Transaction Bank of the Year
Bank of China
Bank of China only set up its global transaction banking department in 2018. But it was still the first and the only one among China’s big four – Agricultural Bank of China, Bank of China, China Construction Bank and the Industrial and Commercial Bank of China – to do so.
Having integrated its transaction banking services into one department, Bank of China is on its way to becoming a formidable competitor to other joint-stock commercial banks, most of which ventured into this area much earlier.
Bank of China was set up to be a dedicated foreign exchange and trade finance bank in 1912. But over the years the bank has evolved far beyond that initial mission and it now offers a full suite of transaction banking products.
Many of Bank of China’s offshore subsidiaries have also set up their own transaction banking departments, mainly targeting Chinese companies that are expanding overseas and Fortune 500 companies.
The bank has been quick to adopt new technology. With the help of facial recognition and big data, it has streamlined the corporate account opening process so that it only takes 30 to 40 minutes rather than days. It also demonstrates innovation with its ‘BOC Bill E-discount’ product to help micro, small and medium-sized enterprises with online bill discounts.
As a result of these efforts, the number of corporate internet banking clients rose 18.7% to reach 4.6 million by the end of 2019, according to Bank of China’s annual report. Its transaction volume also surpassed Rmb200 trillion ($28 trillion).
The bank maintained a decisive advantage in what it does best: international trade settlement and renminbi cross-border payment services. In 2019, the bank’s international trade transaction volume reached $5.2 trillion and its cross-border renminbi payment volume hit Rmb7.32 trillion. That puts it comfortably in first place onshore for both services.
Bank of China’s focus on transaction banking may be relatively recent, but it has already gathered serious momentum. It should be seen as a sterling example for China’s other large state-owned banks.
Best Transaction Bank for Domestic Cash Management
Ping An Bank
|Li Yue, Ping An Bank|
Li Yue, president of the transaction banking department, has led the bank’s drive to establish a cross-bank, cross-border smart cash management platform that allows corporate clients to monitor their bank accounts at partner banks, domestic and international, on a real-time basis.
Over the years, Ping An Bank has identified specific client problems and has found solutions. For example, many of its domestic conglomerate clients have a large number of subsidiaries: some of these clients found it difficult to track cash movements between those subsidiaries, so Ping An built a multi-tier cash pool, allowing its clients to track cash movements between subsidiaries and affiliates closely and to allocate cash to each business unit swiftly.
The bank went further, adding a human-resource management product to its cash-management platform so that companies could manage their employees’ income, bonuses and expenses across all subsidiaries and affiliates.
One of the most notable improvements at Ping An Bank in the last year was to its renminbi cash pool service. The bank noticed that one of its large clients spent a lot of time and energy making sure that its subsidiaries were punctual in paying the interest on their outstanding loans. The client managed all of its subsidiaries’ cash in a centralised cash pool and had to hire people to manually transfer the exact amounts to its subsidiaries on the days the interest payments were due.
To help, Ping An Bank improved its cash pool services and enabled automatic cash transfer from the group’s account to subsidiaries. As a result, the client now only needs to make sure that there are enough funds in the company’s centralised cash pool on the day of the interest payments.
Best Transaction Bank for Supply Chain Finance
Industrial Bank has chosen to focus its supply-chain finance business on several key industries: auto, consumer products, green,
|Chen Xinjian, Industrial Bank|
By 2019, the bank’s outstanding supply-chain finance volume reached Rmb249.5 billion ($35 billion), a jump of 115% from the previous year. The bank signed up 121 leading companies in 2019, bringing the total to 403 so far. These companies have in turn brought in 4,845 small and medium-sized enterprises as part of their supply chains. That number also represents a 64% increase from the previous year. Financing through the bank’s bills pool reached Rmb143.4 billion, nearly tripling the amount from the end of last year.
Industrial Bank offers a range of supply-chain finance products, including commercial bill discounting, factoring, account receivables financing and domestic letters of credit.
Last year, the bank made enhancements to its online supply-chain finance platform, using technologies such as blockchain and robotic process automation to enhance the funding experience.
It has also paired up with government and third-party information sources and conducted big-data analysis to enhance clients’ risk profiles.
The bank broke new ground last year with its green supply-chain finance business, publishing the first-ever green supply-chain finance guidance onshore last October. The guidelines define the concept of green supply-chain finance and outline the strategy to develop the industry.
For the year to come, the bank is committed to using its supply-chain finance products creatively to help enterprises in poverty-ridden areas.
Best Transaction Bank for Trade Finance
Bank of China
In 2019, Bank of China and its offshore subsidiaries completed $5.2 trillion of international trading transactions. It also conducted Rmb7.32 trillion ($1 trillion) of cross-border renminbi payments. Both numbers put it in the top spot, not just in China, but in the world.
The bank also leads in cross-border guarantees. By the end of 2019, the outstanding amount of letters of guarantee, including financial and performance guarantees, reached Rmb1.05 trillion.
Bank of China also offers a wide range of trade finance products, including cross-border remittance and multi-currency import financing.
Despite its size, Bank of China is not just about large state-owned clients. The bank upgraded its financial services plan for cross-border e-commerce last year, helping these smaller vendors with matchmaking, financing and payment. It also provides tax and fee financing services for small and medium-sized enterprises.
The bank continued to use Bank of China Hong Kong (BOCHK) as a testing ground for new functions in trade finance. Last year, BOCHK became the first bank in Hong Kong to connect to eTradeConnect, a blockchain-based trade finance platform launched by the Hong Kong Monetary Authority in October 2018 to digitalize the trade finance process and reduce risks. By 2019, BOCHK had opened access to more than 90 application programming interfaces and worked with more than 130 partners.
While the global economy has suffered from trade protectionism and the Covid-19 pandemic recently, the Chinese government will continue to treat stable foreign trade as one of its top priorities in the coming years.
Best Transaction Bank for Technology
China Merchants Bank
|Hou Weirong, China Merchants Bank|
In October, the bank amended its Articles of Association to include specific amounts of fintech spending – the first Chinese commercial bank to do such a thing.
The bank promised that its overall budget for investing in fintech in any given year would not be less than 3.5% of the bank’s operating income in the previous year.
That seems a reasonable target.
In 2019, China Merchants Bank spent Rmb9.36 billion ($1.3 billion) on information technology investment, a 44% increase from the year before. That number was equivalent to 3.72% of its net operating income in 2019 (and 3.8% of the operating income for 2018).
In 2019, Hou Weirong, general manager of the transaction banking department, led the bank’s move to enhance the ‘Cloud Bill’, a unified payment and settlement platform that allows online and offline transaction verification and identification. The volume of transactions conducted on the platform reached Rmb287.3 billion in 2019.
CMB also leveraged technology in online financing services for small and medium-sized enterprises (SMEs). It added the self-service management and verification functions to its ‘Invoice Cloud’ platform in April last year.
By the end of 2019, the bank had provided services to 2,131 corporate customers, and checked and verified funds amounting to Rmb126 billion, according to the bank’s annual report.
CMB continued to leverage technology to control risks. It built a smart pre-warning system last year based on machine learning algorithms for corporate customers. By the end of 2019, the accuracy ratio of the system identifying corporate customers with potential risks reached 75%.
Best Transaction Bank for Mobile Banking Services
China Merchants Bank
Competition in the Chinese mobile banking market, whether for corporate or retail clients, is fierce. But China Merchants Bank’s CMB Corporate App stands out because of the sheer number of clients it serves, as well as its wide array of functions.
The app was launched in August 2018. Within six months, it had about 533,900 users. By the end of 2019, CMB’s corporate mobile service platform had more than one million users, representing a 87.5% increase from the end of 2018.
The number of active users per month also reached 426,500, up 137% from the year before.
The total number of mobile payment transactions made through CMB Corporate App amounted to nearly 3.3 million, with a total volume of Rmb107.7 billion ($15 billion) in 2019, according to the bank’s annual report. I
It ranks top among its joint-stock bank peers in terms of both the number of app users and its transaction volume.
In the last year, China Merchants Bank achieved many firsts. The bank became the first and only domestic bank to allow corporate accounts to pay tax by simply scanning a QR code. It is also the first bank onshore to enable corporate clients to make mobile payments through their CMB bank cards by scanning the QR code of UnionPay.
In 2019, CMB launched the international version of its corporate mobile app at the bank’s New York branch. That made it the first Chinese bank to roll out corporate mobile banking in the US.
Since it was launched, the app has been a key factor in CMB’s attempts to attract new corporate clients and deposits. In 2019, roughly 70% of the bank’s new corporate clients have also chosen to open an account on the CMB Corporate App. The app collected 467,000 new users last year.
Best Technology Partner for Transaction Banks
In recent years, China’s online financial services industry has welcomed a handful of ambitious newcomers, including Ping An Bank’s One Connect and Alibaba Cloud Financial Services Solutions. But Hundsun Technologies, a pioneer in the field, has managed to maintain its leading position as a technology partner to banks.
The Hangzhou-based company, founded in 1995, is China’s largest service provider of financial technology.
It offers integrated solutions and services to securities houses, futures trading companies, funds, trusts, insurers, banks and exchanges.
Hundsun’s model appears to be one of constant innovation. More than 80% of the company’s 8,000 employees are engaged in research and development.
Hundsun’s market share as a provider of the technology behind banks’ cash management offerings is approximately 80%, the company says.
By April, Hundsun had provided cash management service to more than 80 commercial banks. It has also served more than 150 commercial banks with bill payments services.
China’s financial system is full of innovative, ambitious companies. But few have done more to advance the country’s financial plumbing than Hundsun Technologies.