Transaction Banking Awards 2014

Welcome to The Banker Transaction Banking Awards 2014, the first time that the awards have been presented in this format. 

The announcement of these awards coincides with Sibos, the annual conference of the Society for Worldwide Interbank Financial Telecommunication (Swift), where thousands of the world’s transaction bankers will gather in September in Boston. 

Last year, the Transaction Banking Awards were incorporated into the Technology Awards, but it was felt that they deserved to stand alone because of the growing importance of transaction banking to the industry as a whole. In recent years, transaction banking – or transaction services as it is also called – has been growing in importance as executives at the board level recognise the importance of the stable returns that it can provide. 

It is not just the global banks from developed markets that have restructured to make room for transaction services, there are also a number of regional banks in developing countries that are emerging as credible competitors in this field. It is interesting to note that many of the winners this year come from Asia, a region whose share of global trade and economic activity – and, as a result, transactions – is increasing. 

Also, many of the entries this year demonstrate the increasing importance of the renminbi to banks’ activities. This is a change from three years ago, when the industry was first discussing the implications of the internationalisation of the renminbi, to a situation today where banks are offering their own solutions and products and are seeking to differentiate themselves. 

The awards are divided into two parts: awards by product and awards by region. The product categories were judged by a panel of external judges, who are all experts in their field. Meanwhile, the regional categories were judged by a panel of The Banker’s regional editors. 

In all the categories the judges were looking for entries that demonstrated a clear strategy, as well as improvement and progress in the past 12 months. Investment in technology was not the deciding factor, but rather improvements that enhance the experience of the customer. Many of the entries demonstrated the trend of client-centricity, in which banks strive to put the clients at the centre of what they do, creating useful solutions that cater to their needs, rather than merely pushing products. 

Global and Europe

Winner: Standard Chartered 

Standard Chartered has been recognised as the best transaction bank from Europe inThe Banker’s Transaction Banking awards, and the strength of its entry means that it has also been given this year’s global award. 

The bank’s headquarters are in the UK, hence why Standard Chartered qualifies for the ‘best transaction bank from Europe’ award. The accolade, however, has been given to the bank on the basis of its work in emerging markets, particularly Asia. 

It has been a busy year for Standard Chartered, in which it has been working hard to improve its transaction banking business. Like many transaction banks, Standard Chartered views client centricity as a key issue and recently underwent a restructuring of its organisation so that it can deliver its products and services in a way that it believes best serves its clients’ needs. 

The restructuring, announced in January 2014, was built around three client segments – corporate and institutional clients; commercial and private banking clients; and retail customers – as well as five product groups. Transaction banking is one of these product groups, along with corporate finance, financial markets, wealth products and retail products. 

In the reshuffle, transaction banking now has Alex Manson as its new head. He replaces Karen Fawcett, who as part of the reorganisation has moved into a new role as group head of retail customers. 

Mr Manson says of the reorganisation: “It is pretty much complete in the sense that a huge amount has been achieved and our new structure has been in place since April 1.  We will obviously continue to fine tune as we see ways to improve delivery for our clients, for example in the context of our network and product capabilities across the bank. I also think that the initiatives we have launched such as the standardisation of our platforms will yield benefits over time with genuinely consistent and reliable client experience across our network.” 

The transaction bank has been working on a number of areas to improve its business. Mr Manson explains that the rest of 2014 will continue to be a challenging year for the bank’s clients. But despite this, he says: “We’ve continued with a consultative approach with our clients, combined with great systems and execution: our treasury advisory team is supporting more and more clients in the context of strategic treasury design in order to achieve better regional and business alignment, higher efficiency and lower costs.”

Aside from delivering innovative solutions to its clients, Standard Chartered has also been continuing with its push for bank payment obligation (BPO), which carries the benefits of a letter of credit but is an automated process. As the first bank to offer this solution, Standard Chartered is now making the product available to other clients, which in turn is stimulating wider interest in BPO and leading to wider adoption elsewhere in the industry. The bank has used BPO in markets in Africa and Asia. 

Although many transaction banks put an emphasis on client centricity, and many say that they put the client at the centre of everything they do, Standard Chartered has a very clear idea of what its clients’ needs are. In the past year it has been focused on driving growth for its clients through operational efficiencies, improved visibility of cash, better working capital management and greater regulatory and risk management, among others. 

Mr Manson says of the changing needs of the banks’ clients: “[They] are facing the multiple challenges of managing their risks – for example, cross-country payments and receivables – being accountable to all their stakeholders and increasing efficiency, all at the same time. No wonder they expect more from their bankers!”

In Asia, Mr Manson believes that client needs are also changing as treasuries become more sophisticated. “When it comes to Asia, an additional noteworthy point is how professional treasuries have become: regional treasury centres of multinational companies have increasingly large and complex mandates while treasurers of Asian companies are facing the same complexities as multinational corporations in managing their cash, payments, etc. These all call for more reliable and sophisticated products and service from their banks.”

Asia-Pacific

Winner: DBS

From its base in Singapore, DBS has built out its franchise across Asia and is competing with the largest global players in the region. The bank’s growth has been steady and impressive and despite the challenging economic environment in Asia in 2013, the bank’s global transaction services (GTS) division was able to post a total income of S$1.48bn ($1.19bn), with a compound annual growth rate of 26% over the past four years. 

This strong performance continued into 2014 and Tom McCabe, the bank’s global head of transaction services, says: “Our transaction banking business has delivered outstanding first-half results; total income and deposits rose by 11% and 13% year on year, respectively. Our risk profile is very sound, and we are well placed to achieve our target of $1bn in profit for 2014.” 

Financial targets are not everything, however. In a previous interview forThe Banker’s online Transaction Bankers profile series, Mr McCabe emphasised that achieving the financial results alone can be a hollow experience for the bank’s staff. For this reason he has been also focusing on developing a culture whereby staff can be fulfilled in other ways. 

This is in line with one of the bank’s key strategic priorities, which is a focus on building management processes, people and the culture of the bank. Building out the GTS business and growing its capabilities in Asia is also a key priority of the bank. DBS has been investing in its GTS capabilities, while also investing in its technology and infrastructure platform, as the basis for its future regional growth. The bank has been rolling out its new systems in Singapore, Hong Kong, Macau, China, Taiwan, India and Indonesia. 

In terms of its regional expansion, the bank has identified Hong Kong as a key strategic location, with a focused strategy of targeted offerings to mid-cap companies, small and medium-sized enterprises and affluent customers. Also, the bank continues to build its pan-Asian franchise. Commenting on the potential of the region, Mr McCabe says: “Asia’s economies have built up strong foundations over the past decade, positioning them well to weather short-term economic volatility as they realise their long-term potential. At DBS, we believe in the growth potential of these economies and we are invested for the long term in these geographies.”

North America

Winner: Bank of America Merrill Lynch

Transaction services have become increasingly global at Bank of America Merrill Lynch (BAML) as the bank has been integrating the strengths of Bank of America with those of Merrill Lynch since the entities were combined back in 2009. 

With a motto of putting the client at the centre of everything it does – which is in line with a wider industry trend – the bank has restructured in a bid to give its clients the benefit of its transaction services capabilities as well as those from other parts of the bank. 

Paul Donofrio, head of global corporate credit and transaction banking at BAML, explains that in the changing global regulatory environment “banks will differentiate themselves not only by advising clients on the impacts of these new regulations, but also by creating strategies to help them compete and prosper”.

Mr Donofrio says of the achievements the bank has made so far this year: “At BAML, we focus on meeting our clients’ industry and regional needs as they expand into new markets. We do this through continuous innovation and by serving clients in a proactive, pan-enterprise manner.” 

In the past year, the bank has introduced a number of new products and services, one of which is digital disbursements. Piloted in May 2014, the approach was taken that it should be just as easy to receive a payment from a company as it is an individual. Peer-to-peer payments among individuals are familiar to many retail banking customers, but when it is companies or governments disbursing payments to individuals, the process is often clunky. With the new service, BAML’s clients can pay their individual customers by using their mobile phone number or email address, with the funds being transferred directly to the individual’s bank account. This removes the need for cheques and customers no longer have to share their bank details to receive the money.

Another example of BAML’s improvements in the past year is the Cash 360 receivables solution, which changes the way that retailers handle cash and cheques. The product, made available through a relationship with G4S Retail Solutions, processes cash and a cheque-imaging module is being integrated that will be able to convert cheques into a digital image. Unlike other devices that have been available, this handles coins, small bills as well as cheques. For retailers who are still reliant on cash, the machine removes the need to manually count cash and the recycling feature means that what would normally be trapped cash can be put to use.

Africa

Winner: United Bank for Africa

United Bank for Africa (UBA) is named the best transaction bank from Africa for 2014 based on the strength of its entry and its clear demonstration of its improvements that it has made to its transaction services. 

The pan-African bank, which has operations in 19 African countries, has steadily been improving its network across Africa and has introduced a number of solutions that make it easier for the bank’s customers to manage and track their transactions. 

The bank has also been consolidating its operations across Africa and put a renewed focus on customer service, and, like many transaction banks, has been considering how best to improve customer engagement. 

U-Pay is an example of how UBA has improved customer experience of making payments. The solution is a salary administration tool that removes the manual processes and inefficiencies of the systems that the bank’s clients were previously using. The manual processes were open to abuse, and one problem in particular was that of ‘ghost workers’, where non-existent people were added to the payroll and the existing staff were able to collect that ghost’s wages. 

UBA’s solution to this was to introduce U-Pay, a client-server-based solution that automates the entire value chain in salary administration, which removes the problem of ghost workers, reduces errors and saves time for those processing salary payments. 

Another example of an improvement is U-Collect, which enables customers – both large and small – to collect payments online, in a way that the set-up and ongoing costs of receiving card payments are reduced. 

Yinka Adedeji, divisional head of e-banking at UBA, says that it is the U-Direct Corporate solution that is UBA’s most significant achievement. U-Direct Corporate is the bank’s web-based banking platform that enables small and large companies to manage their transactions more easily. The platform has eight different functions – including payments, collections, liquidity management and cash forecasting – all of which can be accessed with a single log-in and password. 

“[U-Direct Corporate] has been well received by the business community because of the flexibility, automation of manual processes, ease of doing business and cost savings it offers the business community across Africa. A unique aspect of this product is the mobile application that allows busy executives to initiate and approve requests on their mobile phones,” says Mr Adedeji. 

Looking to the future, Mr Adedeji adds that the business environment in Africa is changing, particularly with cross-border business, because of security and health concerns in the region. This, he says, “will deepen the need to raise efficiency levels of transaction banking services in Africa in the rest of 2014 and beyond”. 

Cash management

Winner: Standard Chartered 

The visibility of cash and transparency remain the key themes of the cash management industry and are high up on the needs of treasurers and chief financial officers. 

Standard Chartered, the winner of this year’s cash management award, has been focusing on these themes and has been improving its cash management offerings to give its clients greater control over their cash. 

The bank has taken advantage of the opportunities made available as a result of China’s liberalisation of regulations on the flow of renminbi and the opening up of the China (Shanghai) Pilot Free Trade Zone. As China internationalises the renminbi, Standard Chartered has worked with its clients to provide new cash management solutions that incorporate the possibilities of using renminbi in the corporates’ global liquidity pool. This has enabled the bank’s clients to reduce their borrowing as they are able to use their surplus renminbi more effectively and also sweep their surplus renminbi outside China. 

Such facilities have been made available by other transaction banks, but Alex Manson, group head of transaction banking at Standard Chartered, explains how the bank differentiates itself with its renminbi products and services. “The first point is that we are probably more committed to renminbi as a currency than almost any non-Chinese bank: the longevity and the nature of our commitment to this market, our depth of presence across Greater China,” he says. 

“What this means is the combination of delivering services in renminbi in a completely integrated manner across the network, and relentless thinking – as regulations evolve almost by the day – to find innovative solutions to support the growth of renminbi for our clients obviously, but also for the overall market in such a way that all stakeholders will benefit,” he says, giving the examples of access to onshore liquidity, clearing in multiple centres, and risk sharing in the context of renminbi trade finance. 

Competition among cash management providers is tough, however. Mr Manson says: “Our clients are entitled to expect that we will do a great job for them, advising, servicing, delivering and continuing to raise the standards at which we operate.” 

Looking ahead to what his plans are for his team for the rest of 2014 and 2015 are, Mr Manson says: “While our treasury advisory team will continue to work with clients around the world, we will also innovate in two particular areas: channels, across digital and mobile, as well as renminbi to continue to offer clients a best-in-class and innovative proposition across our product space and network.”

Payment

Winner: Yes Bank 

Yes Bank’s case study of how it implemented a payments solution for dairy farmers demonstrates how transaction services can have a real impact on the end user. Financial inclusion has been on the agenda in India for many years. Asit Oberoi, senior president and chief operating officer of Yes Bank, explains that all banks in India need to offer a Basic Saving Bank Deposit Account as one of the targets set by the Reserve Bank of India, the country’s central bank. 

He says that one of Yes Bank’s biggest differentiators is that it is offering the accounts to respond to customer demand, rather than pushing them onto customers. “Due to this, the majority of accounts offered by our bank are active transacting accounts as against the chronic problem of inactive accounts faced by many other banks,” he adds. 

This is demonstrated in the case study of a dairy in southern India that collects milk from 4500 milk banks located in more than 8000 villages. The dairy has long had a system of paying farmers – based on the quantity of milk delivered – on the same day each week. The farmers, however, were paid in cash. Yes Bank implemented a system where the farmers were given a basic bank account and were paid automatically, with the data from the milk bank transmitting as a payment instruction. 

The bank has also been working on improving online security for its corporate customers and has introduced second-factor authentication, which means along with a user ID and password, the customers have to be authenticated in another way. Yes Bank has given its customers a choice of how they do this. “Our ability to provide customers with an option to choose the mode of authentication most suited to their internal processes is, in my opinion, what gives us a unique advantage over our peers,” says Mr Oberoi. 

One of the options is public key infrastructure (PKI)-based authentication, a system where users have their individual digital certificates downloaded onto a dongle and protected with a personal identification number to authenticate the users. 

Mr Oberoi describes PKI-based authentication as the bank’s flagship offering and has found good traction among customers. He adds that right now the bank has more than 300 corporate clients – with in excess of 800 users – who access the bank online through PKI. Since their introduction, the central bank has brought in guidelines recommending that banks use digital certificates to authenticate corporate customers. “We have a natural heads up in this case as were living with PKI before this guideline,” says Mr Oberoi.

Securities services 

Winner: DBS

As a bank that positions itself as an Asian specialist, DBS has been steadily building its franchise in the region and this also extends to the bank’s securities services. 

The Singapore-based bank has more than 30 years’ experience in custody services and has been a custodian of choice for some of the world’s largest financial institutions and institutional investors in key markets in Asia. In Indonesia, for example, the bank has been a sub-registrar for local government bonds, and in March 2014 the bank received sharia certification to provide custody services for sharia-compliant bonds. And in Hong Kong, which has been a market where DBS has seen significant growth, the bank has been offering offshore renminbi, including clearing and settlement of renminbi-denominated securities.

DBS’s securities and fiduciary services (SFS) business has been performing well and its regional assets under custody in 2013 registered a 7.9% growth year on year, which outperformed the growth in the region generally. The total number of funds under administration across the region also grew, at a rate of 24% year on year, while assets under management grew more than 400% in 2013. 

Soh Ee Fong, managing director, head of SFS, in DBS’s global transaction services division, says on the reason for the growth: “DBS knows and is focused on Asia. This enables us to respond swiftly to changes, and be our clients’ voice for these market developments. We listen and are flexible in our approach to providing distinctive solutions that will meet our clients’ specific needs; for example funds processing and Singapore-based securities borrowing and lending capabilities.”

The bank has put an emphasis on security, stability and strong risk management. In its entry, DBS demonstrated that it had taken steps to ensure that it has a sound and sustainable business model, and employs best practices, which is imperative for a custodian bank. 

Risk management does not just apply to sustainable business models and governance processes, but also to security. Compared with retail banking, where the bank account is often held by a single individual, with corporate accounts it is harder to authenticate users because a company may want more than one person to access the account. In April 2014, DBS added a multi-authoriser feature to its Ideal Custody online platform, which gives clients greater risk control as they are able to define multiple users for transactions. 

Looking ahead, Ms Soh says: “We will participate in and provide required services to our valued clients in the various Asian and Association of South-east Asian Nations initiatives, such as the funds passports.”

Supply chain finance

Winner: DBS

Products alone are no longer the differentiator in transaction banking. Rather than being product pushers, banks across the industry are offering solutions and are taking on an advisory and thought leadership role for their clients. This trend was demonstrated in DBS’s entry for the supply chain finance category of the Transaction Banking Awards, which gained high scores from all of the judges. 

DBS’s Working Capital Advisory Programme (WCAP) is a solution that uses big data so the Singaporean bank can offer insight to its clients on both their physical and financial supply chains. The WCAP uses the bank’s proprietary data gleaned from more than 65,000 companies globally and benchmarks key drivers of their cash conversion cycle. 

By benchmarking themselves against their peers, the tool allows chief financial officers to free up their trapped cash and optimise their working capital.

When asked what the impact of the WCAP has been, Vijay Vashist, DBS’s global head of trade and supply chain finance in the bank’s global transaction services division, says: “WCAP has helped us better serve our customers. We engage as thought partners to holistically understand our customers’ businesses. Together, we systematically look for opportunities to optimise working capital across the physical and financial supply chains. This forges deeper relationships and increases our share of mind and wallet.”

As well as focusing on the thought leadership aspect, the bank has also improved its product offerings. DBS offers accounts receivable purchase solutions in its key markets in Asia. The bank has expanded its offering from two vanilla products to 10 variations of the product. Some of the bank’s new initiatives include expanding its underwriting capabilities with external credit providers, such as export credit agencies and credit insurers. 

The offering of a wider range of solutions, as well as the working capital advisory programme, stand the bank in good stead to offer its clients services that fulfil their needs. 

At the moment, explains Mr Vashist, the bank’s clients are concentrating on the end of the financial year, and hence the peak reporting season. “The ability to generate liquidity and optimise their balance sheet would be high on their corporate agenda,” he says. On what this means in terms of their requirements, Mr Vashist says: “Given the need to manage credit risk in the supply chain, monetise receivables and improve days sales outstanding, we believe that there will be a strong focus on working capital solutions such as accounts receivable purchase.”

Trade finance

Winner: Maybank 

Many of the entries in The Banker’s Transaction Banking Awards demonstrated the growing trend of renminbi solutions that transaction banks are offering to their clients to facilitate trade with China. Maybank, the winner of the trade finance category this year, was able to demonstrate how its renminbi solutions benefit its clients. Expanding beyond its home region of south-east Asia, the Malaysian bank is forging ahead to position itself as a bank that can facilitate trade in China for some of Asia’s largest companies. 

As well as offering renminbi solutions, Maybank also finances trade in China in its local currency, the Malaysian ringgit, and is the only Malaysian bank that has been allowed to do so. The bank announced the facility in February 2014 and at the time its global head of transaction banking, John Wong, said: “The Malaysian ringgit trade financing service further reinforces Maybank’s position as the key go-to Malaysian bank for businesses in China as it was the only Malaysian bank appointed by People’s Bank of China as a market maker for Malaysian ringgit and renminbi.”

The bank has a vision to be a regional leader in trade and supply chain financing services in Asia. In the past year, it has arranged a number of trade financing arrangements that benefit its corporate clients, as well as the companies they trade with. In one example, the bank arranged a renminbi-US dollar trade settlement facility for a major paper and pulp trader in south-east Asia. Through its Hong Kong operations (Maybank HK) the bank enabled its client to settle its cross-border trade transactions with its Chinese buyers in renminbi, while settling its transactions with its south-east Asian suppliers in US dollars. 

For the importers, the Chinese buyers, the costs of trading are reduced as they are being paid in their local currency and do not have the foreign exchange risk to contend with. This aspect of renminbi solutions is increasingly being welcomed by Chinese companies that are seeking to mitigate their foreign exchange risk. 

While such arrangements are nothing new for the industry, Maybank demonstrated clearly in its entry how it was also able to arrange a renminbi-US dollar trade settlement facility for one of the world’s largest palm oil producers to facilitate its trade with China. The bank also created a facility for a major Chinese energy company to finance its oil trade.