Insight & Analysis

The future of cash management in ASEAN’s era of digital transformation

Person holding hands out with a digital global transformed between

Being a treasurer in the digital age is tough. As existing businesses find themselves being disrupted by smaller firms and emerging technologies, corporates have to take on new business models to stay relevant to their customers. And treasurers have to play a role in facilitating this move while protecting the company’s value from financials risks.

“When you add in issues like cybersecurity, data privacy and tax concerns, executing digital transformation can potentially create significant strains on revenue streams and internal governance controls,” says Kee Joo Wong, Regional Head of Global Liquidity and Cash Management, Asia Pacific, HSBC.

Increasingly, corporate treasurers are expected to ensure a smooth financial transition into this new landscape, he adds. “And this all sits within the context of tightening of resources; treasurers are under pressure to do more with less.”

Revolution

With the emergence of the ASEAN digital consumer, corporates in the region are having to adapt their business models to incorporate new technologies. According to Deloitte, nearly four million new users are expected to come online every month in Southeast Asia for the next five years, generating a user base of 480 million by 2020.

The shift to digital can no longer be ignored; from a logistics business having to look to Robotic Process Automation (RPA) to manage their warehouse more efficiently, to media companies changing their distribution models to direct-to-consumer streaming services, Wong argues that businesses must make changes “or risk being left behind”.

“When corporates adopt a new digital business model, the commercial side of the business often leads the charge, with new initiatives often not communicated quickly to the treasury department,” he notes. Treasuries are then pressed for time to adapt these new business models, and the transformation is rapidly changing the everyday practices of finance functions in ASEAN. “We often see businesses adopting digital solutions derived from multiple service providers, ultimately reducing scalability and cost-efficiency.”

Another issue faced by treasurers is creating a framework to quantify the financial success of digital investment. Measuring success only on traditional metrics such as cost, revenue and customer satisfaction is, comments Wong, “now too myopic”. He argues that there’s an increasing need to consider new metrics, such as brand value in market, percentage increase in customer engagement across digital channels or cost per click, to get the right control and visibility of progress.

Challenge

For ASEAN to retain its competitive edge and achieve smart, sustainable urban development, Wong believes that the region must invest in its cross-border digital infrastructure. Payment interoperability is the next step in the digitisation of ASEAN’s economy.

Significantly changing fixed costs, reliability and access, the idea of interoperability will accelerate the flow of people and trade. Yet there is a long way to go before the region is truly cashless. Singapore is leading the way in driving the payments agenda; as a trusted broker and first-mover, the Republic is helping establish shared common standards, be it in digital payments or cross-jurisdiction data protection. For Wong, Singapore’s expertise in global trade and innovation, its intellectual property protection laws and the government’s desire to work with corporates to incubate ideas “makes it an obvious leader in the region’s innovation”.

Announced at the Singapore Fintech Festival in November 2018, the Monetary Authority of Singapore (MAS) and Bank of Thailand are working to link their national digital payment systems, PayNow and PromptPay, respectively. Once completed, businesses and residents in both countries will be able to transfer money instantly and securely using only their mobile numbers, thereby increasing efficiency and minimising the cost of cross-border payments.

Looking further ahead, MAS is taking a leadership position with Bank of Canada, the Bank of England, and a consortium of banks led by HSBC to understand the emerging opportunities for digital transformation in cross-border payments.

Which technologies?

The key question now for treasurers is about which technologies will deliver practical benefits for their business. While it is known that technologies can drive efficiencies and improve risk management, truly grasping how to navigate and apply them practically can be challenging.

“Buzz terms like Application Programming Interface (API) and Internet of Things (IoT) are spoken about frequently, but there’s still a wider lack of appreciation for their value in practice,” notes Wong. “Treasurers are often hard-pressed to find suitable use-cases that would compel them to make the financial investment to embark on change and therefore struggle to migrate to these technologies.”

Adding to headwinds, vendors providing technological solutions often operate in silos and it is therefore hard for businesses to find a single solution provider to meet all objectives.

For example, with the rapid rise of mobile users across Southeast Asia, e-wallet providers are battling it out to capture the increasing volume of non-cash payments. Yet, says Wong, this increased popularity comes with its difficulties. “E-wallet providers are not inter-operable and there is often no one payment gateway that can provide a single solution,” he says. The knock-on effect is that businesses are battling an increasingly complex collections process to keep pace with the expanding number of payment methods and channels available.

Integrating an omni-channel strategy that enables multiple payment and collection methods through a single channel is a solution that is gaining increasing traction in ASEAN, says Wong. “Purchasers enjoy a convenient payment experience irrespective of their chosen payment method while sellers avoid the need to support each method individually, instead benefitting from a single solution and consistent processes and information flows.”

Government and legislation

As businesses move into the uncharteed land of digitisation, treasurers need to manage the associated costs that come with the responsibilities of protecting customer information. Wong suggests the questions for consideration here should probe how digital service tax comes into play, how corporates secure customer data with regulations such as General Data Protection Regulation (GDPR) and Personal Data Protection Act (PDPA), and how internal forensic data analysis can be used to safeguard against cybersecurity risks.

Knowing what national resources are available is also an essential and cost-effective tool for businesses. In Singapore, the Smart Nation and Digital Government Office (SNDGO) currently has several frameworks that could prove useful to corporates. One is the National Digital Identity (NDI) system which has a digital vault of personal data, dubbed MyInfo, to eliminate repetitive form-filling and document verification, and enhances accuracy. This can be used for everything from tax payments to credit card application.

Path ahead

“ASEAN’s treasurers will continue to grapple with the increasing number of innovations sweeping across the region. For them to benefit practically, collaboration will be required,” notes Wong. Indeed, in this era of innovation, a change in mindset is the most important change businesses need to adopt, he adds. “Key to making digitisation a success will be the transformation of treasury practices in line with commercial developments.”

The rise of technology is an opportunity for corporates, as well as banks, as it has pushed all stakeholders to upgrade and improve at a much faster pace than perhaps would perhaps otherwise have been seen. Technology needs to be approached as a source of motivation instead of disruption. To navigate the current environment, businesses – and banks – need to engage industry experts to provide their expertise in emerging domains and continue investing in themselves to keep pace with ever-changing needs of today’s clients. As Wong says, “to deal with transformation, we must be open to transform ourselves”.

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