Multiple banking relationships, cost, reliance on customised bank systems and work-around solutions all hinder real-time view of operational liquidity
SINGAPORE – Almost two-thirds of corporates in Asia Pacific lack a transparent line of sight to their real-time cash positions, according to a survey released today by Cashfac Technologies, a global leader in Cash Management solutions. High costs, proprietary banking systems and patchy work-around solutions were all seen by corporates as undermining the accuracy and confidence in data and impacting the ability to achieve real-time cash visibility.
For the survey – The Cashfac Operational Cash Index – research firm East & Partners Asia interviewed 364 chief financial officers and corporate treasurers to create a unique snapshot on the true state of play for the treasuries of major organisations in Asia Pacific. The report highlights issues around clarity on cash positions and the realities of managing multi-bank systems for large corporate treasuries in the region, and found high levels of frustration with the linking of bank accounts and with the cost of bank product solutions and upgrades.
Lachlan Colquhoun, Chief Executive, East & Partners, Asia said: “Due to the complexities and shortcomings of managing multiple banking relationships regionally, our research found that many Asia Pacific corporates lack a line of sight to their cash positions. There are barriers, both regulatory and operational that firms need to wrestle with, but the survey showed that in every region there’s still room for firms to benefit from greater control of operational cash.”
Key findings from the report include:
- Only 35% of corporates surveyed had access to a real-time view of their transactions and cash.
- Only 23% of cash is physically pooled in Asia Pacific and where Notional Pooling is possible it’s not fully exploited; with less than 50% of all cash being notionally pooled together.
- The biggest shortcoming in multi-banking arrangements is in the linking of accounts between banks.
- Self-serve functionality and reliance on banks for customised changes was cited as a major shortcoming of multi-bank arrangements.
Commenting on the research Alastair McGill, Managing Director, Global Business, Cashfac, said: “Corporates across Asia Pacific are often handcuffed by siloed, inflexible and bank specific systems, which restricts transparency of operational cash. There’s absolutely no reason why these firms shouldn’t be able to see the majority of their cash in real-time and have the tools and processes in place to maximise the value of cash in their business. And for innovative Banks in the region there’s a fantastic opportunity to steal a lead and offer better multi-bank, cash management services to their corporate clients.”
View from the treasury
Achieving a real-time consolidated understanding of transactions and balances remains elusive. Only 40% of Hong Kong corporates have a real-time consolidated view of their cash, while a lower 25% of Malaysian corporates are able to do so, despite having fewer bank relationships.
Among the corporates who have systems that enabled a real time view, only 54.8% of all cash can be seen in real time. The balance of corporates cash resides “in the shadow” and needs to be manually consolidated in order to achieve a holistic view. Malaysian corporates had the lowest percentage of their cash visible at 44%.
Managing cash centrally with pooling structures is inherently difficult in Asia due to the variances in local regulatory requirements. Hence, notional pooling is more prevalent than physical pooling. In Malaysia as much as 38.7% of cash is not optimised under any pooling structure.
Satisfaction ratings show that although corporates feel that multibank solutions have been designed to meet their needs, they find that the ease of implementation and usability of these solutions is poor. Thus, the key area of concern with multi-bank solutions lies with the process and not the product.
The biggest shortcoming was thought to be the linking of accounts between banks with 23% of corporates citing patchy work-around solutions as their biggest problem. This issue was most prevalent amongst Malaysian corporates.
Self-serve functionality was cited by 22% of all corporates as the second largest shortcoming due to reliance on banks for customised change often being slow and incurring additional process and verification. This was the biggest concern in Singapore with 24.2%.
Inadequate network and connectivity was highlighted by 17% of all corporates, making it the third largest identified shortcoming. Australian corporates were most critical of this, with 22% identifying this issue.
Obstacles hindering a real-time view
Corporates were in unison in singling out product solutions by banks and high upgrade costs as the two major obstacles in achieving a real-time view of their cash. Internal factors such as decentralised ERP systems, decentralised organisation structures and local regulatory restrictions had a less negative impact.
For a copy of the Cashfac Operational Cash Index please visit: www.cashfac.com/cash-index/