Trade finance has become a major focus in Asia for both global banks and local domestic lenders, reports East & Partners in its latest briefing.
The business banking market research and analysis firm reports that with Asian economic growth powering along and the economies of the region more open than they have ever been to world trade flows, a common pattern is emerging among non-Asian banks wanting to gain a foothold in the region.
US, European and Australian banks are following their national corporates into Asia, increasingly leading with trade services and then looking to add transaction banking, cash, payments and other products.
Trade lending has special attractions for today’s commercial bank in Asia in having relatively light capital requirements, quick churning tenors and sticky cross sell upside. The more advanced with this strategy then reaching out to their customer’s Asian trading partners, seeking to win a slice of their wallets too.
Examples cited by the firm include Wells Fargo and JP Morgan from the US, Deutsche Bank and BNP Paribas from the eurozone, Australian banks such as ANZ and well-credentialled specialists such as SWIFT, all looking to attack incumbent providers with trade led propositions, be they the large globals, HSBC, Citi and Standard Chartered or the regional players such as DBS and OCBC.
East adds that its research shows for every $1 of trade finance revenue generated in a primary trade finance relationship, a further $1.70 is generated in foreign exchange and cross border banking fee revenue. In addition, banks which win the role of primary trade finance provider can expect to win as much as $2.25 in other transactional services revenue – a total up-sell of four times.
Research also shows customer churn to be on the increase in Asia, although banks which have the primary trade finance relationship can reduce relationship churn on other banking products by an average of 68%.
This all points to trade as a key banking relationship. Banks which secure lead trade relationships can build out deeper relationships and win more wallet share across a much wider product spectrum. They can also be more confident that the customers will stay with them, the firm concludes.
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