Banking on your ecosystem

By United Overseas Bank (Malaysia) | Aug 15, 2019

Using live cases from its e-hailing and education clients, United Overseas Bank (Malaysia) Bhd explains how a deep understanding of a business ecosystem can ensure companies operate at an optimal level.

Most company treasurers derive business strategy and growth by looking at their own capabilities. This perspective, while prevalent, is too narrow. Treasurers need to recognise the importance of their business ecosystem, the participants, and variables. Getting this right is key to staying ahead of the competition.

For example, a beverage manufacturer might be tempted to increase production just to reach their growth target. As a result, their distributors are given higher sales targets and are required to purchase more from them. If not executed correctly, the distributors would be negatively impacted since an increase in their purchases means an increase in working capital is also required. The company would then need to take a step back, and analyse the impact of their decision to all participants in their entire business ecosystem, and not in a contained perspective.

So, what is a business ecosystem? It is the network of organisations – including suppliers, distributors, customers, competitors, government agencies, and so on – involved in the delivery of a specific product or service through both competition and cooperation. Each participant in the ecosystem affects and is affected by the others, creating a constantly evolving relationship in which each entity must be flexible and adaptable to survive and thrive.

The ecosystem approach is not restricted to a specific industry and applies to all – for example, fast-moving consumer goods (FMCG), technology, transportation and education – regardless of how complex or simple the business ecosystem is or how newly incorporated or seasoned the company is. All it takes is the realisation of how interconnected each participant is to each other, and thus able to help a business optimise their value chain.

Featured Case: E-Hailing Company
An e-hailing company in Malaysia understands the importance of their ecosystem when they engaged UOB Malaysia to support their business ecosystem. As a new entrant in the e-hailing business, they require solid and robust cash management solutions to support their business, especially for receivables and payables. Given that majority of their customer base is made up of elderly clients, they needed support to enable their customers to make out-of-app payments.

So, who are the participants in their ecosystem? They are: the e-hailing company, their drivers, and their passengers. UOB Malaysia provided a Mobile Point of Sale debit/credit card terminal to all 1,500 taxi drivers to collect taxi fares from their passengers. At the end of each day, the taxi drivers will receive their payments automatically via online banking.

By properly examining their business flow and ecosystem, United Overseas Bank (Malaysia) Bhd (UOB Malaysia) was able to resolve the key customer pain points and provide benefits to all ecosystem participants.

Featured Case: Education Centre
One of the oldest private education centres in Malaysia also understands this concept when they embarked on a collection optimisation process for their school fees collection.

With 60% of their school fees collections primarily transacted via cash and cheques, their priority is to reconcile the collections to the student IDs. Additionally, for the parents, there is an element of security risk when they deposit cash for school fees payment at the cash deposit machines or when travelling to the school for over-the-counter payment. As such, we can already glean who their ecosystem participants are – the school, the students and their parents.

To solve these challenges, UOB Malaysia has provided multiple collection methods for their school fees – Virtual Account, Deposit Referencing, and Interbank GIRO. Virtual Account is a range of virtual account numbers which is assigned to each student’s Student ID. The payments are then made to the Student ID numbers. As for Deposit Referencing, specific information is required to be provided by the depositor for each deposit, in order to improve reconciliation for the school.

In addition, UOB Malaysia also provides the school with a self-contained cashless environment. Their students are able to purchase their food and books by just using their debit card. Furthermore, for the school employees and parents, they are able to enjoy preferential rates for UOB Malaysia’s retail banking products like financing, as part of the Corporate Employee Program.

The school was not only able to solve their receivables challenges, but was also able to add value to their ecosystem.

No business is an island on its own
“No business is an island on its own. It is crucial to move away from a focus on the company and to instead concentrate on the business ecosystem to create value. This means carving partnerships and closer ties with suppliers, distributors, and sometimes even with customers or end-users”, said Lucas Chew, executive director and country head of transaction banking, UOB Malaysia.

To bring value to your entire ecosystem, it is vital to partner the right bank for the right solutions. However, for the bank to be able to provide impactful and relevant value, access to the entire ecosystem has to be provided. This is when “putting one’s eggs into one basket” might not be a wrong move at all.

More information is available here.

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