Transaction banking has always been a core business focus in the corporate banking strategies of banks and financial institutions, operating with the objective of connecting solutions and products across markets to provide enterprises with the most seamless and convenient global service experience.
The strong wave of digital transformation worldwide has driven the trend of implementing unified transaction banking platforms, enabling swift and comprehensive responses to corporate needs while opening opportunities for new business models.
What is Transaction Banking?
Transaction Banking is a collection of financial products, services or instruments with two component groups: Trade Finance and Cash Flow Management.
Import and export trade finance
The growth and integration of businesses into the global supply chain have driven a significant demand for import and export transactions. The diversity and flexibility of corporate financing play a critical role in the speed of fulfilling goods movement transactions to meet market demands.
Traditional secured loans or credit arrangements often pose risks for businesses and act as barriers to the smooth flow of goods. Trade finance emerges as a solution that enables banks and financial institutions to strengthen their ties with businesses, sharing both benefits and risks. Common trade finance products and services include Financing, Guarantees, Letters of Credit (L/C), Discounting, Factoring, and more.
Furthermore, banks should aim to integrate multiple businesses onto a unified trade finance platform, optimizing capital flow across the supply chain and delivering shared economic benefits.
Figure 1: Trade finance for supply chains. Source: FPT Digital
Payments and Cash Flow Management
Centralized account management, domestic and international payment transfers, including foreign exchange with competitive rates, are core financial services provided by banks to help businesses focus on their primary business objectives.
Even without crises like the COVID-19 pandemic, businesses, especially small and medium enterprises (SMEs), constantly face challenges in managing cash flow and asset liquidity. Cash flow is often compared to the circulatory system that sustains the body, representing the lifeblood of a business and a matter of survival.
With the expansion of transaction banking networks and the availability of big data on transactions and the creditworthiness of corporate clients, banks and financial institutions are well-positioned to offer solutions that support effective cash flow management and business health. These solutions include regular analytical reports, cash flow forecasting, and investment recommendations to enhance asset liquidity, among others.
Learn more: Why banks must transform digitally
Digital Transformation Trends in Transaction Banking
The explosion of information technology, combined with immense business demands and opportunities, is driving a wave of digital transformation in transaction banking, with the primary trend being the implementation of unified transaction banking platforms and the enhancement of corporate customer experiences.
Transaction Banking Platform
As mentioned above, integrating a chain of businesses onto a unified transaction banking platform brings numerous benefits to enterprises, banks, and the economy as a whole. Leading global banks and financial institutions in corporate services, such as ANZ, Citi, Deutsche Bank, HSBC, and Standard Chartered, have all developed and enhanced digital platforms for their transaction banking operations. These platforms are equipped with comprehensive features to meet the needs of global enterprises, such as:
|Figure 2: Some key features of enterprise chain integration on the Transaction Banking platform. Source: FPT Digital
Furthermore, these financial institutions are joining forces with the ambition to expand their service networks while creating unified digital platforms that hold immense potential in commercial transaction data. This collaboration opens up opportunities for new business models.
Advanced financial technology companies such as FIS Global, Finastra, and Intellect Design have also launched comprehensive solutions for transaction banking platforms, enabling banks and financial institutions that are late adopters to accelerate their digital transformation and close the gap with leading organizations.
Enterprise Customer Experience
Compared to individual customer experiences, corporate customer experiences have unique characteristics in terms of journeys and connection channels. However, enhancing personalized and self-service experiences remains a shared priority that transaction banking aims to deliver to corporate clients.
The application of mobile technology, artificial intelligence, advanced analytics through Machine Learning, and similar innovations is increasingly being adopted to enhance customer experiences, particularly in the small and medium-sized enterprise (SME) segment, which constitutes the majority of businesses in most economies.
Current status and recommendations for Vietnamese transaction banking
In Vietnam, the COVID-19 pandemic crisis has caused numerous negative impacts on businesses and the economy. On the other hand, the crisis has acted as a catalyst to accelerate the digital transformation of transaction banking. Solutions such as VietinBank eFAST, BIDV iBank, and F@st EBank by Techcombank are exemplary services that have brought a new vitality to businesses, contributing to positive changes in operations and alleviating financial bottlenecks, allowing enterprises to focus on their core business activities.
Despite these positive highlights, banks and corporate financial institutions fundamentally need to take more synchronized steps in line with global trends. This can be achieved through the development of appropriate policies and detailed guidance from the State Bank of Vietnam (SBV) to advance unified transaction banking networks and platforms, thereby protecting and enhancing the value of the Vietnamese business community.
