Krungsri teams up with MUFG to offer cutting edge cross-border banking services

Krungsri teams up with MUFG to offer cutting edge cross-border banking services

Krungsri (Bank of Ayudhya Pcl.) is banking on the vast network of Mitsubishi UFJ Financial Group (MUFG) to help its customers in Thailand expand regionally and globally. Meanwhile, its Japanese customers can also count on Krungsri’s local expertise and extensive services to connect and work with businesses in the Kingdom, says the company President and CEO, Noriaki Goto.

MUFG is the largest financial group in Japan and the fifth largest bank in the world, with assets of more than 2.79 trillion USD in 2017, according to the latest S&P Global Market Intelligence’s annual ranking. The Japanese giant is a member of one of the largest and most stable financial institutions in the world, with operations in more than 50 countries and over 2,300 offices.

Krungsri, meanwhile, is one of the top banks in Thailand and the fifth largest in terms of assets but being the largest in this aspect is never on the company’s list of top priorities or repertoire.

"It is really the combination of a global financial institution and a local financial institution," Mr. Goto described his company comparative advantage.

He explains that in the past, MUFG had only one foreign branch in Bangkok that was solely a wholesale corporate bank. On the other hand, there was Krungsri which was a full-fledged local commercial bank that was covering retail all the way to wholesale corporate banking. As MUFG was planning to expand further into Thailand during that time, the combination of the two was a perfectly logical choice, as Mr.. Goto sees it.

"The MUFG’s foreign branch in the past had a big Japanese corporate customer base, but since they did not have any retail product, they were not able to offer those retail products, and they only had one office here. On the opposite end, Krungsri did not have this deep access into Japanese corporate and market," he recalls.

"Combining the two means MUFG can now provide services across the nation while Krungsri is now able to bring Thai corporate customers, who are interested in expanding overseas, to gain access to thousands of MUFG’s offices in more than 50 countries. This is something that other Thai banks and other foreign banks do not have," he added.

For their Japanese customers, this "complementary marriage" has enabled them to work outside of Bangkok with ease as most of them operate outside the capital. While being part of a Japanese bank, Krungsri can also provide services that also connected with banking networks and parent company in their home country.

"We are seeing a lot of Thai corporate customers who are trying to go outside of Thailand to expand and grow their business so my message is please come to Krungsri and we are more than welcome to help you and grow along with you," he said with a welcoming smile. "What we can do outside of Thailand is really the MUFG’s network that we can bring."

For Thai corporate customers who want to open a factory, for example, in the US or in India where MUFG has its presence, Krungsri can actually send its personnel along with the customer to make sure that things run smoothly such as foreign exchange rates.

 "We went with the customers and we saw that they needed a local currency like US dollar and Indian rupee, we asked MUFG to give financial assistance to these customers that were going there. But, since MUFG did not know who they were, we also guaranteed the credit of these customers so that MUFG can finance them," he reveals recent cases.

In retail, Mr.. Goto has observed that there are now a lot of Thai tourists that are going to Japan because of lower visa restrictions. With that in mind, MUFG’s and Krungsri’s credit card company are now looking to see what they can do together to better serve these Thai retail customers in Japan.

fIf you have a Krungsri credit card and you do some shopping in Japan, you can get the Krungsri discount and that is some of the services that we are bringing to retail customers who are going abroad," he reveals.

As of July 2017, Japan has taken measures concerning Visa Exemption Arrangements with 68 countries, including Thailand, which means that Thai citizen can now visit Japan with no visa for up to 15 days. As a result and according to the Japan National Tourism Organization (JNTO), more than 980,000 Thai travelers visited Japan last year compared to around 660,000 in 2014.

TECHNOLOGY

Another benefit of the partnership between Krungsri and MUFG is technology, and Mr. Goto believes it is an important one because technology is now changing overnight and not over a period of a month anymore.

"To keep with the speed of changes in technology and because doing R&D is expensive where MUFG already has this big team with people sitting in the Silicon Valley…we have asked them to share their knowledge with us," he reveals. "We can always rely on our parent company to provide the state-of-the-art technology and then we bring it here to see how we can use those technologies to create our digital products and services."

In terms of fintech players, Mr. Goto does not see them as disruptors and what he seeks is collaboration because fintech has the technology but banks also have a wider knowledge of traditional financial products so it more about cooperation than disruption.

"It is really about how we can work together and combine them (technology and traditional knowledge) together and see what we can bring to our customers," he says. "Yes, it is a disruption but the time of saying that it is disrupting or disturbing your business is no longer there and all the financial institutions already know this."

As for Krungsri, the company is now using blockchain technology to help  customers send money cross borders in a much faster way. With the current technology, the company can now transfer money from countries in ASEAN such as in Laos and Singapore to Thailand within seconds compared to one to three days in the past.

"The traditional SWIFT network would have taken a day or so to complete the transaction," he says while referring to the Society for Worldwide Interbank Financial Telecommunication network that was founded 45 years ago.

Approved by the Bank of Thailand, Krungsri became the first bank in Thailand to offer real-time international funds transfer based on the company’s Blockchain’s Interledger which was launched in June 2017. The innovation allows international funds transfer transactions to be done within seconds with security provided by one of the most secure technologies around. Meanwhile, the cost of such transaction has also been curved for the bank’s customers and the entire supply chain of business, from upstream to downstream.

Going forward, Krungsri is looking to collaborate with MUFG to bring further technological solutions and benefits to more customers in Thailand in order to better serve them, Mr. Goto says.

 "We are looking to bring more of a superb experience to our customers in the future via MUFG’s network and expertise," he added. The Japanese giant now has a 19.7% stake in VietinBank in Vietnam, 76.88% in Krungsri, and 20% in Security Bank in the Philippines, and recently acquired 40% of Bank Danamon in Indonesia.

"We are trying to see what we can do with these partner banks which is a little bit different than the network that MUFG had in the past...where the key is how to connect these banks together and that will be the most exciting part of it," he says.

He explains that each join venture bank is leveraging MUFG’s expertise and knowledge to gain an edge in their respective country and the connection between these banks will make these edges even sharper.

"Thai customers, both retail and corporate, are going outside Thailand right now and this is a good opportunity for us to really support these customers using MUFG-Krungsri or MUFG-local bank collaboration," he said.

For challenges in ASEAN, Mr. Goto said that each government in the region could do more in terms of platform so that this whole region can move money and financial services in a more efficient way.

"Each country is making their own QR-code payment and there are people moving around ASEAN but the problem is that there different QR payment systems," he acknowledged. "If governments work together and see what we can do to standardise it in the Mekong region and ASEAN, that will make things much easier for private banks to create something and work on it."     

The mobile phone is going to be the key for banking business in the years to come and it is all about what kind of services and products can be put into smartphones to make transactions and other services faster and more convenient.

"Customers wants to do all their banking on the phone and how we can accomplish this is going to require both technology and a new way of creating these products and bring them to the market faster than we did in the past," he pointed out.

Brick and mortar, meanwhile, will continue to be important for Krungsri where the number of branches will eventually come down but it will not completely "go away", since people are still looking for services from them.

"There will come a time when branches only need to provide services but not transactions and those services might be provided by machines but we still need the brick and mortar location to put them in. However, the number of branches might not be the same as what we have right now," he reveals. "The number of products and services may also be dissimilar where each branch can have its own efficient and effective way to provide services."

Brick and mortar, he says, can also provide a sense of comfort as "when you have a yellow branch there, that itself can already make a customer comfortable", adding that the bank is aiming to grow, "not as fast as the last three years", but they will try to grow their net income to a level at least faster than the market’s.        

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