of the key considerations.
The next wave in transaction banking support for corporates will be around instant payments and facing non-bank counterparties with the advent of Fintech and Techfin players as industry disruptors. There is still a lag in corporates’ ability to transfer funds immediately. Technology is also a key area of support, for example around seamless integration with APIs and open banking concepts. As we progress along the automation journey, both banks and corporates will benefit from the efficiency and thereby, reducing operating costs in the long run.
Tim Lee
Head of Transaction Banking Greater China
BNP Paribas
Managing working capital remains the key focus for corporate treasuries in Asia Pacific. The current fast evolving interest rate and foreign exchange environment poses a unique challenge for multinational corporates in the region, where they have to ensure access to adequate cash levels to fulfil day-to-day working capital requirements across a diverse range of fungible and restricted currencies.
At BNP Paribas, we work with many European companies trading in Greater China and Southeast Asia, using Hong Kong as a procurement hub. The pandemic and various geopolitical tensions in recent years have prompted many companies to rethink their business resilience and supply chain strategy.
Across the retail and manufacturing sectors, businesses must manage the higher commodity prices and longer inventory holding period. We work with them to provide the appropriate trade and supply chain financing to bridge their working capital needs and secure the buyer and seller relationship. Many corporates are investing in expanding their manufacturing base beyond China. Looking across the region, Indonesia and Vietnam are popular options because of the availability of cheap labour and lower costs.
With the divergence of interest rates across different currencies, treasurers are seeking opportunity to optimise the overall borrowing cost and limit foreign exchange exposure. For example, many exporters are increasingly opting to keep and manage their USD receivables in Hong Kong to take advantage of higher yield and borrow in RMB.
Hong Kong is also a financial hub for Chinese corporates accessing offshore liquidity through debt and equity capital markets. Effectively managing cash flow and liquidity, onshore and offshore, is critical for these companies. To support their international expansion, we help these corporates set up cross-border cash pooling structures and roll out treasury integration projects to provide better visibility and control of their working capital across entities and geographies. Looking beyond Greater China, the shift to real-time payments in many Asia Pacific markets has prompted treasurers to devote more resources to integrate and automate their treasury operations. We are constantly in conversation with our clients, working with their IT teams and fintech companies, where required, to co-create pragmatic solutions that meet the unique needs of their business. For many corporates, ESG has become an operational imperative. Here in Hong Kong, we are deeply involved in rolling out sustainable supply chain finance programmes for our clients who are mostly international retailers. This involves close collaboration with their finance, procurement and sustainability teams, to first define KPIs, gather data and analyse their supply chains. We then develop a structured outreach programme to their suppliers to educate them on sustainable practices and bring them onboard. In this region, businesses have varying degrees of maturity in their ESG journey. Sustainable supply chain programmes can help address a business’ scope 3 emissions, and I believe banks like BNP Paribas have an important role to play in supporting our clients’ transition journey.
Aditya Gahlaut
Co-Head of Global Trade and Receivables Finance, Asia Pacific
HSBC
Manoj Dugar
Co-Head of Global Payments Solutions, Asia Pacific
HSBC
On the trade side, supply chains continue to evolve. More corporates are adopting “China+1” and diversifying to other countries in the region. This plays to HSBC’s strengths as we are present in 19 markets in the Asia Pacific region. We are, for example, able to help Chinese corporates set up either directly or via joint ventures in markets such as Vietnam, Thailand, Indonesia and the Philippines.
There’s also a growing demand from our corporate clients to help support their supplier ecosystem. In the past, efficiency was the biggest factor when choosing suppliers, but now it’s a combination of efficiency, resilience and sustainability. Corporates are looking to build more strategic relationships with their suppliers, which includes requesting banks to put in place supply chain finance (SCF) programmes both for pre- and post-shipment needs of the suppliers. This is great for transaction banks such as HSBC to come in and make our banking relationships stickier. SCF, which was a push product for us when we started offering it about nine years ago, has become a pull product. Pre-covid, we managed about 150 SCF programmes; that figure has since grown to about 480. These programmes give us access to nearly 40,000 suppliers and represents a huge opportunity for us not just to provide post-shipment finance but also to support them on their procurement and manufacturing requirements.
Sustainability is another emerging use case of SCF that expands the programme’s benefits to support the client’s sustainability or CSR objectives. Our clients are spending time with their suppliers to determine the best KPIs, putting in place supplier-tiering criteria to support their sustainability objectives, while banks such as ourselves, are supporting them by incentivising suppliers through differentiated pricing based on their achievements against these KPIs. Sustainable supply chain finance is another example of how companies are building more long-term, strategic relationships with their suppliers.
On the payments side, higher-for-longer interest rates have underscored the importance of working-capital optimisation. Companies need to ensure they have good visibility of their underlying liquidity so they can reduce their debt level and enhance the yield on their balances. Technology such as APIs can help companies access real-time information on their balances, which also supports the liquidity piece Meanwhile, real-time or on-time treasury has become a reality as companies move away from the batch-based processes of old. Asian corporates are increasingly investing in TMS and ERP systems and over the past 12-18 months we have seen growing client interest in treasury centralisation and optimisation – as well as the use of technology to streamline processes.
We are supporting clients as they roll out online commerce strategies, which capitalise on the proliferation of real-time payments and allow them to grow their customer base. We are also helping our clients monetise their payments data, using real-time information to improve efficiency and fine-tune their strategies. For example, greater insights into transaction flows, supplier concentration or FX risks provide opportunities to improve treasury management. In forecasting as well, the use of data helps corporate treasurers to better analyse receivables and payables and optimise working capital and allow immediate reconciliation to manage liquidity risk.
Next question:
“How will AI change treasury – where is it used in treasury now, and where will it be used in the future?”
