Regulators in Asia emerge as a driving force behind improving treasurers’ cash and liquidity management to safeguard against future disruption
Through decades of explosive growth, corporate treasurers in Asia have faced twin challenges: having minimal time to adapt treasury functions to the needs of accelerating businesses and battling a corporate philosophy that often prioritises expansion over technology evolution.
The result is that in a region synonymous with technological advancement, most companies lack a digital strategy and risk being left behind. But this is changing. While previous attempts at digitisation have typically focused on increasing control and efficiency, companies in Asia are now seeing digitisation as their top priority to position their businesses for future resilience and growth 1.
At the regulatory level, governments in the region, already primed by previous shocks such as the SARS outbreak and global financial crisis, are adapting to the need for rapid digital transformation amidst the COVID-19 pandemic.
“There has been a major push by almost every regulator in Asia to upgrade their clearing infrastructure, make it real time and 24X7 and to launch a number of new cashless payment solutions,” said Ankur Kanwar, Regional Head of Cash Management Products for Singapore and ASEAN at Standard Chartered. “In addition, there has been a massive push by consumers and businesses for the B2B space to replicate the innovation we’ve seen in the B2C world.”
Here are the main ways in which companies in Asia are responding.
1. Going paperless
The paperless trend is accelerating even in markets such as the Philippines and Thailand, where Standard Chartered had observed that up to 85% of B2B transactions were formerly conducted by cheque.
One interesting example is Standard Chartered’s partnership with Deutsche Post DHL Group to co-create an online collections solution on the DHL Express portal, which allows their customers across Asia to make online payments in local currencies for shipping charges, taxes and duties, using local payment methods. The solution is live across six countries and expanding.
“We support DHL with digitisation of their in-store collections and payments-on-delivery using QR codes and instant payments, powered by our proprietary app and integration with their delivery agents’ handheld devices,” said Judy Bei, Global Head of Payments and Receivables at Standard Chartered. “This provides DHL with a cost-effective solution, enabling elimination of cash, access to a variety of local payment methods across multiple geographies and automation of their reconciliation, all through a single integration and a single contract.”
2. Adopting automation tools
Another concurrent trend is the accelerating shift towards treasury centralisation. Kanwar explains that as Asian companies become more multinational, Standard Chartered is seeing that treasurers are prioritising pooling cash for greater visibility and more effective deployment, rather than having it fragmented across multiple banks. Automated tools are now being deployed around the region to aggregate cash from different bank accounts using the local direct debit network, which cuts costs and gives treasurers greater control over capital.
Automation is also increasingly being deployed in foreign exchange management. A lot of business in Asia is conducted in hard currencies2, but suppliers and smaller companies that do not hold foreign-currency accounts are unable to hedge their exposure and end up paying bank conversion costs, which are passed on to customers. Automation tools can analyse currency exposure on a continuous basis. This minimises risks and, according to one survey3, can save companies up to 5 per cent on each invoice.
3. Using digital processes to counter operational lags
While the pace of transformation is speeding up, the region also faces its own set of challenges. Unlike the US or Eurozone, the payments infrastructure in Asia is quite fragmented. Clearing-house requirements, file formats and currencies are all localised, which slows payments and clogs up the machinery of liquidity management.
However, more and more companies and clearing houses in the region are taking an interest in adopting the ISO 20022 standards, which will provide consistency between countries and make life simpler for corporate treasuries across the region.
In Singapore, for example, the implementation of fast payment networks has cut the payment transfer process between banks from as much as three days to a few seconds. This has enormous implications for future cross-border treasury operations, in terms of payment speeds, security, real-time liquidity and the opportunities for data analysis.
Bridging the digital divide
For unicorns and start-ups that have sprouted into a digital landscape, digitisation is less of a problem, but for larger and more traditional Asian companies, transitioning away from legacy systems and processes is not an easy task.
Making that entire transition in one shot is unrealistic, particularly for companies that do business across such a diverse region, so there is a growing demand for digital advisory services that can help companies adapt smaller portions of a business first.
“There’s a big shift towards digital advisory, which is what banks like Standard Chartered can offer,” said Ankur Kanwar. “We understand the priorities and processes corporates have and aim to leverage new technology to enhance client processes and help their business priorities. It’s not about just trying to use technology for the sake of it but trying to solve real pain points and help businesses grow”.
Standard Chartered recently partnered with the International Air Transport Association (IATA) to support the development of a multi-country pay-as-you-go solution called IATA EasyPay in Bangladesh, Pakistan, Nepal and Taiwan.
The system enables travel agents to load funds into their Standard Chartered accounts, which are used to pay for air tickets and settle proceeds, enabling agents to book tickets without needing a financial security or bank guarantee. For airlines, the system increases sales channels and enables them to receive settlements within 48-96 hours of tickets being issued, compared with up to four weeks previously.
As the demands on corporate treasurers to digitise continue to grow and evolve, banks should strive to provide innovative solutions to support their strategies and growth agenda.
“Banks like ours are taking the lead in Asia because we are investing in technologies and making sure we offer a standardised set of solutions no matter which countries treasurers are dealing with,” Kanwar said. “We present a consistent experience across these markets, so they don’t need to get bogged down in nuances.”
To succeed in the face of disruption, corporate treasurers in Asia’s dynamic markets need to accelerate their move towards digitisation. This becomes easier by working with FI (financial institution) partners like Standard Chartered that have a widespread regional network, local expertise and market ready technology solutions to provide the necessary support for both local and multinational organisations to operate effectively and efficiently now and in the years ahead.
Produced by Bloomberg Media Studios in partnership with Standard Chartered.