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The changing face of transaction banking

Transaction banking is a veritable money spinner for banks with strong corporate banking focus. What are the new trends in this domain? Heads of two private banks speak about their respective operations

Transaction Banking by definition is a suite of products targeting the key corporate needs for working capital optimization. These products invariably integrate cash, trade finance, payments and to some extent forex. With supply chains becoming global corporates are pushing banks to provide transaction banking products that are of benefit to them, of convenience to them. They look for greater value from banks by way of solutions that combine various traditional products, custom-made products, multi-bank aggregation, interaction across functions like payments, trade, cash and liquidity even as a central control is very much in place. The need is for seamless and end to end solutions and for data that concerns their working capital, their cash requirements, payments, etc. In fact, it is a dashboard that they are expecting. To some extent, the transaction banking that some of the banks offer does provide such conveniences.

So, for banks, transaction banking is an effort at reorganizing several disparate transaction-based activities into a single commercial business unit, giving a global reach, intelligent customer segmentation and better external communication.

Have banks in India been able to cater to these disparate requirements? We examine the salient aspects of the products and services offered by two banks – which are totally different in their structure, in their operations and in their approach to customers.


Says Rupa Balsekar, managing director, head-Transaction Banking, India, at BNP Paribas India: “BNP Paribas India offers full suite of transaction banking solutions and has developed a fairly robust franchise with continued focus on the 3 main streams – cash management, trade finance and supply chain. With rapidly changing technology landscape, the future holds a lot of potential for innovation that can create opportunities with clients. What is also important is to improve client experience with every innovation and BNP Paribas places a lot of emphasis on this. We firmly believe in the philosophy of taking a collaborative approach with clients to bring in efficiencies in their operating models and this helps us stay ahead in the value chain.”

She says increasing customer expectations is changing the way banks use technology to provide innovative solutions and with traditional products getting commoditized, banks need to attain maturity levels of its systems at a faster pace to make it more meaningful for clients. “We have always believed that consumer-led development is a differentiating factor that delivers value added features with a standard offer and helps winning long term loyalty of clients,” says she.


Pitchai Mahalingam, head – Transaction Banking, Federal Bank, defines the USP of the trade finance offerings of the bank as ‘unique synthesis of geographical reach with the digital service delivery platforms’. Emphasizing that technology and coverage are the two plans of the transaction banking service offering of the bank, he says the bank offers the entire gamut of transaction banking products of cash management, trade finance and supply chain finance domains. “Our theme is ‘Digital at the Fore, Human at the Core’ and our transaction banking capabilities epitomizes that theme as we offer a unique range of digital capabilities while at the same time ensuring our branches are available to provide the unique human touch,” says he.

With regard to specific service offerings in the three domains, he elaborates: “We offer physical and electronic receivable and payable products under cash management services. Our UPI application Lotza with Scan & Pay capabilities is well known in the market. The app allows buyers to make payments to seller corporates, online integration with customers’ ERP systems for online collection and updation of data and students/parents can remit fee to any of the partner institutions using any bank account, a feature that enables schools/colleges to manage their fee collections with ease and make donations to religious institutions. We offer other electronic products like payment gateway, virtual accounts, direct debits, etc to our customers. Under trade finance, we offer the traditional products like LC, BG, export finance, import finance, etc. Under supply chain finance, there are financial products like dealer finance, receivable finance, factoring, vendor finance, payable finance, reverse-factoring, etc., to the whole supply chain of any corporate. We are able to leverage our strong branch network to connect the dealers and vendors. We also offer various options for the customers to access the bank, through branches, internet front-end, mobile application, etc.”


Rupa Balsekar highlights the strategy to remain agile to client needs, which is possibly giving the bank a competitive edge

BNP Paribas India too has a wide spectrum of propositions, covering services from traditional models to more sophisticated solutions to integrate with various business models of its clients and is easily replicable across industries. “We have developed our channels with great amount of flexibility that facilitates automation of processes, ease of use, real-time information, reconciliation and efficient reporting capabilities,” says Balsekar. She adds: “Our propositions have facilitated dematerialization, thereby evolving into a paperless process. We have a very successful document management solution ‘eWare’ that has brought in efficiencies in the way import documents are managed and cross border payments are made. Our cross-border payment capabilities among others encompass a number of functionalities right from submission of instructions online, printing of submission letters, tracking document flow through its life cycle, regular email triggers on document status and due dates. Another example in this space is our ‘Electronic Invoicing & Receivables Solution’, which aims to ease the invoicing process and facilitate faster reconciliation. It is an enterprise level end to end solution that we offer. This is an automated process, which otherwise would prove to be a troublesome task for a corporate.”

She also speaks about the efficient treasury management framework that resides on certain critical success factors that not only have accelerated access to working capital, but also has a robust risk management framework. “A lot of strategic decisions around digitization and integrated processes are an integral part of treasurer’s responsibility. This is also creating opportunities for convergence of isolated processes to address challenges of treasury managers and we have been focused to make the corporate to bank interaction more standardized and user friendly,” she explains.


The bank has an acclaimed portal, ‘Centric’, which is a global multi product portal providing a single window framework for electronic banking channels for cash, trade and forex and has been designed specifically not only to provide global connectivity to clients for their accounts worldwide but also to facilitate local (India specific) payments viz, tax, utility bill payments, etc through ‘Netpay’.

Balsekar elaborates: “With Centric, our clients can view balances, manage cash positions, execute payments, conduct trade and FX transactions. This centralized approach to product delivery facilitates the development of bundled services between applications and streamlining workflows.”

The bank also offers a trade platform ‘Connexis Trade’ that allows optimized management of a corporate’s international trade transactions through dedicated modules and ‘Connexis Supply Chain’ which is a supply chain platform that can help clients improve the financial efficiency of the supply chain, resulting in both suppliers and buyers enjoying a substantial reduction in working capital through the supplier finance/vendor finance program.


“These platforms can be easily integrated with a corporate’s SAP/ERP systems offering a seamless experience for the user. We have also customized these platforms to suit the requirements of Indian corporates, meeting the regulatory and compliance requirements,” says Balsekar.

She adds that with such solutions the bank has been able to cater to clients across various industry segments and with varied needs. “For example, we offer the entire spectrum of cash management services to a leading Indian corporate operating in the dairy sector for which the last mile connectivity is a key component of the business model. Managing receivables was a primary concern for them especially due to the geographical spread and risk management. We have successfully provided them with a combination of solutions to accelerate receipt of funds and reconcile seamlessly,” says Balsekar.

The bank has also designed and customized similar systems for Indian firms in the IT and ITES sectors too. Its implementation of a virtual account system in Bharat Petroleum Corporation has been cited as one of the best in the industry. It has been a complex process involving nearly 70,000 dealers spread across the country, remit funds using electronic modes. These payments are advances to procure the products of the company. The system has to work in near real-time as any delay in acknowledging and accounting for the payments would lead to delay in the supply of the products ordered, which in turn will lead to severe loss of business for both the company and the dealers. “We have created an efficient host to host connectivity for the company, ensuring almost real-time reconciliation of payments as also MIS for various levels of the management. Similar, but highly customized systems, are working for companies in the automobile sector too,” says Balsekar.

Pitchai Mahalingam mentions how the bank offers a unique range of digital capabilities at the same time ensuring branches are available to provide the unique human touch


Federal Bank has created a quality internet portal for its customers, which is used for transaction queries, generation of account statements, initiation of transactions, etc. The bank is offering mobile banking facility – Corporate FedMobile to SME and corporate clients. The major features of Payee Management, fund transfers and statements are offered through this platform. There is also Lotza UPI merchant services for corporate clients for integration into their platforms. These services will enable the client to accept funds through UPI platform. The bank is also offering host-to-host and API integration services.


Mahalingam says about the mobile banking services: “Yes, we have been offering mobile banking facility to our corporate customers, which is well appreciated in the market. Services like balance enquiry, mini statement, payee management and fund transfers are also available. We propose to introduce services like stock statement, bulk uploads, non-funded limit request, etc soon.”

BNP Paribas India launched its mobile banking ‘BankSmart’ in 2013, allowing senior management of the client to stay in control even while on the move. The app is available on Android, iOS, Windows and Blackberry platforms with high level of security and 2 factor authentication process. “Mobile banking mirrors the organization’s workflow and allows transaction authorization. Account balance and statements can be viewed as well,” says Balsekar.

She adds: “Our strategy revolves around remaining agile to client needs and that is possibly giving us the competitive edge. We have been consistently rated amongst the top 3 cash management banks for the last 8 consecutive years in Euromoney survey. We have won awards for several India implementations across solutions viz, trade, supply chain and risk management, liquidity management and working capital solutions. The Asiamoney Cash Management Poll 2016 adjudged us as No 1 Best Foreign Cash Management Bank in India as voted by large-sized corporates.”


BNP Paribas India emphasizes on adequate investment in technology. “It is a way of life for us in order to gain long-term benefits,” says Balsekar. “What we look for ultimately is customer satisfaction and customer delight.”

Federal Bank too has made substantial investments in creating an infrastructure for its transaction banking system. Among the tech products, Mahalingam points out to the eCollection system that the bank has developed, which helps in providing valuable MIS to corporate customers for both physical and electronic collections. Alongside, there is eMaintenance system, which specifically takes care of the requirements of apartment associations and societies to electronically collect their dues.      The bank offers host-to-host connectivity as well as API-based interfaces too.

As part of an effective risk management process, the bank is leveraging its straight through processing capabilities while simultaneously incorporating operational checks and controls at key processing events. “The centralization of processing has helped us to improve the performance efficiency and consistency of approach, while use of standardized processes help us avoid duplication to a greater extent. We have also engaged specialized and skilled officials and we effectively make use of the synergy of centralization,” says he.

The SWIFT environment in the bank has been fully secured with all modern full proof measures, including separate biometric entry IP addresses, firewall, etc. Also, transactions are being monitored by a specialized cell on a real-time basis.

Balsekar too says BNP Paribas is recognized as one of the world’s leading banking and financial groups on SWIFT. “As a main member bank of SWIFT, we have a strong and longstanding commitment to standards development and innovation like SWIFTNet for corporates, ISO UNIFI 20022 XML format, EBAM (Electronic Bank Account Management) and 3SKey (the digital personal signature). As one of the largest user of the network worldwide, we are also actively involved in the SWIFT working groups,” she says.


Banks are today examining the efficacy of distributed ledger technology and transaction banking is one area where this technology is going to have a big impact. Have these banks ventured into this domain?

Balsekar points out that BNP Paribas has been involved in experiments being carried out in using distributed ledger technology in banking transactions. “As a global bank, we adhere to the guidelines from various regulators in the use of this technology. At the global level, we are working with a number of clients to co-develop new products and services, based on our experiences with the ‘Blockchain Bizhackathon’ we had organized in 2016. The aim of these projects is to optimize the efficiency of our services in the fields of cash management; international trade finance and documentary credits, inventory and collateral management, working capital management, commodity finance and open accounts. In fact, we have been investing in blockchain technology since 2011,” says she.

She also adds that the bank has been part of the French Labchain and international R3 Blockchain projects. “We also have a stake in Digital Asset Holdings, the fintech company which develops distributed ledger solutions for the financial services industry. We are convinced that blockchain technology could well be a driver for innovations in banking practice that will be of benefit to all clients, she says.

Following the Blockchain Bizhackathon, BNP Paribas had launched ‘Cash Without Borders’, a proof of concept designed to improve the customer experience in the field of international payments. Using the Blockchain approach, this solution helps to avoid delays, unexpected costs and/or processing errors, by providing compensation, settlement and reporting in real time. It has also optimized visibility on, and accessibility to, cash flow. Similarly, another initiative, Smart LC, uses blockchain technology to enable faster, simpler and more secure processing of LCs, by replacing quantities of paper-based commercial documents with digital flows.

“I must emphasize that our Connexis Supply Chain platform is evolved on the concept of blockchain. It is in fact a closed group distributed ledger – connecting suppliers, the corporate and the distributors on a single platform. It is intended for an interruption free service to our customers and to bring together global franchisees,” says Balsekar.

Federal Bank is a member of the India Blockchain consortium, Bank Chain, headed by State Bank of India.  The consortium is studying the use cases of the technology’s applications in banking and the results are expected to be submitted to RBI.

“We are at present working with our remittance partners to test the efficacy of a distributed ledger offering in the remittance domain and are in discussion with our corporate customers to test a supplier financing user case,” says Mahalingam.

He adds that distributed ledger technology offers complete transparency in processing, enhances digitization efforts, channels real time, online interoperability with the entire value chain and ensures effective TAT.


The transaction banking platform at BNP Paribas makes use of data mining and analytics in order to help its customers take informed decisions. “For example, there are alerts and triggers incorporated in the system whereby a customer can get information in case of a possible attempt to delay payments or even in the case of a purported fraud. The system is capable of understanding patterns – say in payments – and it allows the customer to take pre-emptive action,” says Balsekar.

“We are ably supported by a strong back office that is able to generate analytics for our customers, who can then base their decisions on whether escalate or de-escalate their exposures to a particular market. Since the payments are credited/debited virtually real-time, there is hardly any scope for dishonoring cheques, which normally cause hardships to the customers,” she explains further.

Federal Bank, says Mahalingam, is working towards introducing a financing algorithm to help create and manage the bank’s online marketplace portfolio.

He emphasizes that the bank has huge focus on corporate banking, especially the commercial and business banking segments. “Transaction banking is very crucial for us from various angles – it helps us to generate fee revenue and current account balances; it helps in mitigating the credit risk by capturing the cash flow from our borrowing corporate customers. This vertical will be a strong support for the growth of corporate banking, as we have huge potential with our existing client base and with the market,” says he of the prospects of the vertical.

As regards the digital initiatives of the bank, he mentions about the launch of a key service stack as open APIs to help spread the digitization of its core offerings, another initiative towards bringing in a unified UX for its customers across differing channels and the continuous work towards enhancing extant partnership networks and ecosystem for the benefit of supply chain verticals.

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