Trade finance is a major focus for
many banks in Asia at the moment, among both global banks and domestic
With Asian economic growth powering along and the economies of the region
more open than they have ever been to world trade flows, a common pattern
is emerging among non-Asian banks wanting to gain a foothold in the
Banks from the US, Europe and Australia are all following their national
corporates into Asia, increasingly leading with trade services and then
looking to add transaction banking, cash, payments and other products.
Trade lending has special attractions for today’s commercial bank in Asia
in having relatively light capital requirements, quick churning tenors and
sticky cross sell upside.
Some, the most advanced with this strategy, are then reaching out to their
customer’s Asian trading partners, and seeking to win a slice of their
Banks which are taking this path include Wells Fargo and JP Morgan from
the US, Deutsche and BNP Paribas from the Euro zone, Australian banks such
as ANZ and well-credentialled specialists such as SWIFT, all looking to
attack incumbent providers with trade led propositions, be they the large
globals, HSBC, Citi and Standard Chartered or the regional players such as
DBS and OCBC.
East & Partners’ research shows just how powerful trade finance is in
driving profitable cross sell across other banking products.
For every $1 of trade finance revenue
generated in a primary trade finance relationship, a further $1.70 is
generated in foreign exchange and cross border banking fee revenue.
Not only that, but banks which win the role of primary trade finance
provider can expect to win as much as $2.25 in other Transactional
Services revenue – a total up-sell of four times.
FX, for example, is one of the most commonly banked away products and
wallet share is regularly much thinner, but it is a natural follow-on that
a trade provider is also a key provider of FX to that same customer.
East’s research shows that customer churn is on the increase in Asia, but
we also see that banks which have the primary trade finance relationship
can reduce relationship churn on other banking products by an average of
This all points to trade as a key banking relationship. Banks which secure
lead trade relationships can build out deeper relationships and win more
wallet share across a much wider product spectrum. They can also be more
confident that the customers will stay with them.
Already, East’s research is showing how some banks with traction in trade
services are appearing, for the first time, as providers of transaction
banking services. The interesting dynamic here is a “back to the future”
trend with commercial banks returning in force to their origins as
facilitators and credit providers to cross border trade flows – the
current battle ground for the hears of Asian corporates.