Additionally, transaction banking is a strategy adopted by all commercial banks because banks can garner the transaction accounts of customers, including corporates, small- and medium-sized enterprises and other institutions, making it a source of low-cost Casa (current account savings account) and the ability to onboard new customers.
So Lay Hua, veteran banker, IBF distinguished fellow, and managing director and head, group transaction banking at UOB, describes transaction banking as the bread and butter of banking. At a glance, transaction banking encompasses the financial transactions made by corporations, institutions and government on a daily basis.
In a nutshell, any banking service undertaken by a bank customer is part of transaction banking.
Says So: “Franchise is very important to the nature of our business in Asean. Everyone is going to the ‘+1’ situation. We will grow with our customers in Asean. Our customers are well prepared for decentralisation.”
See also: Great Eastern at 5-year high on trading resumption on Aug 21
She adds: “Transaction banking doesn’t deviate much from the nature of the product. We are pretty successful in the market because of two important elements: being able to connect the dots and follow through; and we have all the product stacks and connections with local and international banks.”
“Imagine you’re a customer with multiple businesses in different countries. What would the customer need?” So asks.
Whether a resident or non-resident account, knowing the type of account to open, with the ability to make payments and collection, check bank balances and ensure the company has sufficient liquidity, are the everyday services companies require, adds So.
See also: Singapore banks' weak risk-return clouds Greater China ambitions
A company with multiple locations in Asean needs an account or accounts that can overlay the ability to see the information in these locations, including balances and approved transactions, with linkages to its counterparties. The movement of cash has to be translated into the company’s working capital and cash flow, So explains.
Cash management is an integral part of transaction banking. “When we run cash management, the purpose is to encapsulate as many products in UOB as possible. For example, in term deposits, forex and Casa, we have a liability team to manage the excess balances, which are around three to six months in tenors, and to guard the pricing of the term deposits,” So says.
The movement of cash involves payments. “You need to make sure the transaction is processed. For example, if you need to pay a vendor and the payment is not timely, you would incur a penalty. We are there to support customers, to make sure the daily needs of the customer are being met,” So says.
All these services are overlaid with how to optimise balances. “Many of us have balances in different accounts and accounts in different jurisdictions with different regulations,” So says.
Catch and throw
“As customers move towards certain locations, our expertise comes in to make sure we can structure [transactions] for them,” So says.
UOB’s advantage is that it has a presence in the main Asean economies. Hence, companies from outside the region can use the bank as an anchor for their supply chains. For instance, when a European company comes here to make Singapore its regional headquarters, UOB adopts a catch-and-throw strategy.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
“For example, we may have a customer who says I don’t need any further arrangements for Singapore, but do you have the expertise in Vietnam? We connect the customer with the account in Singapore to the customer with the account in Vietnam (or another country). In Vietnam, our UOB branch could also have a customer and knows what he needs. Or, the counterparty of our Vietnamese subsidiary’s customer is in Singapore and our subsidiary throws it back to us to connect,” So explains.
“The nature of our job is product. You must be able to cater to your customers. The most important factor is the people on the ground. That’s why we have specialisation on the ground where we understand the regulatory requirements,” adds So.
Interestingly, UOB raised its transaction banking game when it implemented a new facility in its UOB Infinity app. UOB Infinity was launched in 2020 and is UOB’s flagship digital banking platform for businesses, designed to streamline financial operations across Asean. UOB Infinity offers cash management services, trade services and since 2022, financial supply chain management (FSCM).
UOB Infinity integrates cash, trade and supply chain functions into one seamless interface. It has a full range of solutions from procurement to payment, ordering to production and finally sales to collection — all on a single platform. This will allow clients in Singapore and Hong Kong to digitally connect with suppliers, buyers and distributors across key markets in Asean and Greater China. Customers on the platform have access to cash management solutions to send and receive payments across all their local and overseas UOB accounts. They have a single view of these transactions to manage their liquidity better.
The FSCM feature allows customers and their trade counterparties to interact with each other to exchange and validate trade documents, to provide evidence of sales fulfilment. Clients can also access financing at different stages of the supply chain, ranging from pre-shipment to post-shipment supplier financing, distributor financing and accounts receivable purchasing.
“Payments and trade are borderless. If we have a customer in all these locations, we can make payments to anywhere in the world. For trade financing, the financing would be onshore. Whether it’s a cross-border trade, telegraphic transfer or if our customers choose a bilateral payment, these can be processed,” So says.
FSCM and trade financing are also ways to get new customers. “When a customer is onboarded, they will come in with thousands of merchants or suppliers,” she adds.
“We identify a customer’s daily operating needs. As customers move towards certain locations, our expertise comes into play to make sure we can structure their needs according to their supply chain. In the end, it’s about cash flow. How do we service them in their daily banking needs, including their financing requirement? You can look at it as a vertical, but I generally like to call it a circle or a pie. The nature of our job is product. You must be able to cater to them. Then, of course, the most important are the people on the ground. That’s why we have specialisation on the ground,” So explains.
All the local banks focus on transaction banking as it is a necessity for companies. It generates fee income and is a capital-light business compared to loans and deposits.
DBS Ideal and OCBC Velocity are the competitors to UOB Infinity. All three systems have their own advantages.
In general, UOB Infinity is for businesses with regional operations across Asean and supply chain complexity. DBS Ideal is suitable for firms that need enterprise resource planning. OCBC Velocity offers other advantages, such as strong local transaction support, e-invoicing and multicurrency options at a lower cost.
Additionally, the local banks raised their digital offerings as the Monetary Authority of Singapore issued new digital banking licences to new players in 2020.
When asked about competition from new digital banks, So says: “I don’t see them disrupting the nature of transaction banking. Am I able to process bigger payments? Yes. I interact with customers. We put warmth and trust in our conversation with them. I’m not afraid of competing with tech platforms; I can do transaction banking in-country and cross-border. I provide solutions, not a payment type. And I’m not shy working with the neo banks as a partner. I must be there for my customers.”
