Executive Interview - Tom O’Donnell - Standard Chartered
(22 April 2003 - Singapore) Tom O'Donnell, Group Head of Transaction Sales, Standard Chartered Bank in Singapore, speaking here with East & Partners Executive Editor, Lachlan Colquhoun.
To what extent would you say that Asian transaction banking is internationalised, or localised?
It is still predominantly on the cash side a local business, although becoming more international and regional as far as how companies manage their businesses and what they are expecting banks to deliver. On trade, it's always obviously been cross border in nature, however, companies are looking for banks to provide more regional services. They understand that more difficult markets are more challenging to operate in but both banks and corporates are looking for more electronic throughput, more standardised delivery so they are putting pressure on the banks like everyone else is to deliver a better and more OECD like service.
What are the particular characteristics of banking in Asia? It's a very unusual geography and servicing it must raise some specific issues.
The many different operating environments under which you are forced to deal with, whether it's from the efficiencies of Singapore and Hong Kong to the challenges of India, China and places like the Philippines. It still represents a fairly diverse patch of regulations and banking environments.
And does that favour any particular kind of bank, would you say? Is it harder for a regional player to gain a footprint for those reasons you've just outlined?
I think it's becoming more difficult. Everything starts with relationship and with credit so I think it's difficult for new banks to break in and certainly it's becoming more of a scale business so in order for it to be economically attractive I think banks have to start figuring out how they get big, how they get efficient, or how they get out of the business. And yes, for banks like Standard Chartered, HSBC and others, it's being about being able to provide regional solutions, being able to justify the investment in the technology, at the same time remembering that it is through local services, payments and collections, confirmations and all things that happen on the local level. It is the blending of those things which make a bank successful.
What are Asian corporates wanting from their transaction bankers?
I think Asian corporates, particularly the larger ones and the Government linked companies in places like Singapore are starting to look for many of the same things that the large multinationals are looking for. They are first and foremost looking at whether you are a credit bank or not - in most instances that remains an important thing to consider and the types of transaction banking services that banks are looking for. There's only so much of it to go around so they like to reward the banks that stay with them, so that's important. They are looking for sophisticated electronic delivery. They are looking for accuracy of processing. They are also looking for signs of commitment that you are going to stay in the business and develop solutions along with the market rather than be someone that trails the market in being able to deliver new capabilities.
In the time that you have been in Asia, have you seen that changing?
I've been in Asia for six years. I've been with Standard Chartered for three years, and prior to that I was with Citibank. We see clearly that companies in general have higher expectations of the banks. Six years ago most of the local corporates - I know they traded cross border but they were really happy with and not interested in establishing relationships with a bank on a cross border basis. They were quite happy to establish different relationships in different countries and wherever that happened to work that was fine. However, now everyone is focussed on margins and unfortunately they aren't as distracted by growth as they used to be and so it's all about how do we become more efficient, how do we reduce the need for working capital, how do we hammer our bank's pricing down, how do we become more efficient ourselves?
Where would you say the market is at in its development, coming back off the 1998 financial crisis?
Until about a year and half ago I thought it was doing quite well. We were starting to gain confidence and there were hopes that we were going to if not return to the boom times of the past, at least get better progressively year by year. But now, with so much uncertainty I think that at least from a confidence perspective the only markets I see much optimism in is when I go into countries like India and China. Now obviously what is going on with the SARS issue is having an impact in China. Our people there are talking about how there is still quite a lot of energy around business there but it's unsure as to whether the recent disclosures on how serious the issue really is will dampen the optimism or energy we see coming out of China. But if you look at it, India and China - apart from SARS - are really the only two markets where there seems to be a lot of activity and a lot of optimism. The rest of Asia is in the doldrums. South East Asia is worrying about how it's going to compete against China, how it's going to keep foreign companies interested in investing. And I think that Hong Kong and Singapore particularly are wondering what they make of themselves. What is the next paradigm for them? How do they compete effectively?
What role is trade finance playing in Asian transaction banking? Is it a key product for engagement?
It will be to the extent that working capital is necessary and we obviously need to fund gaps in the availability of working capital. I think it is a key area or engagement and even if trading relationships are in open account I think banks like Standard Chartered have supply chain alternatives - whether it be electronic platforms like B2BX - or whether it's just simply financing receivables. These are areas that I think companies are still interested in getting some help with.
You've touched on it earlier, but to what extent would you say technology is driving change? Both from the banking side and the customer side.
It is a very important component of change and it drives the expectations of clients in that they see technology as a way for them to put a front on to the difficulties and challenges of Asia. If a company like a Shell, for instance, wants to do business with a Standard Chartered in ten countries and they want to have consolidated receivables, consolidated payables, into and out of SAP in a non-proprietary format, out of a shared service centre in Kuala Lumpur, then that technology capability we are able to bring to the table drives our ability to get the relationship and it makes the world a lot more homogenic. It makes it more like an OECD market - at least it makes it look like that. We in the background, however, still have to deal with the payments systems and how do we have correspondent relationships in the Philippines, for example, to deliver services. India is still a big challenge. So technology drives expectations but there are still certain things that technology still can't overcome that the banks have to still figure out how to do themselves and manage the manual components of providing services in a particular country. So technology is a piece of it but also your ability to provide local services and being able to deliver in more than one market is important even if it isn't delivered exactly like that Shell example I just gave you.
Standard Chartered has rated extremely well in the East & Partners surveys. In the most recent survey you were once again rated as Asia's Best Standout Banker by the region's Top 900 companies. So what would you say you are doing right?
Asia's our home and there's no way for us to back out of difficult markets. Which I think some of the international banks have done, to a certain extent when times get tough. We stick with and remain engaged in the markets where we've been for 150 years. I also don't think we are a cookie cutter bank - meaning we don't produce everything in scale and don't customise. I think our willingness to customise services and engage the client in solving problems - those things mean something to the client and I think they are quite comfortable in doing business with us. They want a reliable partner and someone who has been here for a long time so they don't have to change the relationships. But they also don't want to be in the type of relationship where they are told: 'This is how we do things, take it or leave it.' I think we've struck the right balance between local knowledge, regional capability, substantial presence and a certain amount of stability and reputation but we are still thinking about how we make it work for you rather than work for everybody the same way.
It is still predominantly on the cash side a local business, although becoming more international and regional as far as how companies manage their businesses and what they are expecting banks to deliver. On trade, it's always obviously been cross border in nature, however, companies are looking for banks to provide more regional services. They understand that more difficult markets are more challenging to operate in but both banks and corporates are looking for more electronic throughput, more standardised delivery so they are putting pressure on the banks like everyone else is to deliver a better and more OECD like service.
What are the particular characteristics of banking in Asia? It's a very unusual geography and servicing it must raise some specific issues.
The many different operating environments under which you are forced to deal with, whether it's from the efficiencies of Singapore and Hong Kong to the challenges of India, China and places like the Philippines. It still represents a fairly diverse patch of regulations and banking environments.
And does that favour any particular kind of bank, would you say? Is it harder for a regional player to gain a footprint for those reasons you've just outlined?
I think it's becoming more difficult. Everything starts with relationship and with credit so I think it's difficult for new banks to break in and certainly it's becoming more of a scale business so in order for it to be economically attractive I think banks have to start figuring out how they get big, how they get efficient, or how they get out of the business. And yes, for banks like Standard Chartered, HSBC and others, it's being about being able to provide regional solutions, being able to justify the investment in the technology, at the same time remembering that it is through local services, payments and collections, confirmations and all things that happen on the local level. It is the blending of those things which make a bank successful.
What are Asian corporates wanting from their transaction bankers?
I think Asian corporates, particularly the larger ones and the Government linked companies in places like Singapore are starting to look for many of the same things that the large multinationals are looking for. They are first and foremost looking at whether you are a credit bank or not - in most instances that remains an important thing to consider and the types of transaction banking services that banks are looking for. There's only so much of it to go around so they like to reward the banks that stay with them, so that's important. They are looking for sophisticated electronic delivery. They are looking for accuracy of processing. They are also looking for signs of commitment that you are going to stay in the business and develop solutions along with the market rather than be someone that trails the market in being able to deliver new capabilities.
In the time that you have been in Asia, have you seen that changing?
I've been in Asia for six years. I've been with Standard Chartered for three years, and prior to that I was with Citibank. We see clearly that companies in general have higher expectations of the banks. Six years ago most of the local corporates - I know they traded cross border but they were really happy with and not interested in establishing relationships with a bank on a cross border basis. They were quite happy to establish different relationships in different countries and wherever that happened to work that was fine. However, now everyone is focussed on margins and unfortunately they aren't as distracted by growth as they used to be and so it's all about how do we become more efficient, how do we reduce the need for working capital, how do we hammer our bank's pricing down, how do we become more efficient ourselves?
Where would you say the market is at in its development, coming back off the 1998 financial crisis?
Until about a year and half ago I thought it was doing quite well. We were starting to gain confidence and there were hopes that we were going to if not return to the boom times of the past, at least get better progressively year by year. But now, with so much uncertainty I think that at least from a confidence perspective the only markets I see much optimism in is when I go into countries like India and China. Now obviously what is going on with the SARS issue is having an impact in China. Our people there are talking about how there is still quite a lot of energy around business there but it's unsure as to whether the recent disclosures on how serious the issue really is will dampen the optimism or energy we see coming out of China. But if you look at it, India and China - apart from SARS - are really the only two markets where there seems to be a lot of activity and a lot of optimism. The rest of Asia is in the doldrums. South East Asia is worrying about how it's going to compete against China, how it's going to keep foreign companies interested in investing. And I think that Hong Kong and Singapore particularly are wondering what they make of themselves. What is the next paradigm for them? How do they compete effectively?
What role is trade finance playing in Asian transaction banking? Is it a key product for engagement?
It will be to the extent that working capital is necessary and we obviously need to fund gaps in the availability of working capital. I think it is a key area or engagement and even if trading relationships are in open account I think banks like Standard Chartered have supply chain alternatives - whether it be electronic platforms like B2BX - or whether it's just simply financing receivables. These are areas that I think companies are still interested in getting some help with.
You've touched on it earlier, but to what extent would you say technology is driving change? Both from the banking side and the customer side.
It is a very important component of change and it drives the expectations of clients in that they see technology as a way for them to put a front on to the difficulties and challenges of Asia. If a company like a Shell, for instance, wants to do business with a Standard Chartered in ten countries and they want to have consolidated receivables, consolidated payables, into and out of SAP in a non-proprietary format, out of a shared service centre in Kuala Lumpur, then that technology capability we are able to bring to the table drives our ability to get the relationship and it makes the world a lot more homogenic. It makes it more like an OECD market - at least it makes it look like that. We in the background, however, still have to deal with the payments systems and how do we have correspondent relationships in the Philippines, for example, to deliver services. India is still a big challenge. So technology drives expectations but there are still certain things that technology still can't overcome that the banks have to still figure out how to do themselves and manage the manual components of providing services in a particular country. So technology is a piece of it but also your ability to provide local services and being able to deliver in more than one market is important even if it isn't delivered exactly like that Shell example I just gave you.
Standard Chartered has rated extremely well in the East & Partners surveys. In the most recent survey you were once again rated as Asia's Best Standout Banker by the region's Top 900 companies. So what would you say you are doing right?
Asia's our home and there's no way for us to back out of difficult markets. Which I think some of the international banks have done, to a certain extent when times get tough. We stick with and remain engaged in the markets where we've been for 150 years. I also don't think we are a cookie cutter bank - meaning we don't produce everything in scale and don't customise. I think our willingness to customise services and engage the client in solving problems - those things mean something to the client and I think they are quite comfortable in doing business with us. They want a reliable partner and someone who has been here for a long time so they don't have to change the relationships. But they also don't want to be in the type of relationship where they are told: 'This is how we do things, take it or leave it.' I think we've struck the right balance between local knowledge, regional capability, substantial presence and a certain amount of stability and reputation but we are still thinking about how we make it work for you rather than work for everybody the same way.
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