According to the Boston Consulting Group, payments and transaction banking revenues will reach an estimated $1.1 trillion by 2022. This exceptional growth is being fuelled in large part by the huge growth potential in emerging markets – but nowhere more so than in Asia.

The appeal of transaction banking has dramatically increased over the last few years as markets have evolved and technology has changed. In the wake of the financial crisis, large banks are now facing historically unique revenue and earnings pressures due to the continuation of deleveraging borrowers, morphing capital and liquidity regimes, and the seemingly unending regulatory assaults on risk-taking.

In this environment, transaction banking has become a much more attractive option to pursue. It delivers good, stable growth with low capital strain; and high returns with low risk and excellent long-term sustainability.

So what is the growth and revenue potential for transaction banking in Asia? Simply put: it’s huge. By 2030, Asia will be home to 66% of the global middle class population and 59% of middle class consumption.

Asia is also fast becoming the hub for global trade finance. It is expected that APAC’s share of global trade will reach 35% by 2020. There will be six Asian markets in the world’s top ten trading centres by then; China, Hong Kong, Japan, India, Singapore and South Korea.

Banks that wish to take advantage of this opportunity will need excellent distribution reach and channels, customer franchise and superior execution. International banks will clearly be in a strong position, given their global footprint, but regional and domestic banks are fast catching up. The war for the best banking talent across cash management and trade, both in the region and brought in from elsewhere, will be fierce.

Those banks that are building services around the key trends driving growth in transaction banking revenue pools, and intelligently target specific parts of the corporate / institutional wallet, will be well placed to provide corporates and institutions in Asia the required transaction services to help drive their businesses forward.

Here are six factors anyone looking at the potential which exists in Asia should consider:

  • The rise in SMEs – Trade growth in Asia has stimulated the rise of export orientated Asian SMEs which will have a 20% share of global trade by 2020
  • The growth in importance of commodities – Despite recent price pressure, rising demand will expand commodities share of global goods to 35% by 2020
  • New trade corridors – China and emerging economies in Asia are becoming active across all levels of trade regionally and globally, encouraging growth
  • The rise of open account trading – shipping and delivery before payment is due will triple through 2020 to almost $30 billion
  • Sustaining growth – More liberal trade regimes with greater flexibility of trade between Asian markets will ensure a continuing growth in wealth of the Asian middle class
  • Increasing flexibility for non-banks – Supply chains are becoming more complex, creating an exponential rise in the number of transactions that will take place across global borders

The caveat of course is that after over a decade of growth, emerging markets have slowed down in recent months – but despite this the opportunity across the transaction banking space is very clear. The rising demand for viable transaction banking talent for domestic, regional and global players in Asia will only expand in the years ahead.