Asia is the new battleground for European transaction banking

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Asia is the fastest-growing transaction banking market globally, as banks vie for cash and trade business beyond their core remit.

European banks are particular attracted to the region, as corporates based in Asia hope to diversify away from Asian and US banks that may be caught up in the ongoing trade war, says Stefan Hoops, head of Deutsche Bank’s corporate banking division.

Stefan Hoops,
Deutsche Bank

“It might seem a little incongruous, but over the last 12 months, we have won more mandates for American companies based in Asia than for European companies in North America or American companies in Europe,” he says.

According to Deutsche Bank, its Asia-Pacific business with US multinational corporations grew 6% year on year in 2019 and the bank expects similar results in 2020. In comparison, the bank’s growth with European corporates in the same region remained flat.

“I’d argue that within the current context, a US treasurer working in China is much more likely to seek out advice from a European bank in a region where they hope to mitigate risk and diversify their business as the world becomes increasingly polarized between China and the US,” says Hoops.

Hoops refers to the trade war between China and the US as a case in point. The ongoing dispute between the two economic powerhouses has seen both countries impose tariffs on hundreds of several key imports.

By January 16, the US had imposed tariffs on more than $550 billion of Chinese goods; China had retaliated with tariffs on more than $185 billion of US products.

However, there has since been de-escalation on both sides. Most recently, China has been forced to cut tariffs as it continues to grapple with the outbreak of the coronavirus.


According to McKinsey’s Asia-Pacific Banking Review 2019, transaction banking accounts for around a third of all banking revenues in the region and more than half of transaction banking revenues globally.

During the past decade, transaction banking revenue in Apac grew 17% compared with 2% in EMEA and 5% in the Americas.

Data from Coalition reflect these findings. Regionally, transaction banking revenue growth in Apac for the first half of 2019 was $4.2 billion; in the Americas, for example, there was no growth.

Eric Li,

“No one disputes the fact that the trade war between the US and China has benefited Europe, and European banks will do well in the region, but this isn’t to say that American banks will lose out,” says Eric Li, research director at Coalition.

“European banks lead in terms of trade finance, but in other areas American banks have a lot to offer – particular in cash management, dollar funding and foreign-exchange hedging – in a region where the greenback continues to dominate.

“There are so many opportunities in Asia for a variety of banks to thrive – not just European banks – given the unique challenges faced by companies in individual jurisdictions.”

Given the level of competition in Asia, many European banks could be open to accusations of buying market share as they try to grow their businesses.

The region will be at the heart of transaction banking for some time 

 – Marcus Hughes, Bottomline Technologies

Damian Glendinning, former treasurer at Chinese multinational technology company, Lenovo, says: “I am not aware of any specific advantage European banks may have, other than the fact that quite a few of them are making a concerted effort to break into the Asian market.

“This can make them more amenable to doing things to attract clients, but the resulting economics don’t always stand up. So, while they may be anxious to win the business, there is often a painful reckoning ahead as they either try to improve the pricing or withdraw from the region, as they discover profitability can be elusive.”


And while European banks are strong in the region, local transaction banks are gaining ground, says Marcus Hughes, head of strategic business development at Bottomline Technologies.

“BNP Paribas – which bought RBS’s business in 2007 – Deustche Bank and global players, such as HSBC and Standard Chartered, have always been strong in the region, but the Singaporean banks – which have transformed their offering through digitalization – are performing well, and showing that they can compete with the rest of them.”

In recent years, DBS has invested in a programme to build its cash management product suite on cloud-based architecture, which has led to efficiency and scalability in its transaction banking offering.

Transaction banking contributes 13% of the group’s total revenue – S$1.6 billion ($1.16 billion) – up from just 3% in 2009.

“Asia is the fastest growing market and as a result is more trade intensive then anywhere in the world,” says Hughes.

“The region will be at the heart of transaction banking for some time.”