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Lee says that initiatives such as the Bank Payment Obligation (BPO), if adopted widely, could transform the practice, unless more disruptive technologies involving intelligent electronic payment networks move the game forward faster.
“Payment technologies by themselves will probably not be sufficient but blockchain-based distributed ledger technology in combination with sophisticated e-payment approaches could quickly become the new standards for trade,” he says. “Although new and emerging fintech players may be part of that evolution, it seems more likely that larger trade groups, will lead the charge in moving trade finance forward.”
There are some who say that banks will continue to evolve into a tech industry, but it is certain that banking will become a scale business in which the most significant providers will be able to invest in solutions that will differentiate their client experience. On the other side, since sheer size is often the enemy of nimbleness, partnering with and purchasing fintech firms will continue to be an essential part of their strategy.
In the end, consumers will follow the payment schemes that provide the greatest incentive as well as the greatest transparency
“ Cash management in a more complex world
Nordea’s recent and extensive data mining research showed that discussion of cash management as a whole fell but also took on a different tone. Cash pooling remained a hot topic, as did, for example, implementing meaningful KPIs to drive improvement. The primary lens through which commentators discussed cash management is the need for end-to-end systems that simplify cash in a new era of globalisation. Nordea’s research makes it clear that in global operations cash management is becoming more complex, particularly in Asia where regulations mean clients are in need of new sources of real-time information on tax and compliance.
Banks get more disciplined in resource allocation
The next wave of change is exploring what is possible in a new digital environment, not replicating the old ways of doing things in a digital channel. Systematically opening up APIs to connect bank services to provide payment innovations, new products and new services is the way forward and is a key technology that banks must embrace to fully participate with new fintech market players who don’t need to worry about legacy systems and processes that have evolved over several decades.
Both research reports found that the activities of platforms such as Alibaba and Amazon – which are closely allied to sophisticated logistics networks – are changing expectations across the financial and trade landscape. People now expect much easier interfaces and better user experiences. They also expect services to be integrated on to single platforms and for execution to be fast. But how is the rest of the world gearing up for digitisation?
Lee says: “The disruption of payment methods is heavily dependent upon the emergence of new digital payment channels and digital customer engagement in real-time. As long as payment channels remain focused on making access to consumer funds more convenient and keep customers well-informed and ‘in-charge’ throughout the payment process, then adoption of new methods of payment will accelerate.”
Lee says that while barriers to adoption of digital channels are mitigated by thoughtful approaches to implementation, the numbers of transactions in digital channels still pale in comparison to ‘card present’ transaction: “However, the sheer number of disrupters continues to climb and in the end, consumers will follow the payment schemes that provide the greatest incentive as well as the greatest transparency and ease of use.”
To compete against specialist providers, banks will purchase,
license or develop their own smart analytics to suggest appropriate solutions, leverage known data to prepopulate/streamline applications/new product set-ups, and wrap it all together with easy-to-use integrated dashboard analytics.
Lee says: “Digitisation and disintermediation will continue to build pressure on bank operating efficiency, and reduction in staff is a likely consequence – the new fintech competitors do not typically have large back-office operations and take full advantage of electronic delivery of service, robotic automation and artificial intelligence approaches. However, a key differentiator that is important to millennials as well as other demographic groups is customer experience – the right staff with the right tools and the right training will be needed to deliver the customer experience that all bank customers will be demanding as they move through life events.”
Felix Chan, head of channels, global transaction services, DBS Bank, adds: “SME clients are keen to adopt a digital-only approach to their banking relationships. This stems in part from their accounting software systems being entirely in the cloud. It is also because of moves by the regulators – especially in Hong Kong and Singapore – to nudge companies away from a cheque-based culture. But larger clients are moving that way as well. Their journey typically starts with digital remittances, followed by payroll and then bulk payments and the transition from LC-based trade finance to open- account trade.”
According to Nordea, the biggest overarching theme is the restructuring of global trade. This will lead to new supply chain finance opportunities. But while we have found that SCF is becoming the main focal point of Transaction banking, its research suggests that clients don’t think in terms of trade finance, working capital and SCF. They just need funding. To achieve this, banks and supply chain managers have to co-operate and consult more.
www.ibsintelligence.com | © IBS Intelligence 2018
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