OCBC deepens treasury access with hedging and digital innovation

The era of higher interest rates and inflation, combined with geopolitical tensions and foreign exchange (FX) volatility, has put CFOs and treasurers under mounting pressure to be more resilient and agile to navigate a dynamic and challenging business environment.

Some companies have used technology to enhance treasury capabilities and increase automation, while others have resorted to building cash reserves and optimising working capital and liquidity to reduce FX exposure. Additional tools have included sustainability-linked loans and financial instruments.

For OCBC, the answer has been multi-fold. Southeast Asia’s second largest financial services group by assets has created new and improved ways for CFOs and treasurers to hedge market risks and enhance liquidity management. The bank has also developed robust, regulatory compliant, customer centric, end-to-end digital solutions that integrate with internal processes, treasury systems and payment infrastructure.

The upshot over the past 18 months has been significant penetration into key customer segments. The bank has, for example, acquired new corporate clients as well as secured bigger wallets with premier clients.

On the product front, OCBC has developed bespoke and flow structured products, with strong volume and revenue growth in both areas. The bank is also proud of its sustainability solutions, which have been responsible for many ‘firsts’ in both the Singapore and Asian markets.

At the same time, OCBC has leveraged digital platforms, data and artificial intelligence to drive efficiency, access and scalability for its product and customer journeys.

New ways to help with hedging

In general, investing in digital infrastructure has been a key objective for OCBC to enable it to address corporate treasury needs for emerging market currencies and payment rails. The bank has also made a distinct shift towards instant payments, plus created digital solutions to improve efficiency and reduce risks across the areas of FX, payments and liquidity management.

Collectively, these efforts have been key for OCBC to deliver a dynamic hedging strategy amid rapidly evolving market conditions. Achieving this requires a constant watch on a client’s refinancing schedule and hedging portfolio as the bank seeks to help them mitigate future exposure by capitalising on existing positions.

This might involve product solutions to pre-empt clients’ impending requirements, be they in mergers and acquisitions, loan refinancing, upcoming FX exposures or a search for higher investment yields.

Such an approach has been in high demand given the impact of higher rates on funding costs for corporates. In response, OCBC has used multiple cross-currency swaps to seize on basis swap advantages and allow clients to obtain cheaper funding costs.

OCBC has also improved its platform to automate risk-management position-squaring so the bank can be more responsive to changing markets. Further, it expanded its FX order management to enable centralised order books for risk-management amongst regional branches and subsidiaries like OCBC Securities and Bank of Singapore.

Meeting needs for sustainable solutions has also been a success factor for OCBC. With decarbonisation a priority for many corporates, the bank closed Singapore’s first ever voluntary carbon credit bundled interest rate swap. This allowed clients to hedge against rising rates while offering the flexibility to retire the acquired carbon credits.

Delivering digital solutions for all needs

Since it is unrealistic for a business to find a one-size-fits-all digital solution to meet bespoke needs, OCBC has taken the route of offering a suite of digital solutions across platforms, mobile applications and application programming interfaces (APIs) – for key needs such as cash management, virtual accounts, FX, payments and real-time notifications.

As a result, 90% of ASEAN trade and capital flows are covered by OCBC’s network, which serves segments from retail, to small and medium enterprises, to multinational corporations, to financial institutions.

The bank’s success stems from notable financial achievements for its digital solutions between mid-2023 and mid-2024. These include 37% growth year-on-year in revenue across digital channels, with online FX transactions during the same period jumping 61% in number. The fastest growing digital solution was APIs, which doubled in terms of the number of transactions and notional value, reflecting an ever-sharper focus among treasurers on adopting and enhancing their technology.

At the same time, OCBC has prioritised the ability to offer personalised insights to customers as an essential way to help them tackle their individual challenges.

More specifically, across FX volatility, liquidity and digital capabilities to improve business efficiency, the bank opts to rely on data and feedback to make its digital offerings as seamless and relevant as possible – such as via online transactions.