Global banks chase Asia techs transaction business, as trade war rumbles

By Sumeet Chatterjee HONG KONG (Reuters) - Global lenders including Citigroup and HSBC are stepping up efforts to sell day-to-day banking services to Asia's fast-growing new technology firms, amid growing competition for more traditional transaction banking.

Reuters December 21, 2018 07:05:20 IST
Global banks chase Asia techs transaction business, as trade war rumbles

Global banks chase Asia techs transaction business as trade war rumbles

By Sumeet Chatterjee

HONG KONG (Reuters) - Global lenders including Citigroup and HSBC are stepping up efforts to sell day-to-day banking services to Asia's fast-growing new technology firms, amid growing competition for more traditional transaction banking.

The workaday transaction banking business, which refers to services that deal with companies' operational needs such as trade financing, cash management and facilitating payments, has been a source of stable returns without consuming much capital for banks in Asia, the largest trading region in the world.

While the impact of the trade war between the United States and China has not been felt on that business yet - in part because a temporary truce has delayed new tariffs that were due to kick in on Jan. 1 - analysts say the tensions have clouded the outlook for Asian economies and goods trade and made the services sector more attractive.

The targets for the new initiative include e-commerce firms, mobile payment service providers and ride-hailing companies – from China's Ant Financial and Grab in Southeast Asia to PayTM and Flipkart in India, said senior bankers and consultants.

Standard trade finance business has become commoditised, and Asia is seeing rapid digitisation of cash and growing demand for real-time transaction infrastructure, said Rajesh Mehta, Citi's Asia Pacific head of treasury and trade solutions.

"Cash management for e-commerce companies ... with their long distribution chains in the region is becoming a big opportunity, as these companies grow and their supply chain network becomes bigger and more complex," he said.

Citi saw revenues from its technology clients, including e-commerce firms, surging 20 percent so far this year compared with the same period last year, up from 17 percent growth in 2017, making it the fastest growing segment for the bank's Asia Pacific treasury and trade solutions unit.

The growth across banks in this segment is set to be boosted by surging transactions involving digital platforms in Asia and as many technology firms go cross-border, potentially offsetting any impact from the trade war, banking industry officials said.

The digital commerce market in Asia Pacific is set to surge two-fold to reach more than $1.1 trillion by 2022, accounting for almost two-thirds of the business globally, according to consultancy Accenture.

"The big play here is how can one dominate the services economy going forward and that's where the big battleground is," said Mohit Mehrotra, Deloitte Asia Pacific strategy consulting co-leader. "All these trade wars are about the goods economy."

DIGITAL PUSH IN ASIA

The sharpened focus on techs is also crucial as transaction banking has become the bedrock in Asia for global banks, who use those deep and sticky relationships with clients to pitch other services such as investment and private banking.

The transaction banking offerings for the online platforms include processing of payments from customers and to suppliers in real-time, at times in multiple currencies, as well as managing payrolls and creating innovative financing structures.

HSBC, for example, which makes the bulk of its revenue in Asia, is working with Hong Kong logistics start-ups GoGoVan and Lalamove to facilitate the collection of real-time digital payments on a faster payment system.

In June, the British-headquartered lender also closed a S$500-million ($364 million), five-year asset-backed syndicated loan for Singapore-based ride-hailing service Grab.

"We have relationship managers now focusing much more keenly on new-economy and services sectors to manage their increasingly digital needs," said Stuart Tait, head of commercial banking in Asia Pacific at HSBC.

The scramble among global banks for a bigger share of transaction banking business from technology companies in Asia also comes as many of those firms are going cross-border and expanding their offerings.

While China's Ant Financial and Tencent are battling for the mobile payment business in Southeast Asia, ride-hailing services Grab and Go-Jek are vying to bring banking, e-commerce and food-delivery to every corner of Southeast Asia.

"Even if there is a lot of cash in Asia, it is digitising at a much faster pace than anywhere outside the region," Morgan McKenney, Citi Asia Pacific cash management head, said. "Anyone with 'pay' in their name we typically support."

Standard Chartered was in June this year picked by Ant Financial, operator of China's biggest mobile payment platform, to enable real-time fund transfer for its blockchain technology-based cross-border digital wallet remittance service.

With a view to grabbing a bigger share of the business, the banks are investing more in technology, entering into tie-ups with fintechs, and doing in-house data mining to understand consumer trends and cash flows in the digital economy.

"Speed of delivery of transaction banking services and accuracy of delivery are very critical for the digital technology companies," StanChart's global head of transaction banking, Lisa Robins, said.

"New technology, big data, fast payments, artificial intelligence, blockchain, all of that enable you to move, manage and finance the physical and financial supply chains faster and quicker."

(Reporting by Sumeet Chatterjee; Editing by Alex Richardson)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Oil rises 2% as OPEC complies with production cuts
Business

Oil rises 2% as OPEC complies with production cuts

By Jessica Resnick-Ault NEW YORK (Reuters) - Oil prices strengthened on Wednesday, as OPEC and its allies were seen complying with a pact to cut oil supply in September, even as concerns loomed that recovery in fuel demand will be stalled by soaring global coronavirus cases. Early in the day crude was boosted by a bullish stock market. Even as equities whipsawed on pandemic worries, oil stayed higher, buoyed by expectations that OPEC could staunch a supply glut

Tesla's back-to-back price cuts bring sticker on U.S. Model S below $70,000
Business

Tesla's back-to-back price cuts bring sticker on U.S. Model S below $70,000

By Tina Bellon and C Nivedita (Reuters) - Tesla Inc will further cut the price of its Model S "Long Range" sedan in the United States to $69,420, the electric carmaker's chief executive, Elon Musk, announced in a tweet https://bit.ly/2H0JCP0 on Wednesday. The anticipated drop marks the second time this week Tesla has cut the price for the high-end sedan, following a 4% cut of the Model S's price in the United States on Tuesday to $71,990.

Trump cites teenaged son's bout with coronavirus in calling for schools to reopen
World

Trump cites teenaged son's bout with coronavirus in calling for schools to reopen

By Jeff Mason DES MOINES, Iowa (Reuters) - Under siege over his handling of the novel coronavirus pandemic, President Donald Trump on Wednesday cited what he said was his son's mild bout of the virus as a reason why American schools should reopen as soon as possible. Trump made the comment about his son, Barron, as the president swept into Iowa on a mission to shore up support in battleground states that he won in 2016 but is in danger of losing to Democrat Joe Biden barely three weeks before the election. First lady Melania Trump announced in a statement earlier in the day that the virus that struck both her and her husband had also infected their 14-year-old son