Study Suggests Banks Failing Asian Corporates on Trade Finance

A wide gap exists between Asian corporates and their banks on the issue of credit approval for trade finance, according to research from East & Partners Asia.

The insight comes from the banking market research firm’s inaugural Asian Trade Finance report, the result of December 2013 interviews with the chief financial officers and treasurers of the 1,000 largest corporates across 10 Asian markets, ex-Japan.

The report asks the corporates to rate the importance and their satisfaction with 19 different service factors, with the trade credit process (TCP) nominated as the most important. On a scale of 1 to 5, where 1 is important and 5 unimportant, the TCP was rated as 1.03.

When it came to the satisfaction level, however, customers rated their satisfaction with the TCP as the lowest of all 19 factors at 2.48 on the 1 to 5 scale, where 1 is most satisfied.

East and Partners

The results on credit approval were reflected in responses on the key drivers of trade finance needs, with 31.0 percent citing the need for liquidity support as their main driver, the second most important driver after growth in the corporates’ trade business.

Asked to nominate the single most important initiative for a bank to win their trade business, 23.2% nominated improved trade loan facilities and conditions.

A similar gap existed between professional trade competence, rated at 1.06 for importance but only 2.38 for satisfaction.

Nearly one in four corporates said that a ‘knowledgeable’ trade account officer was the initiative which would win their trade business, the highest response out of eight options.

“Often we see where there are performance problems and customer satisfaction is low there is a drive upward in the relative importance of a service attribute or product,” said Paul Dowling, principal analyst at East & Partners Asia.

“It’s clear from the research that the banks are failing to fully deliver on the credit piece, which is so critical to trading businesses which need that liquidity support.

“At the same time, the feedback on account officers should be a wakeup call to the banks which sends a clear message to aspirants and challengers in this increasingly competitive market space.”

Being the inaugural report, Dowling said the next round in the programme, due mid-year, would deliver further insight and confirmation of the trends already identified in the research.

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