Copyright The Asian Banker 2011. All rights reserved 1/39 Asian Banker Research & Consulting The Asian Banker’s Survey on Benchmarking & Assessing Asia’s

Copyright The Asian Banker 2011. All rights reserved Copyright The Asian Banker 2011. All rights reserved 1/39

Asian Banker Research & Consulting

The Asian Banker’s Survey on Benchmarking & Assessing Asia’s Transaction Banking Industry

8 April 2011The Asian Banker Summit 2011Hong Kong


Today’ Agenda

Assessing Cash Management Services for International and Domestic Banks

Assessing Trade Finance Services for International and Domestic Banks

The Future of Transaction Banking

Cash Payment Service Scope

Distribution

Product and Technology Enhancements

Survey by International Banks on their Preferred Domestic Peers


Assessing Cash Management Services for International and Domestic Banks

Source: Asian Banker Research

We assess transaction banks on a balanced scorecard approach across 6 key dimensions in cash management


Assessing Trade Finance Services for International and Domestic Banks


We assess transaction banks on a balanced scorecard approach across 6 key dimensions in trade finance

Copyright The Asian Banker 2011. All rights reserved

Fragmented transaction services

Integrated comprehensive suit of Transaction products

Service Integration

Infrastructure Integration

Characteristics

Strong price competition, Single digit growth in transaction revenue that too backed by cost cutting

Product innovation being considered as key competition driver

Domestic banks still working on fragmented services on cash, trade and payments

Separate Touch points for client interaction in Cash and Trade

IT investment focused towards processing improvisation

Selected banks looking at processing centralisation

Banks increasing risk mitigation measures, adding visibility and controls

Characteristics

Single global platform to meet all transaction needs

Transaction processing completely centralised. Real time transaction processing

Intra-Asia Trade forming a large component of trade transaction business

Service quality a key competing factor. Whitelabelled technology and Internet enhancements provide competing propositions

Customised and consultative approach, collaborate closely with Corporate, FI client & provide integrated product service

Supply chain financing to become a significant revenue generator for banks

2009/2010 2011/12


Future business model looks at globally integrated suit of products for transaction banking backed by IT investments for service innovation


0

20

40

60

80

100

Cash Pooling Cash Netti ng AccountsReconciliation

AccountsReporting

OutsourcedCash Mgmt

Payments Invoice Mgmt Lockbox Salary accounts Liquid ity Mgmt

SME Corporate

Cash Management Services Scope of Domestic Banks to Corporates and SMEs (2009/2010)

% o

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ks o

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ring

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is s

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ice

Cash consolidation solutions, liquidity management to corporate and payments are at the forefront in domestic banks’ service profile currently



Cash Pooling:•Inter subsidiary funding and Interest reallocation which includes a fixed slab tier structure.•Notional cash pooling facility offering a tailored account structure for the Institutional Bank and Top Tier Corporate client •Tailored interest disbursements back to individual accounts at rates set by the client.• Intraday Virtual Transfer among Group Company Account•Unlimited number of layers of companies

Accounts Reconciliations•Virtual account structure to assist customers with a/c reconciliation.•SA/P & A/R Reconciliation-Integrated to Customer’s ERP.•Customized designed reporting for customer account reconciliation

Account Reporting•Full range of liquidity management reports: interest scale report, interest reallocation report & sweeping reports.•Zero balance, Target balance, and Range

balance.

Distinguishing Features of Competitive Advantage

Outsourced Cash Management•Strategic tie up with Cash-in-transit providers.• Dividend Payments Service•Cheque Issuance service with variety of advice's template.•Tailored solution based on customer’s specific requirements.

Payments

•Complete suite of payments ranging from local and cross border . Both electronic and paper based payments.•Online business banking platform allows consolidation of cash positions into a single portal, reporting of balances & transactions, movement of funds at any bank, around the world•Guarantee Credit within 6 a.m. Of value date-Payroll on Holiday- Real-time and post-dated payment via card solution,

Invoice Management:•Electronic Invoice Presentment &•Payment solution with ASPs.•Bill Placement and Invoice capturing for debt setting.

Lockbox:• Positive cheque matching & exception

reporting.• Intelligent matching of multiple document and

automated reconciliation of payments against the customer’s Accounts Receivables.

• Invoice data capturing service is provided by all branches nationwide

Salary account:• Guarantee Credit within 6 am of value date.• The web-based payroll application service for

the companies to do payroll calculations e.g. tax, social securities and generate payroll payment instruction file.

• Electronics self-service web application for employees to view their payroll transaction details with SMS alert.

• Salary Benefits Solution where special Retail products (e g Home Loan, Personal Loan, Credit Card, Investment, Mobile Banking) are provided.

• Life insurance policy for employees.

Liquidity Management:

• Inter subsidiary funding and Interest reallocation which includes a fixed slab tier structure.

Cash management services scope of domestic banks to SMEs and corporates



Relationship management between banks and of banks with their customers are the crucial components grow mandates and create loyalty

Branches, ATMs Relationship with FI, service providers

Electronic channel

Domestic branches and ATMs

Dedicated SME and Corporate centers

Dedicated RM and specialist team

Follow the clients.

Pan Asian Branches

Relationship with correspondent banks/FI

Relationship with domestic clearing systems

Exclusive partnership arrangements with integrated technology

Non traditional partners- Post office, mobile service provider, convenience stores

Online banking platform

Web portal and web service, customised direct service

Mobile devices

Straight through connectivity with SWIFT

Physical distribution Alternate Channels

Level of advancement in distribution

Commonly used distribution channels by leading Domestic Transaction Banks

Best Practices

•Online targeted for more visibility and control to clients

•Real-time reporting

•Sophisticated analysis and user generated report

•Fully flexible E commerce facility

•STP rate of over 90% via direct internet service

•Mobile used for instant verification, alerts and reporting

Key consideration

•Clearing capability•Reach of branch network•Existing relationships of bank•Business objectives•Standards of service quality•Fee sharing negotiation



Most leading domestic banks are offering basic transaction services online but very few have integrated it for real time information and customized services

Transaction Banking Services on the Internet of Leading Domestic Banks (2009/2010)



Banks focus on same day clearing and consolidation of global multicurrency payments in service innovation in payments business

Consolidation of multicurrency global payments

Real time reporting of balance, payment

Enhanced electronic payment, replace paper based processes

Intraday exceptions and investigation

STP cross border, Same day settlement

Extend bill payment thru phone, internet and convenience stores

Integrate bulk transfer through SWIFT

Clients can use US $ account to initiate local payment

Electronic payment system

Payment Volumes in Asia

Technical Advancement

Bank A

3.7 Million in 2009

Bank B

USD 21.42 Mln,( 27 % share Asia)

Bank C

4.3 Million in 2009

International Payments

Bank D

37% market share in domestic

Bank E

25% market share in domestic

Bank F

6 % market share in domesticBank G

3 % market share in domestic

Domestic Banks

• Leading Domestic banks are targeting same day clearing and reporting

• SWIFT Connectivity low (less than 20%) among domestic banks

• Sought by international banks for their local network and relationships

International banks

• SWIFT connectivity good. SWIFT traffic is 47% intra Asia currently and likely to increase.

• Better service capability

• Intraday turnaround on exceptions

• Strong packaged relationship

• Compressed margins but target high volumes with value added services



Trade solutions have been targeted at supply chain financing, improving working capital availability and risk mitigation

Product and Technology Enhancements in 2010

Trade transaction Technology

Electronic channel

application

Trade products Account

receivables financing with limited recourse

Innovative LC & export financing solution

Supplier financing, WC needs and immediate payment

Bilateral risk participation program and offerings

Receivable financing without recourse

Factoring solutions

Document management, digitization of paper in Open ac.

Seamless end to end trade finance solutions

Online trade inquiry

Online trade transaction reporting system

Trade origination, online or web portal

Real-time transaction tracking and alerts

Multiple product offering, customized reports

Centralised trade processing

Hub and Spoke model with disaster recovery

> 80% STP, 24* 7

Risk audit. Authentication matrix improved, risk reporting

Document Imaging and management

Integrated platform for multiproduct, cash, trade, reporting and payment services

Areas where domestic banks are focusing on


Advances in technology products and online application in trade finance


“What is your primary domestic client bank, accounting for more than 40% of the total international volume (as rated by global FI’s)? (2009/10)


Note: Ranks were compiled from the input of 6 international transaction banks. For every rating as #1 primary client a score of 3 was given

Country Rank 1Strength

ScoreRank 2

Strength Score

Rank 3Strength

Score

Australia CBA 5 Westpac 5 N.A

China ICBC 8 BOC 5 CCB 4

Hong Kong Bank of China 10 Hana Bank 4 HSBC 3

India SBI 15 IDBI 4 N.A

Indonesia Mandiri 10 BNI 5 HSBC 4

JapanSumitomo Mitsubishi

5 N.A N.A

South Korea KEB 10 Shinhan Bank 5 Woori 4

Malaysia Maybank 15 Bangkok Bank 4 RHB 3

Philippines Banco De Oro 9 Metropolitan Bank 5 BPI 5

Singapore DBS 5 UOB 5 N.A

Taiwan Mega International 10 Bank of Taiwan 5 First Commercial 4

Thailand Kasikornbank 10 Bangkok Bank 3 N.A

ICBC and Bank of China are the primary banks in China in the area of trade finance with international banks

Copyright The Asian Banker 2011. All rights reserved


Note: Ranks were compiled from the input of 6 international transaction banks. For every rating as #1 primary client a score of 3 was given

Currency clearing strength of large domestic banks in Asia rest with Chinese, Indian and Australian banks

Documents

Copyright The Asian Banker 2011. All rights reserved 1/39 Asian Banker Research & Consulting The Asian Banker’s Survey on Benchmarking & Assessing Asia’s