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TRADE FINANCE | Staff Reporter, Singapore
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Looking at Asian companies' transaction banking relationships from a historical perspective

They want more than commoditised service.

Churn is one of the most important metrics in East & Partners Asian Institutional Transaction Banking Markets program and is perhaps one of the ultimate measures of customer satisfaction.

Here's more from East & Partners:

In the most recent report, from research conducted in May, 18.8 percent of Asia’s Top 1,000 institutions indicated that change in their primary transaction banking relationship was either “definite” or “high probable.”

This equates to just under 200 of the region’s biggest institutions changing bank in the next six months. Little wonder then that banking providers closely watch this metric.

But how do those May 2013 churn figures stack against a historical trend? East does a six monthly research sweep in Asia and the changes from month to month are incremental: in November 2012 17.7 percent of the Top 1,000 said a change was “definite” or “highly probable.”

The advantage of East’s data is that it can deliver a historical perspective on all metrics, churn amongst them. An analysis of churn since East first looked at the metric in May 2004 shows some fascinating fluctuations.

Back in May 2004, Asia’s Top 1,000 were significantly more satisfied with their transaction banks. In that research round, only 12.7 percent of the Top 1,000 reported that a change was either “definite” or “highly probable.”

2004, of course, was in the less volatile period before the Global Financial Crisis, when banking was very different in so many ways, not least of which was access to credit.

As the GFC hit, churn intention numbers started to pick up and hit a high of 31.7 percent in May 2007. This equates to 300 institutions changing their primary transaction bank in a six month period.

The situation, however, was quickly defused. Asia was relatively calm during the GFC, having had its own crisis in 1998, and was a beacon of stability during that time.

By November 2009, only 6.1 percent reported they were changing bank, a situation which may have owed more to fear and a lack of alternatives than any satisfaction rating.

In the four or so years since then, however, the churn metric has been continually on the rise, and could challenge the 20 percent level in East’s next research round.

Unlike the GFC, when institutions were rapidly deleveraging, access to debt is currently the major reason Asia’s Top institutions are thinking of changing banks, and is identified as a factor by 82.3 percent of those inclined to change. When asked for the single most important initiative their bank could take to improve their quality of service, relaxation of debt covenants was the overwhelming response.

Next in importance are a Lack of added value in a relationship – cited by 69.1 percent – and that constant in banking relationships, Value for Money (67.4 percent).

How times have changed. Back in 2004, change was driven by Service Levels and Performance, and only 24.9 percent of those planning to change banks were doing so for Improved debt offerings and securities, with 9.7 percent citing Value for Money.

The 2013 message is clear enough. Asia’s Top institutions are in growth mode, and want their banks to help fund them in that process. They also want more from transaction banking than a commoditised service.

If the banks are listening, churn intentions should fall, shouldn’t they? East’s next research sweep is in November, so watch this space.

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