Customer relationships have long been touted by transaction bankers as a key selling tool, almost to the point of banality. Now those bankers have validation.
In its annual report on wholesale banking technology trends, Boston-based banking consultancy firm Celent reported that building and maintaining customer relationships is the "number one reason for a corporation to buy transaction banking products". While few will say this is a "new" revelation, it is confirmation that bankers have not just been spouting off about how much their relationship management skills have benefitted their business, especially since the September 2008 collapse of Lehman Brothers.
"The credit shortage has affected the corporate treasurer in many ways," wrote Jacob Jegher, senior analyst at Celent and author of the report. "The first, and most immediate concern, is that now treasurers are questioning the consolidation of their banking relationships. Trust and confidence are a must to build a healthy bank-customer relationship."
Throughout much of the past decade, the trend in corporate treasury, trade finance and securities services was to consolidate banking relationships with one or two financial institutions. The rationale behind this trend was fewer counterparties would create operational efficiencies, reduce costs and improve control. The loss of confidence in the financial system in 2008 shook this belief to its core, forcing many finance managers to take a step back and re-evaluate their counterparty risk.
"Businesses fell back on traditional instruments and the need to work with a reliable and trusted partner became more important than ever," said Richard Linebaugh, a Hong Kong-based Asia corporate product delivery executive at Bank of America Merrill Lynch, with regard to the reaction of corporates after the 2008 credit crunch. "Winning clients is about bringing a consistent advisory experience to each relationship in order to reinforce that trust and knowledge with every interaction."
Banks have made a number of relationship-oriented appointments in Asia recently. In January, HSBC appointed Sohfern Boey as Hong Kong head of sales for the bank's trade and supply chain business and Bank of New York Mellon appointed David Brown as vice-president of broker-dealer global sales. In 2009, UK-based Lloyds Bank moved Patrick Furlong, Asia-Pacific director of financial institutions, and Jason Ving, Asia-Pacific relationship manager for financial institutions, to the firm's Hong Kong office.
While relationship management tops the global agenda for transaction banks, Celent goes deeper into the technology needs of Asian institutions. Jegher wrote that replacing core banking systems remains a top priority and highlighted opportunities for third-party vendors and global financial institutions to provide these systems on a white-labelled basis.
Vendors and global banks stand to benefit from core system upgrades because of the high cost of building a greenfield platform. Industry experts estimate that building a transaction banking infrastructure can cost hundreds of millions of dollars; cash that few domestic or single-region players have at their disposal.
Banks that have implemented new transaction banking systems in recent years include Singapore's DBS and OCBC, the former working with third-party vendors, while the latter has chosen a white-labelled option from J.P. Morgan.
Of course, some institutions feel an international client would be better served by banking with a global institution. "With an increasing number of corporate institutions viewing the world as their marketplace, it is no surprise that globalisation is considered a challenge," said Mark Sutton, head of client integration consulting for global transaction banking at HSBC. "However, this is where choosing the right banking relationship is key to the overall success of your globalisation strategy. Banks have been working hard in the collaborative space, which includes connectivity, security and messaging formats."
Sutton continued: "While I agree with Celent's findings, there are solutions available that will assist corporates in realising their vision of globalisation and make the adoption of technology much easier."
Celent wrapped up its report emphasising the three main technology priorities of banks this year -- managing risk, improving transaction banking and implementing next-generation online banking solutions. Like relationship management and core system upgrades, these priorities are little changed from 2009 and will likely remain near the top of financial institution's to-do lists for some time to come.
