Thinking Local, Regional and Global : Challenges and Opportunities for Banking In The ASEAN Region
By Parvez Ahmad-Oracle on Aug 19, 2014
The FIFA World Cup tournament is the biggest single-sport competition: it’s watched by about 1 billion people around the world. Every four years each national team’s manager is challenged to pull together a group players who ply their trade across the globe. For example, of the 23 members of Brazil’s national team, only four actually play for Brazilian teams, and the rest play in England, France, Germany, Spain, Italy and Ukraine.
Each country’s national league, each team and each coach has a unique style. Getting all these “localized” players to work together successfully as one unit is no easy feat. In addition to $35 million in prize money, much is at stake – not least national pride and global bragging rights until the next World Cup in four years time.
Achieving economic integration in the ASEAN region by 2015 is a bit like trying to create the next World Cup champion by 2018. The team comprises Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. All have different languages, currencies, cultures and customs, rules and regulations. But if they can pull together as one unit, the opportunity is not only great for business and the economy, but it’s also a source of regional pride.
BCG expects by 2020 the number of firms headquartered in Asia with revenue exceeding $1 billion will double to more than 5,000. Their trade in the region and with the world is forecast to increase to 37% of an estimated $37 trillion of global commerce by 2020 from 30% in 2010.
Banks offering transactional banking services to the emerging market place need to prepare to respond to customer needs across the spectrum – MSMEs, SMEs, corporates and multi national corporations. Customers want innovative, differentiated, value added products and services that provide:
- Pan regional operational independence while enabling single source of truth at a regional level
- Regional connectivity and Cash & Liquidity optimization
- Enabling Consistent experience for their customers by offering standardized products & services across all ASEAN countries
- Multi-channel & self service capabilities / access to real-time information on liquidity and cash flows
- Convergence of cash management with supply chain and trade finance
While enabling the above to meet customer demands, the need for a comprehensive and robust credit management solution for effective regional banking operations is a must to manage risk.
According to BCG, Asia-Pacific wholesale transaction-banking revenues are expected to triple to $139 billion by 2022 from $46 billion in 2012. To take advantage of the trend, banks will have to manage and maximize their own growth opportunities, compete on a broader scale, manage the complexity within the region and increase efficiency.
They’ll also have to choose the right operating model and regional IT platform to offer:
- Account Services
- Cash & Liquidity Management
- Trade Services & Supply Chain Financing
- Securities services
- Credit and Lending
- Treasury services
The core platform should be able to balance global needs and local nuances. Certain functions need to be performed at a regional level, while others need to be performed on a country level. Financial reporting and regulatory compliance are a case in point.
The ASEAN Economic Community is in the final lap of its preparations for the ultimate challenge: becoming a formidable team in the global league. Meanwhile, transaction banks are designing their own hat trick: implementing a world-class IT platform, positioning themselves to respond to customer needs and establishing a foundation for revenue generation for years to come.