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Treasury & Capital Markets
Transaction banking a bright spot for Asia banking sector
Transaction banking will be a ‘bright spot’ in Asia’s banking industry as a faster pace of product innovation in the region and a robust global transaction business help drive revenue in the space, says a top Chinese banker.
The Asset 16 Apr 2015

Transaction banking will be a ‘bright spot’ in Asia’s banking industry as a faster pace of product innovation in the region and a robust global transaction business help drive revenue in the space, says a top Chinese banker.

 
Yue Yi, vice-chairman and chief executive at Bank of China (Hong Kong) said Asia Pacific will increasingly play an active role in transaction banking, while also predicting that the renminbi’s weight as a transaction currency will be boosted by increased regional cooperation.
 
By 2023, total revenue from retail payments in Asia-Pacific emerging markets will be 3.8 times that of 2013, with growth almost doubling world average, Yue said citing a Boston Consulting Group study. In a separate report by McKinsey & Co, post-risk revenue of the Asia-Pacific transaction banking business is estimated to grow by 12% to $578 billion in 2017, with China accounting for three-quarters of Asian transaction banking revenues, and Southeast Asia, about 8%.
 
By combining traditional trade settlement, financing, liquidity management and other treasury products, banks are becoming better at meeting the onshore and offshore needs of corporate customers, as well as their upstream and downstream buyers and suppliers. These solutions can bring cost savings to customers and additional hedge and exchange income to banks, says Yue.
 
Amid regional cooperation, the weight of renminbi as a transaction currency will increase. “Emerging economies that are not international financial centers, that export energy or stand to benefit from the One Belt, One Road strategy will become the new drivers for the global adoption of the renminbi,” says Yue.
 
A recent survey from Swift showed that countries such as Malaysia, Indonesia, Thailand, the Philippines and South Korea, as well as the Middle East and Australia, are all increasing the use of renminbi for payments.
 
For these countries, more than 10% of their payments to the mainland China and Hong Kong were in renminbi. Hong Kong is now the largest renminbi clearing platform not just in Asia but worldwide, with a global market share of over 60%. In fact, in 2014 China had already become the world’s largest commodity trading country and the second largest economy with cross- border trade settlements amounting to over 6.55 trillion yuan, 41% higher than last year.
 
Looking ahead, Yue believes that closer cooperation in the Asia-Pacific economic region, the accelerating internationalization of the renminbi and the opening up of China’s capital market will not only bring new development opportunities in global trade, financing and investment, but also stimulate innovative new ideas for transactional banks. With its enterprising spirit and close relationships with industry peers, BOC Group endeavors to provide strong support to the rapid and healthy development of the regional economy.
 
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