The economic outlook for Asia and the Pacific remains healthy, and the region looks set to remain one of the most dynamic of the global economy for the foreseeable future, with digital transformation a major theme for companies and their treasurers. In this fast-evolving landscape, Citi’s strategy is to deliver a remarkable client experience. Digitisation enables this strategy, supported by Citi’s multifaceted approach to innovation to better address the rapidly changing needs of its clients.
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Asia Pacific Sales Head, Treasury and Trade Solutions, Citi
Asia has a lot going for it: two of the largest and fastest growing economies1; a clutch of thriving smaller “tiger economies”; and a relatively young population that has taken to technology with gusto unmatched in other regions. The region is the leader in developing innovative solutions that attempt to bring its vast underbanked population into the mainstream.
For Ernesto Pittaluga, Asia Pacific Sales Head, Treasury and Trade Solutions, Citi, these are not only powerful drivers for the region but also factors that must necessarily shape the bank’s own innovation strategy, both for in-house initiatives and projects with external partners. “We are focused on meeting the future needs of our clients and to do that we must pay close attention to the forces that are shaping their businesses. With that environment now evolving rapidly, foresight is important in thinking about how best to serve our clients.”
At Citi, that forward looking approach covers at least three key interconnected themes. The first revolves around optimisation and efficiency, for instance in relation to helping clients find ways of making payments quicker and automate processes. The second theme focuses on helping clients with their business/sales growth strategy. The third, meanwhile, aims to help clients improve the experience and satisfaction of their own customers. Alongside those client-centric initiatives, Citi has also evolved its innovation philosophy: “We are focused on making innovation mainstream across the organisation.”
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Forging external partnerships are a critical part of that strategy: “We are not limiting ourselves to developing solutions on our own. We look to actively partner with others, including fintechs when needed. We have a clearly defined process for identifying fintechs that offer a good value proposition, something that they have developed already that we can integrate with a value proposition of our own to make it even more attractive for clients.”
As part of its partnership strategy, Citi, via its venturing arm, Citi Ventures, also directly invests in fintechs and other companies. An example of this is its investment in US-based HighRadius Corporation, a software company specialising in cloud-based integrated receivables. Last July, the two announced the launch of Citi Smart Match, a solution that “dramatically increases” the efficiency and automation of the cash application process of matching open invoices to payments received for its corporate clients.
The solution leverages HighRadius’ proprietary artificial intelligence (AI) and machine learning (ML) technology along with Citi’s own proprietary assets. Citi Smart Match helps clients enhance straight through reconciliation rates by cleverly bringing together disparate pieces of payment data and applying AI and ML enabled business logic to match payments received with expected receipts in a more efficient manner.
Pittaluga explains that corporations often experience delays in applying cash due to the difficulty in obtaining the remittance information required to reconcile invoices. Cash application can also be hindered by inconsistent payer behaviour and payment mechanisms used. Many clients facing these challenges are seeking innovative solutions to automate manually intensive processes, thereby reducing costs, decreasing days-sales-outstanding, and optimising working capital.
“These are pain points for clients that Smart Match can help address. It shows our ongoing commitment to investing in our core transaction banking infrastructure and leveraging emerging technologies and partnerships. Our infrastructure allows clients to manage their treasury operations from a single point of interaction, with global consistency. The addition of AI and ML to Citi’s receivables reconciliation solution suite make it an even more compelling proposition to better serve our multinational clients across the globe.”
Indeed, AI and ML are among the key technologies being invested in by Citi. Others include robotics for tasks requiring efficient, repeated processing and data collection; and optical character recognition (OCR) for digitising paper forms and records, to simplify the handling of high volumes of paperwork associated with trade processing.
Another big investment target for Citi is its payment infrastructure: “We expect that over the next two to three years Asia will be in faster payment rails in every country in the region, and we are actively integrating with those clearing channels as a key part of our strategy.”
Digital outside, digital inside
Pittaluga, however, is keen to stress that digital transformation for any organisation is much more than just bolting on new solutions to existing operations. “As we explain to our clients, there is an external and internal element to digitalisation and both are equally important for securing real, tangible transformation. If we partner with a fintech to resolve a digital problem for a client in a digital way, we see that as investing in being digital on the outside. But we also have a cornerstone strategy – both for Citi itself and its clients – to enable them to become more and more digital on the inside.”
Pittaluga believes the bank’s migration from the offering of efficiencies and simple commoditised solutions towards offering a higher value-added customised service, which addresses different types of client needs, will develop into a general trend across the financial services industry.
A major influence for this shift towards much more customised, bespoke solutions is e-commerce, specifically the seamless, holistic, predictive servicing offered by the likes of Amazon and Alibaba. As Pittaluga points out, a bank’s client is also a retail consumer and impact of the latter on client expectations must be acknowledged: “Because they are so used to and enjoy that kind of seamless, one click approach as consumers, many clients want to see similar, painless, friction-free interaction and servicing in their business life too. So, all of those things are going to change the way we do banking.”
Pittaluga sees a big role going forward for Application Program Interfaces (APIs) in delivering such experiences for clients and transforming banking. As the ‘digital plumbing’ that enables software applications to talk to one another in near real time, APIs have been around for many, many years, humbly going about their business unnoticed. But their potential use cases are multiplying fast now, especially for solutions aimed at helping clients optimise operations, grow their business, and better serve their own customers – three key business imperatives.
Citi is investing heavily in APIs and is putting together new solutions that employ them to addressing its three themes. So, an API for the first theme, optimisation and efficiency, could be one that enables the automatic initiation of payments automatically from the ERP or accounting system. Similarly, an API-backed solution aimed at helping client business grow could entail, for instance, helping a distributor who has fully utilised its credit line to reconcile a payment so that he can continue selling.
Recently, Citi launched an API onboarding portal to set up a consistent implementation process for customers in all markets, which speeds up the API testing and implementation process. Citi is also the first global bank to launch APIs that are embedded in Treasury Management System (TMS) providers. This includes FIS, which has connected its Trax corporate payment factory to enable seamless integration with Citi’s core treasury management functionalities, covering payment initiation, transaction status inquiry and balance inquiry.
More broadly, Pittaluga is optimistic about the long-term outlook for Asia, arguing that it boasts some compelling positives versus the other regions. One of the most critical ones is that the region is, according to UN data, home to 4.5 billion people, 60% of the world’s population, with a median age of around 31 years: “It’s being called the ‘population dividend’ and it is why Asia is widely regarded as a consumer play, why it has powered ahead in developing e-commerce and online retail. These two phenomena are progressing hand in hand, with development of technology that supports reducing transaction and communications friction resulting in ever more people gaining access to online trading and faster and faster 24/7 payments infrastructure. Moreover, Asia is the region in the world where you have the highest concentration of countries moving into this increasingly connected faster payments space.”
The region’s drive into the new tech-driven world is also being aided by a “regulatory tailwind”, with central banks and other regulators generally supporting its development. The Monetary Authority of Singapore, for instance, is encouraging financial institutions to adopt APIs to drive banking innovation, consumer protection and transparency. The Hong Kong Monetary Authority recently launched an industry consultation for an Open API framework. The National Payments Corporation of India has introduced the concept of tokenised payments through its Unified Payment Interface (UPI); just as Thailand has done with PromptPay, and Singapore with PayNow.
China is of course well advanced with its cashless revolution but the region’s other heavyweight, India is moving very quickly on this front too, with a flurry of government reforms and initiatives having been launched to wean the economy off cash towards digital transactions. The country pushed through demonetisation and UPI is supporting that by allowing fund transfer between banks with the help of a single tokenised financial identifier. In practice, a consumer buying online checks-out and pays via UPI by providing their UPI ID. “The UPI initiative coupled with a series of other related cloud and biometric efforts to support online transactions and identification are really catapulting India’s growth towards digital and contributing to a much improved business environment,” says Pittaluga.
He points out that India’s digitalisation initiatives, alongside reforms that have made it easier for companies to seamlessly pay taxes and trade across borders, have resulted in the country jumping 54 spots in just two years to rank 77 out of 190 countries in the World Bank “Ease of Doing Business” rankings.
The developments and trends being seen across Asia play very much to Citi’s strengths and strategy, says Pittaluga, adding: “Citi is uniquely positioned to support our corporate clients through the above mentioned transformational trends. Our investments and innovation drive are centred on supporting our clients capturing the associated opportunities that will emerge in the future. We have operations in 17 markets across the region and in some of them for over 100 years. We have vast experience in the markets where our clients want to grow, including those where the digital developments is accelerating such as China and India.”
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