now loading...
Wealth Asia Connect Treasury & Capital Markets Europe ESG Forum TechTalk
Sponsored by Deutsche Bank
Treasury management in the new economy
Enhancing digital capabilities to navigate cross-border challenges
Sponsored Section 16 Jan 2023
Kriti Jain, Asia-Pacific head of new economy, fintechs and platforms, corporate cash management, Deutsche Bank
Kriti Jain, Asia-Pacific head of new economy, fintechs and platforms, corporate cash management, Deutsche Bank

The new economy sector is manifesting a new way of doing business and customers are increasingly demanding a digitally-enabled experience. With the evolution towards borderless business, treasury is imperative for new economy companies to address their growth prospects, which are several times bigger than those of their traditional peers.

It’s not exactly a new term since it’s been mentioned since 1990s when referring to the internet, but new economy is the buzzword right now. The new economy sector comprises of new high-growth industries that are on the cutting edge of technology and digital connectivity, which is a significant driving force of economic growth and productivity today. It demonstrates a new way of doing business with the emergence of new and exciting sub-sectors, such as fintechs and digital assets. It also paves the way for the emergence of shared economy, streaming economy, gig economy and blockchains coming through mobile web services, which are radically changing the business landscape.

“The new economy players are reshaping the nature of work, including how we work, as well as breaking boundaries,” says Kriti Jain, Asia-Pacific head of new economy, fintechs and platforms, corporate cash management, at Deutsche Bank.

Indeed, the new economy sector underpins a fundamental shift in the global economy. “New economy is actually becoming a key driver today and it has actually outpaced the growth of the rest of the global GDP by 2.5x during the past 15 years,” adds Jain. “Some of the new economy players are becoming much larger than the traditional manufacturing companies. It kind of redesigned the capitalist system around more environmental and social goals.”

One of the key trends defining the new economy sector is the emergence of borderless commerce. Businesses are recognizing that they need to be where their customers are, which is pretty much digital anywhere around the world. Another trend is the creation of the ecosystem, with partnerships between various players, such as technology providers and cloud computing blockchains. “We are seeing cloud customer service solutions happening as companies scale up and quickly deliver optimally to their customers. We also noted last-mile logistics fulfilment companies and financial institutions coming together to enable this rapid growth.”

Treasury teams are now shifting from just being cost centres to be strategic partners and enterprise-wide collaborators

The objective is all about providing a full digital experience and a full digital value chain. Says Jain: “The customers are increasingly demanding a digitally-enabled experience, which has come up a lot more in the post Covid-19 environment when everything is done online and through the e-commerce platform. We are seeing a lot of digital interaction between suppliers, and manufacturing and service companies. The key requirement is real-time communication with customers, integration to real-time information, and end-to-end systems on transactions and reconciliation which are enabling this business model.”

So how is treasury imperative in the new economy? As Jain points out, treasury is playing a key role in supporting the growth of the new economy sector. “The treasury teams are now shifting from just being cost centres to be strategic partners and enterprise-wide collaborators,” she notes. “They are providing input into their strategy and ensuring the growth is sustainable and financially-efficient, which is key because the growth prospects are 10x than what a traditional company would see. It is important that whatever you do in your treasury systems, or how you design your treasury workflows, because they’re in such close contact with the customer, you have to ensure an end-to-end transaction flow. And while the systems as well as the region are complex, what the customers need is a simple digital workflow. That’s where treasury comes into play.”

In terms of managing their treasury flow, the new economy companies face a lot of issues and challenges, which are mostly related to globalization. “When everything is moving towards global digitization and being borderless,” Jain says, “the customer expectations and behaviours are varied in different countries and in different markets.”

Navigating regulatory environment

So how do businesses, while trying to be global and standardized, meet these different expectations and behaviours in different markets? Certain markets in Asia, such as Vietnam and Indonesia, for instance, are still pretty much cash-oriented, whereas markets such as Singapore and Hong Kong are completely digital and moving towards a cashless society.

At the same time, the regulatory environment and the payments infrastructure are very diverse in Asia. Jain explains: “The regulatory and political landscape in Asia is very different and in the face of globalization, it is also facing a lot of diversifications. We see a lot of cross-currency controls being put in place. So, when we talk about cross-border transactions being seamless, how do you manage that in a situation where there are local currency restrictions in different markets and the instant payment systems are all domestic in nature? These are some of the big challenges that new economy players in the region are facing.”

Indeed, diversification, according to Jain, is the key challenge for new economy companies when navigating the regulatory environment. “We have different jurisdictions in Asia that have different agendas,” she says. “And there are multiple regulators in each jurisdiction that have different sets of rules when it comes to managing payments, whether it’s for e-payments, payment service providers, or even for securities.”

Banks know how to seamlessly integrate the various accounts across jurisdictions, how to manage liquidity or inject liquidity into the system

The regulatory environment adds a layer of complexity for business as new economy companies scale up beyond their home market. “It is important to understand how do you comply with the requirements to be able to effectively expand in new markets,” Jain adds. “It also underpins how do you effectively manage your cash management and liquidity.”

Some of the key areas the new economy companies face in different jurisdictions are the barriers to enter the markets; the incorporation of business; the stringent controls in doing business; the different taxes that are being applied, whether it has to be a resident account structure or a non-resident account structure; and what are the activities that are restricted whether it’s offshore and onshore. “Understanding all these nuisances on regulatory landscape and regimes is important,” says Jain.

New economy players are also facing issues relating to foreign exchange as they scale up their businesses regionally and even globally to capture opportunities. “The ability to pay and collect cross-border seamlessly and at scale to manage the related cross-currency and liquidity risks, while catering to local markets, are the other challenges the new economy players are facing,” notes Jain.

With the evolution towards borderless businesses, Jain calls for the new economy treasurers to deepen their collaboration with their service providers in order to navigate the different payment and collection systems as well as market infrastructure in various countries.

“The banks are knowledge warehouses,” she points out. “They know how to seamlessly integrate the various accounts across various jurisdictions, how to manage liquidity or how to inject liquidity into the system. The new real-time connectivity also helps when leveraging on open banking framework, with the API (application programming interface) connectivity. Having a strong banking ecosystem gives the treasurers access to all of these options. It helps them reduce costs, increase the operational efficiency and the time to market.”
 

Conversation
Mildred Chua
Mildred Chua
managing director and group head of syndicated finance
DBS
- JOINED THE EVENT -
In-person roundtable
Beyond Covid: Emerging trends in a changing lending landscape
View Highlights
Conversation
Eric Liu
Eric Liu
portfolio manager, Asian credit
BlackRock
- JOINED THE EVENT -
17th Asia Bond Markets Summit - China Edition
Rebalancing in the transition journey
View Highlights