Unraveling the State of the Digital Corporate Banking Market in Southeast Asia | Techy Kings

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With the advent of open banking, the financial sector has undergone radical changes. In a report published by Starfish Digital, with the support of the Open Data Institute (ODI), they argue that the adoption of a more open data infrastructure causes a strong positive impact on customers, small businesses and new market entrants. Unfortunately, while the retail banking sector has been nimble in adapting to these changes, the corporate banking sector in Southeast Asia is lagging behind.

What is digital corporate banking?

Through digital corporate banking, services such as account onboarding, setup, management and maintenance will be done through digital channels. Likewise, various transactions can be done digitally as well. However, the biggest benefit of corporate banking is the provision of real-time data from corporate banks to their customers’ treasury, ERP and financial systems. For example, this allows the Chief Financial Officer (CFO) the opportunity to manage the company’s liquidity, minimize financial risk, optimize investments and reduce transaction errors.

ASEAN market

According to a Starfish Digital report, the ASEAN market is a ‘broken market’ because there are too many countries with too many players. Basically, the lack of an overarching regulatory body like the Berlin Group (BG) in Europe creates challenges in real-time corporate banking. In addition, although the region recognizes that digital technology is a critical growth enabler, only a limited number of regional banks have invested in digitization processes such as the use of Application Program Interfaces (APIs). That said, Singapore has been a driving force for change in the region. For example, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) published an API Playbook that outlines guidelines for banks using APIs. Likewise, Malaysia, Indonesia, Thailand, and the Philippines follow API adoption.

However, despite progress, problems with the current corporate banking system persist. For example, Filipino bankers and chief executives argue that the current corporate banking system in the Philippines is too unreliable, resulting in large transaction discrepancies. Additionally, a General Manager from an international company in the Philippines mentioned that looking up finances through an online banking platform can be time-consuming. As companies use multiple banks to meet their needs, they must go through each banking platform to view their finances. There is no single platform where all financial data can be viewed in real time.

Barriers to digital corporate adoption

Based on Starfish Digital findings, 81% of 110 respondents answered that the biggest obstacle is the integration of real-time corporate banking technology into the existing information technology infrastructure. Looking at internet connections alone, apart from Singapore and Thailand, most countries in Southeast Asia have slow internet connections. Thus, making digital banking quite unreliable.

Other barriers to adoption include lengthy and complicated procurement processes that prevent banks from addressing the demands of corporate clients. This is made more complex because the financial institutions involved in the report have offices and procurement teams operating in multiple locations. Furthermore, these financial institutions lack a structured regulatory framework and sufficient technical skills within the organization, which increases the risk of adoption. Similarly, the absence of competition in the digital corporate banking space makes banks less willing to invest in the digitization process. As noted in 2017 research from Research in International Business and Finance, banks are wary of disruptions to their services. Therefore, they are less likely to pursue any change if there is no great need or demand for it.

Overcoming Challenges

Despite the challenges of adopting digital corporate banking, the report highlights that financial technology (FinTech) providers can help solve these challenges. As highlighted by the Chief Information Officer, FinTechs are complementary to banks. “They can disrupt today’s corporate banking relationships as they reimagine tomorrow’s financial relationships. Banks that will survive are banks that embrace change.”

For example, the way some CFOs obtain their financial data is by receiving information from their treasury department or from the corporate bank, usually in PDF. This archaic approach slows down the CFO’s decision-making process because their data is not real-time. Through digital corporate banking, CFOs gain the ability to dynamically manage their company’s finances because everything can be seen and acted upon instantly.

Furthermore, FinTech can provide cost-effective solutions that provide competitive advantage through data analytics, AI and machine learning. Additionally, FinTech can breathe new life into legacy systems by offering innovative products and solutions to challenges related to legacy systems.

Additionally, according to Stanley Epstein, Director and Co-Founder of Citadel Advantage, a financial services consultancy, FinTech can help reduce operational costs, reduce transaction errors and improve service. Basically, with the help of FinTech, the use of digital corporate banking is possible. Starfish Digital is an example of a FinTech provider that can help banks adopt digital corporate banking. Through the Starfish Digital Universal Adapter, it can provide automated banking data that integrates financial and treasury data in real time.

Conclusion

In conclusion, although there are barriers that prevent the use of digital corporate banking in Southeast Asia, given the market conditions in the region, it is reasonable that the use of digitization through the help of FinTech providers can help solve the problems of the current system. . Similarly, it can advance the capabilities of the corporate banking sector in the region. What stands in the way now is the recognition that this leap forward requires funding!

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