Client retention through integration

F O RU M
In association with

As more companies implement ERP systems at various levels, they have also started to reach out to their own financial institutions to begin the integration process. Financial institutions unable to provide for these services can be at a competitive disadvantage. Banks in Asia are therefore considering a number of approaches including entering into partnerships to meet the needs of clients

The Asset: In terms of integrating back-office systems what sort of demands have you seen from your corporate clients? Yin Fong Lum: Whether they are large multinationals or the larger SMEs, the need to link their ERP systems to the bank is very important. Corporate clients are also very cost conscious. To streamline the back office, they also want to have cost-saving tools that they can use. The only way for that to happen is that instead of just having to send transactions either manually or electronically, they want some integration to the back office so that they can download from their system and transfer the transaction files to us. As far as the banks are concerned, many have started to look into how to integrate to the clients back office system such that they can provide

AT T E N D E E S Lum Yin Fong, managing director , global transaction services, DBS Bank Arpavadee Meekun-iam, executive vice-president, Bank of Ayudhya Linda Goh, head, financial institutions product & services, OCBC Bank C J Tan , assistant general manager , Mizuho Corporate Bank, Singapor e

Budi Sanjaya, head of international Donald F Schule, senior vice-president, business solution, PT Bank Central Asia global client access, JPMorgan Chase Ketut Triasa, head of operations, Bank Niaga Satrio Kusnanto, IT officer , Bank Niaga Kosuke Nishi, senior manager , payment strategies and solutions, UFJ Bank David A Potterton, vice-president, Chase Access Services Lee Chung Keet, vice-president, head of payments-receivables & financial systems integration, JPMorgan Chase Michael Whitehead, head of financial institution sales, JPMorgan Chase

November 2003 49

Fong: I think cost, full integration and security are all very critical

Tan: In order for us to be competitive, it is impor tant for full automation and that the operation is seamless

not just payments but also collection.

F O RU M
In association with

Kosuke Nishi: It is very important to service our clients through a variety of sophisticated services. TA: Given the requirements of your corporate customers, how are you tackling some of these needs? Fong: If you look at the SMEs, they have their own requirements even though they might be different. For multinationals, the needs are different and much more complex. If not in terms of a single file, they prefer to send a file that can take most of the transactions that is sent to us. The issues we have always been faced with are different standards. There are also different versions for the ERP platforms. It does not mean that the next version is necessarily compatible. Some work needs to be done on the part of corporates when they do integration. A lot of times these corporates do not want to pay. They would like you to do it free of charge. So on the one hand you want to provide those services but there is the cost to the bank. We need to find a cost effective way to provide such integration services to the customers. The other question is timing. How quickly can we implement the integration? Again, for the platform that we have, a simple version, can be applicable for SMEs. But for the large corporates in which the volumes are high, then a simple e-banking channel may not be the solution. Potterton: Do you have plans to move in that direction or are you still studying and actively engaging your corporate clients on their needs? Fong: Definitely there is a plan in place. For us to stay in this business, we have to provide that. But as a local bank, we cover both the small and large corporates. We need different delivery channels. We need to have strategies for the small companies as well as the large companies. Potterton: While everyone agrees that is the way to go, the question is how to bridge that because that is going to take some time. Certainly when you look at how you can meet the needs of corporate clients today, it has to be flexible enough that you can, as standards evolve, move to that more effectively. Sanjaya: Every customer talks about cost. When we plan to adopt a new system moving to use more technology, the customers do not want to use it because they want us to service

information to them as well as receive transaction files. C J Tan: At the end of the day, all customers expect their banks to serve them and expect the operations department to be part of their team doing all the administration work. But in order for us to be competitive, it is important for full automation and that the operation is seamless. The only way is through some standard formats. T day, we still do not have one o standard format. Somebody should take the lead in setting some standards. Fong: Other than standards, corporates are also concerned with security. At the back of their minds, they are wondering: how secure is it? Because you are talking about their transactions being sent over. I think cost, full integration and security are all very critical. Budi Sanjaya: Most of our customers are retail but we also have corporate customers. They are also quite traditional. But some are beginning to change and are starting to look at Internet-based solutions among the SMEs as well as the corporates. However, in general, we still use traditional ways to service our customers. Linda Goh: When you look at the corporate environment, it is also important to find out how you define corporate. Big international banks look at corporates in terms of the Fortune 500 companies. Here in Singapore, we look at the large listed companies. We also look at the SMEs, but their needs are actually quite different. Goh: W also e look at the SMEs, but their needs are actually quite different Arpavadee Meekun-iam: Our corporate customers require straight-through processing and also would like to integrate their systems with the bank in the area of cash management

50 November 2003

Arpabadee: Our corporate customers would like to integrate their systems with the bank in the area of cash management not just payments but also collection

Whitehead: The customers requirements are also increasing in their frequency and that is a constant challenge for all of us

them. They want to talk to us. The challenge for a bank like us is how to service them. Because when you start to talk about cost, they still insist that the bank should provide the service. It is often difficult to change the mind-set of the customers. Tan: I think when a bank goes into automation and integration with a customer, the objective is to make the process costeffective. However, relationship is ever changing because of the competition. When I talked about standards, it is important if there is one global standard in the market for all the ERPs. Banks often pamper their customers and they sometimes compete with other banks by offering customizations free of charge. At the end of the day, when we do customizations for these customers, the question is how long is this service going to last? Before, when we talk about trying to lock up customers from their system to our system, that was forever. These days, that is no longer the case. Relationship is always dynamic and always changing. At the same time, there is no one standard in the market and there is always a cost to us. So when we automate, we want to reduce our bank processing steps while at the same time the customer is telling us your process is more efficient. The dollars and cents should be right down to kamikaze levels! (laughter) From my experience, I find that the small companies are the ones generating better revenues. Here, their credit risk is not deemed as healthy and therefore the spreads are much better. Chung Keet Lee: I want to share some insights on issues such as standard formats. We all know today that we are all trying to look for that nirvana of global standard, but there is no such thing. Even if it is SWIFT, you have pseudoSWIFT. When you look to integrate with your corporate clients you need to have a solution that is robust enough and that is flexible to at least address some of the common standards. At least it should be standard driven and configurable not just existing standards but also a solution provider and allow us to future-proof some of the newer standards such as XMLs. Also, in terms of standards, there are ways to overcome that where you can actually go for certification. A lot of the ERP solution providers have programmes where they actually certify their own standards with certain banks. Use your criteria or checklist to look for your solution providers. If those solutions come with certifications, it means that they would com-

mit to future-proof their standards with whichever bank or solution provider that partners with them. In terms of costs, when you look at your own checklist you should look for solutions that you can replicate to many corporate clients. In terms of relationship, although it has been mentioned that it is a thing of the past because you can build converters in a matter of weeks, while that is true, besides building a straight file converter, you have to basically put in value-added services, something like reporting functions, funding report, currency exposure report and some of the MIS analytics that allows your customer to really derive value. If you talk to CFOs and treasurers and look at the article in The Asset magazine, you can see that they are always grappling with trying to get timely information from a variety of systems from their own internal organization. How can they get a consolidated view of all the information? If you package your integrated solution that allow the CFO or treasurer to get a consolidated viewpoint of information flow, you can get your customers to continue to view you as a value added solution provider. TA: How are you as banks planning to execute your integration strategy with your corporate customers and what is the likely timing? Fong: In terms of the lower volume of transactions, we have the capability for both the SMEs and the larger corporates. When it comes to the high volumes, we have just built a new delivery channel where customers can send files to us for their transactions. We still have to contend with some issues on how best to provide some of the features to the customers. At the same time, we need to also work out how to implement it less painfully. What is clear is that we should be able to provide solutions for both the small customers as well as the bigger ones. Michael Whitehead: Our financial institutions (FIs) are becoming sophisticated and demanding. As their own corporate customers evolve and become more sophisticated, then these requirements are passed on to us. these requirements are also increasing in their frequency and that is a constant challenge for all of us. For the financial isntitution, the integration work and the system development that needs to take place has to be prioritized with many other systems developments. Work is required with regulatory issues; with CLS there are lots of things going on. One of the most noticeable changes in the past few years in

November 2003 51

Lee: At the end of day you want to enhance your position and create the stickiness

Don: Now the corporates are saying help me reduce my internal costs. W see that as a e real opportunity

F O RU M
In association with

this part of the world is the willingness of banks to engage their providers to help them in these areas. Areas that would have typically taken place as an in-house development are now being outsourced or subcontracted to third parties, often banks. For all of us, as the demands whether they are customer or regulatory or other types increase, we will see more and more of this type of development and integration work performed outside of typical in-house solutions. Potterton: Is that something that you see within your organization that would engage outside parties to implement these types of solutions? Fong: For us, we also want to shorten the time to deliver. Therefore, it is better to look for a good solution, and spend time integrating whatever that platform offers. We are also seeing more platform vendors offering different solutions. There are a lot of things out there for us, and we can choose the best. So pick the one that really meets your requirements and that of your clients. Sanjaya: It is much easier to transform an MNC to adopt a system because they already have standards from their main office to adopt a more technology focused approach. It is quite different with the local corporate, which constitute the bulk of our customers. They also are unable to distinguish between cost and investment. Potterton: While we certainly agree that large MNCs who are the ones that drive the demand for integration services, or moving towards ERP systems, the other side is that SMEs still need information and they still need to be efficient and effective. Even though their needs might be lower and their requirements much simpler, it is the SMEs that you are probably getting a significant percentage of your revenues from, and they are the ones you want to make sure are taken care of. And that is why you still want to offer them a simpler more efficient solution. Whitehead: The skill in all these areas of integration is the ability to replicate. The one-off process is expensive for all of

us and time-consuming. As we look around the region and determine how we can help our FI customers, we constantly study how we can provide something to them that is very easily replicable from one of their clients to another. Goh: Ultimately, practicality will prevail and banks will look for solutions that best suit their needs and that of their clients, whether it is outsourcing or whether development is done in-house. Potterton: It is not necessarily all or none. You can strategically pick the solutions that make sense for you to outsource. And outsourcing itself is not necessarily an end game. You can outsource for a period of time and decide to in-source it back. It is a very fluid environment. The key is for organizations to understand the benefits of that as they strategically decide on the model that suits their needs. It is a balancing act between what are the aspects you want to buy because they are commodities versus what are the valueadded pieces that we should be building. At JPMorgan we want to build solutions that are the differentiator and what clients are looking for and extend that out. Lee: Deep integration with your clients is basically the glue that puts you into the doorstep of all the products and services that you want to offer to your clients. At the end of day you want to enhance your position and create the stickiness. Don Schule: There are always multiple solutions. It is about sometimes building internally; sometimes it is about taking a package off the shelf. Often there is great value in partnering. The value in partnering is because we can bring to the table solutions that meet multiple client needs with only the requirement to invest once. It is about focusing on core compentencies. You need to stay in touch with your clients. You want a direct, ongoing relationship with your clients. That does not mean you need to process the transaction or build the link. We know that cash management is becoming very much a commoditized business. But we know that there is a way to extend the value chain for the clients. Clients used to look to us and say reduce your banking transaction costs; now the corporates are saying help me reduce my internal costs. We see that as a real opportunity; we see that as a core competency for banks. A

52 November 2003