13 July 2009
As I tour Asia there seems to be a consistent trend. Most banks in the Far East are taking a new look at wholesale services such as trade finance and cash management. The top global banks are beefing up their offerings. Top tier national banks are thinking about whether to build their own capabilities or partner with some of the global players. I have come across banks in India, Malaysia, Singapore, and Japan who are all saying much the same thing. Speaking to a top bank in Malaysia, “We don’t consider Malaysian banks as our competitors, but want to compete with the big global players.” What is driving this trend? Business isn’t booming in Asia, but it hasn’t ground to a complete halt either. Banks are looking to both gather deposits and generate fee-based revenue. Cash management fits that bill rather nicely. This isn’t an easy business and requires global infrastructure in one way or another. One way would be to partner with a global bank and use their capabilities. Another would be to build the technology infrastructure and find local partners in each market where the bank chooses not to establish international branches. Because so many banks are expressing interest, I am concerned that the market will become too crowded, driving margins down. If a bank wants to get into this business it needs to understand where it will play and why it will win. Banks haven’t yet thought that through.