Meeting the Asia challenge

Asia''s cash management landscape is challenging CFOs, treasury captains and their bankers. But providers are picking up the gauntlet.

Managing cash across Asia can be a tricky business. For cash managers, the quest to better manage cash in the region involves walking a wire pulled taut by chequered regulatory environments, multiple currencies and disparate practices and delivery channels.

The region's infrastructure and technology landscape is uneven. In markets like Australia, electronic transactions tip the scales, while those like Vietnam are still largely paper-based. Yet others, China for instance, are leapfrogging intermediate technologies - skipping dial-up telephone banking and moving directly to internet banking.

Cash managers say the state of affairs has improved. Infrastructure is developing surely and rules are being rewritten; even in China, deemed to be one of the world's most challenging and even rigid environments for cash managers.

CFOs and practitioners in China still grapple with issues like how best to extract more valuable and timely information from incoming receipts, effectively and efficiently managing physical cash collection among different stores/shops in different cities, wringing more efficiency from the payments processes and leveraging surplus cash trapped in the country.

But regulators are easing up on restrictions and offering alternatives in structures such as holding companies, foreign-invested companies limited by shares and entrusted loans.

Countries like India too, are jumping onto the catch-up bandwagon. The country piloted its Real-Time-Gross-Settlement (RTGS) payments system in January 2004, joining the world's developed economies in establishing a domestic payments platform that eliminates systemic risk.

Cash management in Asia is likely to see some sea changes yet, and cash management banks are going all out to help corporates ride the wave.

Banks primed

Banks have been busy in recent years. Corporates may have been reticent in spending on enhanced cash management structures as the global economy continues to find its feet, but banks have beavered away, priming their cash offerings.

Among providers, old structures have given way to more flexible platforms, web-based products have been launched, and cash management expertise boosted.

Integration and cross border capabilities have been pumped up. In the payments space, integrated e-payments processing structures that address clients' domestic and cross-border payment needs for different permutations and combinations of currencies and payment types are readily available. Standard Chartered has, for instance, implemented an innovative low-cost, high-volume cross-border guaranteed remittance service that uses alternate clearing infrastructures to move and distribute funds in an efficient manner while guaranteeing the delivery window and remittance amount.

In collections, integrated platforms for efficient collection and reconciliation of the various payment methods such as local and foreign currency cheques, cash, TTs, ACH direct debits are the norm.

In liquidity management, banks are bringing to the table liquidity management platforms with domestic and cross-border pooling, sweeping and interest re-allocation capabilities. Yet others are moving on to development of regional cash concentration solutions and automated multi-bank sweeping capabilities.

Is it enough?

Most leading cash management banks sport the requisite products and have strong development pipelines. Further enhancement of product functionalities, expansion of their products' geographical coverage into markets (eg China, Taiwan, Korea, Japan, Bangladesh and Sri Lanka) and differentiated solutions for client segments are well underway.

The cash evolution will continue to play out, says Chris Furness, Standard Chartered's global head for cash management.

"The squeeze on corporates to improve overall returns on capital and get surpluses to where they are most needed has not let up," observes Furness. "Banks will need to understand these pressure points and deliver the right responses."

For many banks this will mean making new and improved products and services and transparent pricing their calling cards. "Clients will want to fully cost bank services, determine their true value and exploit opportunities to improve the situation."

Furness also anticipates increasing client appetite for financial solutions that integrate seamlessly into their physical supply chains, allowing them to use the stronger balance sheets to obtain better financing costs and terms, facilitate STP on logistic and documentary requirements and improve account reconciliation.

Providers like Standard Chartered have gone full steam into investing in supplier financing, invoice discounting and consolidated reporting across cash and trade channels to milk synergies between the two.

Aces in deck

Ultimately, banks out to nab a generous slice of Asia's cash management business, must revisit the tried and true tenet - 'the client is king'. "Clients in Asia want banking partners with not only the requisite know how and solutions, but the will to stretch technology and talent to meet their needs fully," says Furness.

"In some of the most challenging cash management climates like China and India, clients are coming to us because they like our aggressiveness in tailoring solutions and the on-the-ground expertise we demonstrate as we design and implement customized solutions," he notes.

Commitment to start-to-finish implementation and service are key, according to Furness. There is evidence that corporates are taking mandates to trusted banking partners that have proven their mettle in these areas.

"The implementation experience, follow-up, the client education and hand-holding - these are still aces in the deck," asserts Furness.