Starfish Digital, the financial integration company, and the Open Data Institute report initial findings from the pan ASEAN survey, Unlocking the world of Digital Corporate Banking.
Regulators, global and regional financial institutions as well as multinational companies shared insights into the significant opportunities and challenges for real-time digital integration between companies and corporate banks operating in the top five performing economies of the Association of Southeast Asia Nations (ASEAN): Singapore, Thailand, Malaysia, Indonesia, and the Philippines.
Over 50 global and leading regional financial institutions and multinational corporations reported that, while it is clearly understood that digital technologies are a critical enabler of growth, challenges remain owing to intense competition for skilled IT resources and the plethora of legacy technology platforms not able to meet Chief Financial Officers' demands for real-time banking data and analytics.
What are the most important barriers to real-time corporate banking?
The major finding to-date is that 90% of survey respondents believe the most important barrier to real-time corporate banking connectivity is integration with existing information technology infrastructures. Global and regional banks are struggling to drive multi-year replacement programmes of their legacy core corporate banking, while companies are faced with the challenges of replacing treasury reporting applications.
Talent and resourcing technologists within the organisation was the biggest challenge noted by 62% of respondents. Within the global banking sector, it was felt that the role of regulators should not stop at controlling but extend to the enablement and nurturing of innovation.
The role of fintechs
The survey initial findings show that excellent opportunities exist for financial technology (fintech) providers offering cost-saving solutions, as well as innovative products and services that can interface with legacy technology platforms. Evolving digital technologies introduce the possibility to bring impactful (or high impact) changes to the corporate banking industry, which has yet to fully embrace real-time connectivity. One global European bank reported that, in Asia Pacific alone, they experienced over four million transaction errors a year and employed over 300 people in corporate banking operations to manually correct the misinput data. Notably, over 40% of respondents believed that fintechs can address growth opportunities by offering cost-effective API-first products that provide corporate banks and companies with real-time financial data.
A Chief Information Officer at a large regional bank stated that “Fintechs are complementary to the banks. They can be disruptive to corporate banking relationships today as they re-imagine the financial relationships of tomorrow. The banks that will survive will be the banks that embrace change.”
ASEAN is a fractured market
According to one respondent, “ASEAN is a fractured market. There are many countries with too many players and the lack of an encompassing regulatory body creates challenges. For Chief Financial Officers, obstacles to real-time corporate banking connectivity remain. One respondent noted that, in ASEAN, structures and frameworks could potentially make it more challenging for businesses to operate. Some respondents held the view that digitisation might be the mechanism to overcome such commercial walls. The cross-section of market actors interviewed by Starfish Digital revealed that companies are looking for increased regulatory guidance to support the adoption of a corporate banking digital first approach and signal to the market that digital finance is "safe".
Lastly, the younger demographic in ASEAN cannot be ignored, with corporate banks being mindful that customers who are natively digital are becoming senior decision makers in their organisations and prefer digital experiences.
Hyperconnectivity is a state of Unified Communications (UC) in which the traffic-handling capacity and bandwidth of a network always exceeds the demand. The number of communications pathways and nodes is much greater than the number of subscribers. All devices that could conceivably benefit from being connected to a network are, in fact, connected. This nirvana of digital corporate banking is on the road map for technology teams at several global banks with regional headquarters in Singapore.
Digital corporate banking according to the interim survey results, has a way to go before real-time data information flows in ASEAN are achieved, but market leaders are taking great strides in working to meet the demands of the modern Chief Financial Officer who requires real-time digital corporate finance services to enable a unified view to monitor balances across all corporate banking products and services from multiple channels. Process automation and deep digital adoption would drive efficiencies and optimise the end-to-end corporate banking value chain, according to a senior banker at a leading regional ASEAN finance institution.
What do Chief Financial Officers need from their corporate banking provider?
Survey respondents with responsibility for treasury functions had common requirements. Notably they stated that digital corporate banking services should enable:
Accuracy of financial information with minimal to no manual intervention.
Ease of record retrieval and audit trail to prevent fraud.
Ease of external connectivity: to partners (suppliers, buyers, lenders) in the supply chain.
Deployment of analytic tools to better understand business processes and market demands.
Digital relationships that support an organisation’s ECG carbon neutral goals.
Corporate banks are under pressure to meet the demands of their corporate customers
A senior Managing Director at a leading Thai bank stated “We need to adapt or die. The technology is not the challenge. What we need is to change is the mindset of the executive leadership who are reluctant to move away from doing business as usual."
Some key observations from survey respondents worthy of highlighting are:
The term digital has become a catchall phrase for a way to save costs and serve customers better. It needs to be better defined in each circumstance that “digital” is being used.
New products are being adopted by competitors much faster than before, causing the first mover advantage achieved by faster time-to-market to shorten.
The demand for digital solutions have not been internalised by senior executives who do not support open banking and have yet to grasp the tangible benefits.
Shareholders are heavily influencing the drive to digital agenda as they push banks to lower their costs of operation.
Governments need to invest in and develop new digital frameworks.
Overall, many respondents felt that the focus of their bank was to increase total revenue rather than lower cost.
Regulators need to enforce open banking to support the introduction of corporate digital ecosystems.
In conclusion, process and greater digital automation will drive efficiencies, and regional banks must respond to the needs of tech savvy, globally active, corporate customers who demand digital experiences. If regional banks wish to compete against the global banks, they have to overcome the barriers presented by legacy systems and embrace a commitment to digital technology investments and business models.
The final survey report will be published in June 2022. To receive your copy, please contact firstname.lastname@example.org