The global financial crisis was a stark reminder for many companies that effective working capital management and strong counterparty risk management are important.
In this light, many large companies embarked on large scale transformation projects to streamline their internal processes and banking relationships. Many small and medium sized companies are also taking a second look at their liquidity and cash management protocols.
The typical transformation initiatives your organisation should consider are:
• financial management value chain, to improve internal liquidity via better control and transparency of your cash positions
• supply chain strategy, to establish stronger, reliable and symbiotic supplier relationships as well as improve on receivables management process
• risk, compliance and governance protocols, to develop and execute more robust and comprehensive treasury policies such as investment practices and higher credit rated banking relationships
• information management systems, focusing on transparency for transactions with the ability to track, trace transactions in progress and access information about the underlying transactions.
In addition, many companies are also looking into availability in all locations and countries where they have operations, adequate information on transactions and integration with their back office Enterprise Resource Planning system or accounting packages.
These initiatives have heralded a demand for more speed, visibility, and information. Coupled with more businesses moving into the mobile channel, the current landscape has created significant business opportunities for banks and third-party payment providers.
As such, many financial institutions are now asking: What role can payment institutions play? How can banks and other payment service providers leverage upon these opportunities?
Back to basics
Before the global financial crisis, many banks viewed payment services as a lacklustre younger brother when compared to their investment and corporate banking services.
Innovation was king, and new products were seen as essential to retaining customers and attracting new business.
The landscape has changed. After the crisis, banks began shifting their focus back to payment services such as cash and transactions management. This contributes a growing and sustainable portion of revenue for the banks.
Asia Pacific – localise not standardise
For many global companies, national borders are merely an inconvenience. Some of the larger companies are even forming their own ‘clusters’ where they perform netting and clearing within that group. Many have in-house banking specialists.
The services they require are closely related to cash management functions. These require close cooperation with the provider to deliver the correct set of services with integrity, transparency, accuracy and speed.
This is important, as Asia Pacific is still a collection of national markets rather than a regional market per se.
While there have been recent moves to coordinate regulation, the Asia Pacific market is still fragmented. This is despite several payment service providers having set up links with their peers in other countries.
On this basis, large companies in the Asia Pacific are more likely to retain some local characteristics and prefer working with local providers.
It is therefore apparent that the recent global financial crisis has forced both large and small companies to re-evaluate their risk management and sustainability agenda.
In particular, they are now looking at ways to simplify their internal processes and relationships with suppliers, customers and banks.
Payment institutions, both banks and non-banks, should capitalise on this by adopting an approach that is aligned to the mindset of their corporate customers. They should continuously improve the value they bring to their corporate customers and provide innovative bundled value-added cash management services with payment services.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Siow Hwei is the Director of BNP Paribas Securities, Head of the Business Implementation and Change Management covering Asia. In this role, she is instrumental in establishing the governance structure of the new function with the objective of leading the team to transition clients’ back-end processes successfully and instituting efficient change programs.