How Standard Chartered is leveraging its size, history and technology to create bespoke transformative business solutions for its clients
With its 160-year legacy and presence in most of the world’s established and emerging markets, Standard Chartered starts from an advantageous position when it comes to providing solutions for companies of all sizes wishing to operate in and find opportunities within an interconnected world. The bank has made deep and early investments in technology that have yielded results.
Edited excerpts from an interview with Ricky Kaura, head of transaction banking Asia Pacific, Africa & Middle East at Standard Chartered on how the bank is helping its clients meet the most significant opportunities through 2023 and beyond with packaged solutions.
Supply chain disruptions have emerged as a big concern going into 2023. What are some of the key trends within this space?
The supply chain is fractionalising, and a focus on emerging markets and shorter supply chains is on the rise. Large clients want to support suppliers, but there is a significant financing gap. Pre-pandemic, there was an increasingly efficient just-in-time system which shifted to a just-in-case system through Covid-19. It’s now a hybrid and that will continue through 2023.
Access to those global and regional supply chains is vital but remains a challenge for smaller players, especially as the two largest trading blocs in history are ratifying — the Regional Comprehensive Economic Partnership (RCEP) in Asia and African Trade Agreement (ATA) in Africa.
Another trend is the emergence of new corridors. For example, geographically, 'China plus one' has been evident for a while with ASEAN, but now India’s acceleration of its production-linked incentives across priority industries (including electronic goods, pharma, textiles, automobiles and auto components, to name a few), addresses not only domestic demand but exports as well.
How are Standard Chartered and its clients preparing for this?
When you think about the countries within the RCEP and ATA, we have a long history and experience. Considering the genesis of the bank 160 years ago, we have an advantage, and as those countries connect, we are ready across those corridor networks as a major supply chain provider — either number one or number two — in key centres.
What differentiates us is that we go much deeper into the supply chain than most.
We are also syndicating that risk in a different way. It's highly automated, facilitated by different tech stacks. These programmes can scale at pace for companies that are considering not just tens but tens of thousands of partners. We have numerous notable examples of these approaches in large jurisdictions like China and India.
There was a wave of digitalisation through the pandemic. Could you elaborate on Standard Chartered’s journey?
We were already a major player even pre-Covid. But tomorrow’s banking is an evolution, and we are continuously looking to the future to ensure our clients are well served. For example, we recently made an announcement on Project Guardian with the Monetary Authority of Singapore (MAS). This relates to tokenisation of trade assets. An exciting space, as it opens up a larger investor class, who have an interest in these assets. Attracting a larger investor base creates very different approaches to address the financing gap, which we estimate to be around $1.7 trillion.
That's a big play as we think about how to help clients strategically strengthen their supply chains.
Further, there is a need for the financial and physical supply chain to integrate more efficiently. We have partnered with large operating platforms, and were the first bank to partner with SAP Taulia since it became part of the SAP family. It opens an integrated approach to a much bigger ecosystem, easily accessed by clients.
Often, the intent is there, but the technological linkages to put the pieces together become an issue. Clients internally cannot get access to those resources – there are problems with lead times, complexity and budget. But now, its pre-configured and we can integrate a host of services not just within the supply chain, but also on the operating cash management/liquidity management side creating powerful working capital efficiencies.
Given your remit across APAC and AME as well as the incredible diversity of your client base, how far along are the bulk of your clientele on the digitalisation journey?
Covid-19 was an accelerant. Perhaps some companies were a little slower and may not have had the resources internally, to digitise completely.
We were already on the journey and our tech stacks and platforms ready. We have won a lot of market recognition for our cloud native backbone that uses micro services, and a number of enabling technologies. That has helped us become over 99% digitally initiated on the cash management services side, with digitalisation increasing at pace on the trade side as well across key centres.
In many parts of Asia, we were the first bank to provide integrated services driven by API-linkages. But what clients also need is advisory as they re-engineer their processes.
We help by having experts embedded into our business who are not bankers. They are former corporate treasurers, technologists, treasury management system experts, or physical supply chain experts.
That’s how we serve clients across the journey over and above technology, and assist in creating a competitive advantage. What everyone seeks is a simpler more seamless digital interaction to tie that ecosystem together. We have been spoilt by personal technology which has set experiential expectations for the corporate world as well.
Blockchain brings with it the promise of transparency, speed, efficiency, and security. To what extent is this being realised today? And is it affected at all by the bad publicity around the crypto space?
We shouldn't confuse enabling technologies.
For us, blockchain is not just at the proof-of-concept stage — we have multiple applications. We commercialised this space years ago as one of the first international banks working with advanced new economy clients such as Ant Financial. We partnered to integrate our technologies, leveraging blockchain enabled payment rails and trade activity.
Nowadays, there are many blockchain and distributed ledger technology (DLT) developments taking place simultaneously with an increasing number of central banks running digital currency pilots using DLT. We work with them in finetuning use cases. An example being mBridge which is a collaboration between the Central Bank of the UAE, the Hong Kong Monetary Authority (HKMA), the People's Bank of China (PBOC), and Bank of Thailand to create an interoperable network. Standard Chartered was one of the early participants, even before the partners had all come together. It is a great example where we continue to be involved in a space, both from a private and public sector perspective.
Many enabling technologies and banking services are allowing several clients in Asia, who were behind the curve to leapfrog.
In-house banking is a good example. Large technology infrastructure investments in this space used to take many years. We first began building such services for clients in Europe as they started to adopt in-house banking solutions to address challenges around resourcing, time, and expertise. Today, clients work at a different pace and they can do that because they use treasury management systems as a service, and we help with integrated solutions. For example, we provide specialised account platforms between a virtual and physical account, which allows the segregation of entities flows. A client can be up and running with an in-house banking infrastructure in a fraction of the time, cost, and footprint of technology that an organisation may have had to bear in the past. Asian clients have leveraged this, with an enormous amount of innovation coming from companies in China and India. They don’t just create efficiency but new platform driven business models. The risk management of these large flows becomes critical against a backdrop of more client information protection and financial compliance. This cannot be underestimated and underpins a different element of our advisory as well.
We partner with clients at all stages of the transformation journey, and given the size of our client base, we cater for different stages of the journey. However, the advanced ones are moving at speeds that banking wasn't used to! We respond by bringing in very different skillsets that are embedded within the organisation. We are increasingly known as the go-to bank in this part of the world for leading transaction banking services, and that is only increasing.
What are some of the practical implications of this?
If you remember the global financial crisis, a lot of CEOs and CFOs woke up and said, ‘Where's my money?’
Unfortunately, sometimes that answer was, ‘I'm not sure’. And that led to the need for infrastructure, transparency, and digital real time. The supply chain disruption also created gridlock. It impacted our clients’ working capital balance sheets quite dramatically.
An important element of our advisory is providing a total working capital management diagnosis. Our teams are equipped with internal tools (we call it Compass) that can create detailed benchmarking data on the efficiency of their working capital cycle, relative to the industry, the market and competitors. This drives collaborative diagnostics and a transformation roadmap, with solutions to create competitive advantage.
ESG and sustainability are likely to remain important themes through 2023. What are some of the trends that you are observing in the space?
We were amongst the first banks in terms of providing sustainable transaction banking flow options. Our product suite is live, and we continue to innovate and work with the various agencies within a larger sustainability ecosystem.
We are seeing more clients eagerly embrace it. Whilst Europe probably emerged a little earlier, transitioning in the developing parts of the world is a very big play. On the transaction banking side, Asia is probably leading.
We have not only delivered sustainable flow trade solutions but are very large in the halal ecosystem. Increasingly, clients want optionality, and we have already delivered Islamic Sharia-compliant sustainable solutions.
Are there any other emerging trends that treasury departments should look out for?
The internationalisation of the renminbi (RMB) which has moved to be the fifth largest traded currency in the world from the 20th in only a short time. We are beginning to see significantly more usage and the momentum is driven not only by Chinese companies, but also foreign MNCs.
We find many in the corporate community catching up on these trends, and it can relatively quickly become a requirement for corporate treasuries.
We already operate in almost 40 markets with international RMB capabilities which also provides us an insight into the current flow. RMB continues to become more relevant in not only trade flow activity, but FX, hedging and treasury settlements. We see increasing investments, leveraging the North-Southbound Connect schemes and the corridors into China and of course, outside of China. China’s investments in Asia and Africa continue to grow and that will only become more significant.