30 Oct 2015
The key to trade finance in Asia
The past is no guide to the future for Australian companies looking to succeed in lucrative Asian markets - particularly in building a sustainable competitive advantage. The expectations of Australian and Asian chief financial officers are actually quite different.
This is particularly so in trade finance, despite the sector having broadly avoided, or been spared, innovation and disruption on a broad scale.
"Emerging customer characteristics and demand drivers are especially valuable given the different strategies Australian banks are employing to 'crack' new Asian markets."
Martin Smith, Head of Markets Analysis at East & Partners in Sydney
eTrade solutions and straight-through digital processes are yet to pervade Australian import and export goods and services transactions with the regularity and frequency observed across lending, payments or transaction banking products.
The uptake of relatively new trade products such as bank payment obligations, electronic bills of lading, open account financing and overall appetite for outsourcing trade documentation has been limited.
DIFFERENCE OF OPINION
According to our surveys, the specific trade finance product and service factors corporates rate the most highly differ significantly whether you are consulting an Australian- or Asian- based CFO.
These surveys at East & Partners involve direct conversations with over 350 export and import enterprises within Australia and the top 1000 Asian institutional enterprises by revenue (excluding Japan), providing unique analysis and comparisons across both regions.
Although risk advice and value for money are key drivers of customer acquisition and retention across both regions, Asian corporates hold trade credit processes and industry knowledge in much higher regard than their Australian counterparts.
Conversely, Australian corporates are considerably more focussed on general trade advice and customer service.
Asia's largest enterprises by revenue continue to demand better liquidity support and closer guidance for growing their underlying trade business, while their Australian counterparts favour innovative supply chain management initiatives the most intently when considering who to allocate their trade finance business to.
In the context of trade finance, emerging customer characteristics and demand drivers are especially valuable given the different strategies Australian banks are employing to 'crack' new Asian markets.
The Australian big four banks have successfully expanded aggregate institutional trade finance market share and wallet share ($A725m turnover or greater).
Of Australia-based banks, ANZ is now the fifth-largest primary trade finance provider to the top 100 institutional enterprises in 10 separate Asian geographies according to East & Partners Asia research and will soon be bracketed with the 'Big Four' regional trade finance heavyweights including Standard Chartered, HSBC, Citi and DBS.
Yet Asia's 'Big Four' continue to encounter ultra-competition among the region's largest enterprises by revenue, evidenced by static market share growth and declining wallet share outcomes.
Adapting and integrating with local market conditions clearly presents as a critical success factor for both banks and their customers alike as they overcome substantial market barriers in trade, yet the ability to develop and implement effective eTrade solutions will be a key differentiator in 2016 and beyond.
Martin Smith is Head of Markets Analysis at East & Partners in Sydney
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.