With regional banks investing in independent electronic trade and supply chain solutions, Asia now represents a lucrative market for third party providers.
While global banks that rely on their own proprietary platforms are spearheading the movement towards greater automation of trade and supply chain finance in Asia, a number of independent technology solution providers have also made successful inroads into the region.
Increasingly, many of them are working with local and regional banks that want to deploy new, electronic solutions for traditional and open account trade transactions, and roll-out supply chain finance programmes for their corporate customers.
Misys, which has been active in Asia for more than 30 years, has doubled its resources in China in the last year alone. It now has 50 clients there, including Agricultural Bank of China, Bank of Communications and China Development Bank.
“Having a local presence is key – especially in the trade and supply chain finance space, as when you are putting in domestic market models you have to be close to that market,” says Olivier Berthier, global solutions director, transaction banking at Misys, who relocated to Singapore a year ago to head the company’s transaction banking product development and strategy. “We decided that we wanted to have our strategy and solution development in the market where we are witnessing the greatest growth so that we can meet local requirements.”
Berthier points out that there are significant opportunities in Asia for best-of-breed, independent trade and supply chain finance solution providers to work with both regional and local banks that are now looking to expand their businesses and compete more effectively against global players.
“There is relatively less competition (to us) from large, global banks outsourcing services in Asia because regional banks are competing fiercely against global banks in their own domestic markets,” he says, pointing out that such competitive pressures have reduced opportunities for true partnerships. “Many regional banks are also very ambitious and want to do things their own way.”
He adds that the pace of technological change sought by many Asian banks has also created new openings.
“We are seeing great demand for fast time to market, and this is why many regional banks are looking towards third party technology providers instead of developing their own technologies,” he continues.
“They want to capture and capitalise onthe fast growth of the market and region today, and for this reason working with a third party provider of best-of-breed solutions makes sense.”
The drive towards the deployment of electronic trade finance solutions also stems from many Asian banks’ desire to meet their own corporate customers’ demands for increased automation and advanced online capabilities when managing both open account and traditional trade finance transactions.
Whereas historically, Asian banks invested primarily in third party back-end processing solutions, demand is now increasing for front-end solutions as they seek to service the needs of their increasingly internet-savvy corporate customers, explains Berthier.
“There is now as much demand for our front-end solution, Misys Trade Portal, as for our back-end solution, Misys Trade Innovation Plus, as banks are looking to improve their levels of corporate customer service and provide them with greater online capabilities. Corporate customers are looking for quicker access to, and more details about, their trade finance transactions on a 24/7 basis,” he says.
Another leading provider of bank solutions in Asia is China Systems, whose total trade finance, supply chain financing and payments solution, known as Eximbills, has been installed at leading banks in the region including Bank of China and Bank of Shanghai.
Digby Bennett, regional sales director at China Systems, also recognises the potential to service local and regional banks, but notes that there is a need for tailored trade finance solutions.
“Some banks do develop their own proprietary solutions, and this is one of our biggest areas of competition,” he says, adding: “One of the key advantages of Eximbills is that it comes with a rules-based engine and a development toolkit, allowing banks to adapt our business solution to meet their exact requirements, and change it in line with their needs over time.”
Like Berthier, Bennett also identifies a strong movement to deploying the latest technologies at the back-end and front-end, as well as an increased focus on seamless and secure multi-channel environments.
“Asian banks are recognising that their trade customers have become very dynamic and ambitious – and they want to be attuned to the latest technologies,” he says, pointing out that, aside from online trade services, Asian corporates are increasingly looking to deploy user interfaces such as iPads and iPhones – particularly for checking trade transactions.
China Systems also offers Customer Enterprise, the front-end of its Eximbills solution, directly to corporates, who use it to support a full range of trade finance, open account and payment transactions, as well as financial supply chain activities.
“There is growing demand for all types of supply chain finance, and corporates are recognising that they need a portal to manage all their trade transactions. Our solution enables them to view their cashflows, see where their receivables are and also discount them,” he says.
“Paper will eventually be replaced by electronic formats for a large range of transactions in Asia as companies seek to improve their visibility and reduce risks.”
Many Asian banks looking to make a major investment in new trade finance solutions today are in a strong position to leapfrog existing technologies and move directly to the latest converged cash and trade solutions.
By deploying fully-integrated solutions now, they can facilitate their own expansion plans and lose no time in servicing their corporate customers in a more unified way.
“Many of them are moving straight from basic functionality to online, electronic cash and trade solutions that run on the same platform,” says Berthier, who acknowledges strong interest in the deployment of both Misys Trade Portal and Misys Cash Portal, which use the same underlying technology as a converged solution.
“Banks are witnessing increased demand from corporates for one-stop shop access to both their cash management and trade finance – and there is now a major evolution taking place in unified cash and trade solutions.”
He adds: “A number of relatively large banks are quite ambitious to grow and recognise that to achieve this they need to improve customer service and their own reach. They want the ability to service customers across the region in a multi-product way.”
Here, he identifies Maybank, the largest bank in Malaysia, as one local bank that has deployed Misys’ front-end solution for trade finance to support ambitions to grow its business across the region.
The bank now offers online trade finance services via Maybank2e.net, supported by Misys Trade Portal, which its corporate customers can use to interact with the bank from any location to gain a real-time view of their financial supply chains. At some stage in the future Maybank is likely to invest in Misys’ cash management capabilities too.
CGI is another independent provider of converged solutions that has secured a presence in the region with its CGI Trade360 solution, which offers traditional trade, open account, supply chain, receivables, payables and other cash services.
The company counts Australia New Zealand Bank (ANZ), a regional bank that has major ambitions to grow its business across Asia, among its customers; a relationship that dates back for over 10 years, and started with the deployment of Trade360 for trade finance activities alone.
CGI introduced cash management capabilities into Trade360 in order to meet the bank’s requirements for a total, converged solution more than three years ago.
“The introduction of cash management was driven by ANZ Bank as part of their strategy to become a pan-Asian regional bank,” explains Kitt Carswell, senior offering manager, trade and supply chain at CGI. “They determined that for some customer segments the combined cash and trade solution would drive greater value if seamlessly available to their customers as a fully integrated solution.”
Third party solutions
There is also a growing awareness of the valuable role that supply chain finance can play in Asia – not only by western buyers sourcing from lower-cost economies, but by Asian corporates themselves. This is creating new opportunities for third party providers of supply chain finance solutions.
PrimeRevenue, which has had a physical presence in Australia since 2004 and has been rolling out its multi-bank solution on behalf of western buyers in Asia for nearly four years, now anticipates growing demand from Asian buyers – and is looking to capitalise on opportunities presented here by collaborating with local Asian banks.
“We have been in multiple markets in Asia for a few years now for our large corporate buyer clients in the US, Europe and Australia, and have long and deep supply chain programmes in place. However, there is now a lot of interest from local Asian corporates too who are investigating the potential of supply chain finance – and we see this as being the next major step in the evolution,” says Eugene Buckley, vice-president of sales and general manager for Asia Pacific at PrimeRevenue, pointing out that his company is opening a new office in Hong Kong in March to capitalise on this growth.
“We expect the Asian market to continue gathering momentum for the next 15 to 20 years, and also believe that it will take the lead when it comes to innovation.”
PrimeRevenue, which works with 31 financial institutions as funding providers worldwide, is now talking to Asian banks about their participation in supply chain finance programmes, based on its third party supply chain finance solution, which is delivered as a Software as a Service (SaaS).
“We are not actually working with Asian banks as funding partners yet but we have engaged in discussions with local banks, many of whose customers are working on an open account basis,” says Buckley. He explains that by working with third party technology providers, Asian banks are in a good position to take advantage of the latest supply chain finance technologies to meet their corporate clients’ needs.
“Local and regional banks are in a good position to leapfrog the older legacy systems deployed in Europe and the US for supply chain finance, and take advantage of the latest cloud-based technology.”
He adds that PrimeRevenue’s solution comes with self-enrollment tools for suppliers, enabling suppliers to do much of the onboarding work required themselves. The company also has the capabilities to offer mobile access to supply chain finance.
“In certain Asian countries, mobile phone infrastructure is being rolled out faster than traditional infrastructure, and a lot of applications are being developed for mobile phones,” says Buckley. “By using mobile phones, suppliers will benefit from improved visibility into their receivables – wherever they are.”
While a number of global banks active in Asia are offering supply chain finance solutions based on their own proprietary platforms, PrimeRevenue believes that there will be a strong movement towards multi-bank solutions, offered by third party providers.
Buckley attributes this to issues surrounding the cost and availability of liquidity, the size and scale of programmes being rolled out, and the fact that supply chain finance programmes typically span multiple regional jurisdictions with different legal and regulatory environments.
“A corporate might be looking for a lot of liquidity for a programme that spans several countries, and may therefore not want to use just one single bank as this will limit the credit made available,” he says, pointing out that multi-bank solutions can allow readier access to more liquidity in the future.
Hee adds: “There is not one bank that can be the most efficient at providing funding in every jurisdiction. Certain banks have strengths in certain countries, and corporates recognise that by using a third party solution they can work with their core banks in different markets.”