Cash & Liquidity Management

Accelerating Asia’s shift to digital transactions

Published: Nov 2021

The digitisation of business-to-business transactions is accelerating in Asia, and recent developments in Japan, India and China show how the shift away from paper is giving treasurers the opportunity to rethink and overhaul their existing systems and processes.

Double exposure of the city, graph and rows of coins

Makoto Hasegawa, Head of Transaction Banking, Japan, BNP Paribas

Makoto Hasegawa

Head of Transaction Banking, Japan

Rupa Balsekar, Head of Transaction Banking, India for BNP Paribas

Rupa Balsekar

Head of Transaction Banking, India

Louise Zhang, Head of Transaction Banking, China, BNP Paribas

Louise Zhang

Head of Transaction Banking, China

As the world shifts from physical to digital – a trend that has been accelerated by the global pandemic – various markets in Asia are undergoing a transformation. Take Japan, for example, where a longstanding corporate tradition is disappearing that is symbolic of the wider trend of digitisation.

The hanko company seal or ‘chop’ – a red stamp that is uniquely carved and registered with the legal bureau – has long been used instead of handwritten signatures on corporate documents. Corporates usually keep it under lock and key in the company safe, with strict procedures around who is authorised to use it. Makoto Hasegawa, Head of Transaction Banking, Japan at BNP Paribas, comments how in an environment where most people are now expected to work from home, “The company chop does not actually match the world culture of 2021.”

Japan needed to find alternatives to the physical company stamp. In October 2020, the prime minister told the government to make plans for removing hanko from government documents. And many corporates have also decided to drop the chop. Hasegawa explains how BNP Paribas was able to support its corporate clients with such a transition. The first step, she says, was to use digital signatures for documents where a company seal was not legally necessary. For example, a withdrawal request, or a loan rollover – where the original paperwork with the seal was already on file – did not need to be stamped again. Also, trade finance guarantees, term deposits, balance confirmation requests, for example, could be arranged by email or e-signature. “This made treasurers life easier as they did not need to go into the office – we offered them a solution,” comments Hasegawa.

The pandemic has been a catalyst for change, and the hanko could eventually disappear altogether. Hasegawa says that corporates should start preparing for this shift now. In advice to treasurers in Asia, she says, “I would start working with a bank that already accepts e-signatures so the shift is easier,” she says.

Japan is not the only market in Asia that has been heavily reliant on physical processes. India has also been undergoing a digital transformation of its own with corporate transactions. Rupa Balsekar, Head of Transaction Banking, India for BNP Paribas comments how the pandemic has pushed treasurers to be more digital: “If a client had manual transactions and was previously sitting on the fence about whether to be manual or digital, they are now moving into digital solutions,” she says. Digitisation is now a top three priority for treasurers. They realise that working from home could be extended,” she says.

She goes on to explain that India is a regulated market where, for example, numerous documents need to be validated in trade transactions. BNP Paribas has developed an online platform to make this process more efficient, a solution that has digitised more than 21 types of trade transaction. Corporate treasurer can now execute trade transactions in an efficient manner . removing manual work from the process, along with the need for paperwork, emails or phone calls.

Balsekar comments that BNP Paribas’ already existing virtual account solution also helps the digitisation process and has been useful in easily identifying remitters of transactions. In addition to that, a couple of industry leading solutions have been put in place in last two years by BNP Paribas in India to digitalise the receivables reconciliation process. The Electronic Invoice Presentment and Payment solution (EIPP) can facilitate collections digitally on a 24x7x365 basis. The order-to-cash reconciliation, which was earlier an incredibly cumbersome process involving extensive manual efforts in reconciling single payments against multiple invoices has been automated using advanced character reading capabilities (ACR) coupled with AI & Machine learning to enhance the accuracy. Now with advanced ACR technology, it is possible to digitally scan documents and automatically match payments with their corresponding invoices, with the reconciliation data being fed into the corporate’s enterprise resource planning (ERP) systems. “This is another game changer that has been put in place in India by recognising companies’ needs and supporting operational efficiency,” says Balsekar.

This digitisation trend in India is also in line with another key priority for treasurers – sustainability – as reams of paper are removed from the system, which in turn helps the environment.

China is another market in Asia that has been on a journey with the digitisation of its payments. Louise Zhang, Head of Transaction Banking, China at BNP Paribas, explains that domestic solutions such as AliPay and WeChat Pay have been ahead of the pack when it comes to digitisation. The area that is ripe for disruption, she notes, is cross-border transactions. In recent years, Chinese regulators have issued a few guidelines in order to facilitate the flow of renminbi internationally. This has also involved simpler, more digitalised processes for the supporting documents for cross-border payments, which can now be submitted in electronic format.

Now, instead of needing to verify paper documents, it is possible to check customer data by referring to a shared database – by checking underlying details with the system of customs office and tax office directly, for example. “This has created new efficiencies,” says Zhang. Payments for goods trade is now far more streamlined, through validation of information in the China International Trade Single Window, which removes paper from the process. In addition to this, BNP Paribas also offers a digital tool to all the clients for regulatory declarations, which has also accelerated the shift to digital transactions for corporates. “BNP Paribas is very committed to this market, and we are offering the latest technology to our clients,” says Zhang.

Zhang emphasises, however, that it is not just to provide a technical tool or product to the treasurers. “We want to help clients navigate this journey and do the entire review of their cash management set-up. We play an advisory role for our clients – it is easy to adopt technology, but it is important that the workflow and the process are also fine-tuned,” she says.

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