Real-time digital payments are rapidly replacing cash and paper-based transactions across Southeast Asia. Most countries in the region count among Asia’s emerging economies that have led the global surge in cashless transactions and are expected to maintain a world-beating annual average growth rate of about 30% through 2022.
This is transforming how corporates manage their treasury. From paying taxes and social security online in Malaysia to managing payment collection and reconciliation in real time in Thailand, and more, is now a reality thanks to digital technology.
Corporate treasury and finance teams have become more agile and seek to manage their operations on a near real-time basis. This has created opportunities for global banks like BNP Paribas to bring their treasury management expertise and technological solutions to Southeast Asia, where corporate banking was once dominated by local and regional banks.
What’s driving the change and how are e-payments affecting businesses? How are banks supporting corporates in their digitalization journey?
A payments revolution led by regulators
This payments revolution is primarily driven by proactive regulators, the rise of financial technology (fintech) firms, technological advancements in finance, as well as changing consumer behaviour in the e-commerce age.
Real-time Retail Payments Platform (RPP) in Malaysia, PromptPay in Thailand, Fast And Secure Transfers (FAST) in Singapore and QR Code Indonesia Standard (QRIS) are some examples of reliable payment systems that have developed under central bank supervision. Singapore counts among countries taking the lead in supporting the development of digital ecosystems and digital-only banks.
Alternative payment methods such as e-wallets like Alipay and WeChatPay that have created a cashless society in China have also expanded into Southeast Asia and are being joined by home-grown players like GrabPay, VNPAY and NextPay, among others.
Technology has greatly impacted finance and businesses. For example, the use of Application Program Interface (API) technology by companies like Google and Apple in improving consumer experience has paved the way for its use in building ecosystems linking Treasury Management Systems (TMS) with Enterprise Resource Planning (ERP) platforms, banks, payment companies and supply chain management systems.
Four pillars of a client-centric digitalization strategy
The regulator-led payments revolution presents global banks with four key areas of opportunity:
1) Building an enriched real-time payments ecosystem: A safe, responsible and sustainable ecosystem ensures treasurers get accurate, reliable and complete data. It also prioritizes fraud detection and compliance with Anti-Money Laundering regulations. BNP Paribas is well-equipped to offer real-time payments in Singapore, Malaysia and Thailand, with future plans in Vietnam and Indonesia.
2) Partnering clients in digital initiatives by co-creating solutions to meet trade needs, such as purchase orders, invoice management, pre-shipment financing, documentation and post-shipment financing settlement. BNP Paribas has participated in the Thailand Blockchain Community Initiative for Bank Guarantees, which introduced the first ever Electronic Letter of Guarantee using blockchain technology to significantly reduce the processing time.
3) Partnerships with regulators to co-design digital initiatives such as the Networked Trade Platform (NTP), an initiative under Singapore Customs that aims to be a one-stop trade information ecosystem to make the country a leading trade, supply chain and trade financing hub. BNP Paribas is among nine core partners building a bank-agnostic platform under the NTP.
4) Client-centric advisory: Global banks are leveraging technological innovations and know-how to offer Southeast Asian corporates advisory solutions in treasury management, narrowing the gap with local and regional banks. BNP Paribas’s regional presence has also enabled it to work with multinational corporations (MNCs) on structured deals and in creating comprehensive digitalization solutions for their local and regional units.
Deepening relationships with Asian corporates
According to Sofia Hammoucha, head of Transaction Banking, South East Asia, BNP Paribas: “Expertise in treasury management and digitalization has helped BNP Paribas move beyond working with MNCs and deepen its relationship with Asian companies. Our client-centric advisory approach delivers value by focusing on core objectives, and regional corporates are extending their relationship with us beyond cross-border cash and trade to address their country-specific and intra-Asia needs as well.”
A South Korean conglomerate has deployed our multi-level cash management and supply chain solution in Vietnam, where we are one of the few international banks offering a fully integrated digital-enabled solution for payments, collections and working capital management. The solution enables optimizing working capital costs, improving receivable cycles, and achieving streamlined payment processes via a bank-agnostic platform.
Co-creating tools for treasury digitalization
Digitalization makes processes more efficient. The fast-moving Consumer Goods sector has seized these opportunities to become a leader in digitalizing treasury management. With better visibility of their overall cash and liquidity, corporate treasurers are looking to banks to help them better manage their collection cycles.
Anticipating the need to speed up laborious and time-consuming processes and to integrate digital payments, BNP Paribas has stayed ahead by co-creating various digital tools. These include a mobile phone application to facilitate faster reconciliation of cheques and cash from remote locations; collaborations with corporates and fintechs to build tools to address specific pain points like reconciliation and cash forecasting; and tools to aggregate payments information from e-wallets into a single reporting format and feed it into TMS and ERP platforms for seamless reconciliation.
“Our collaborations and initiatives are well suited for global and Asian MNCs with a regional presence and enable them to reap the benefits of opportunities created by regulator-led enhancements,” notes Hammoucha. They also open a window to look at overall optimization of cash and working capital management processes, with dedicated digital solutions suited to specific sectors and business processes.
Southeast Asia is just at the beginning of its digitalization journey and this evolution is levelling the playing field for banks in the region’s domestic markets. Banks that can provide integrated working capital solutions and advisory capabilities, like BNP Paribas, will gain market share.
Ruchika Gupta, Head of Cash Management Sales, Southeast Asia, BNP Paribas and Rajendran Lakshmanan, Head of Product Management, Southeast Asia, BNP Paribas also contributed to this article.
For further information, please contact:
Head of Transaction Banking, Southeast Asia BNP Paribas
Contact: +65 6210 4895