VIDEO | Seeing ahead: Building transaction banking in markets before they exist

What does it mean for innovation to be long-term? It requires seeing growth corridors and rises in wealth before they have fully been realised. But this far-sightedness is not prophesying – it’s merely knowing where to look.

Just 10 to 15 years ago, the prominence of an affluent middle class – a modern bourgeoisie – was not a feature often attributed to emerging markets in South-East Asia. But the telltale signs were there. Intra-regional trade in Asia stood at 54% of the value of Asia’s total trade in 2000, a figure which increased to 57% in 2022. For most other regions, intra-regional trade decreased. 

Intra-Asian trade needs to be financed. Multinational banks must be positioned within regional financial architecture, building local partnerships to capture future flows rather than react to them. Over a decade ago, Japanese bank MUFG formed partnerships with Bank Danamon in Indonesia, Bank of Ayudhya (or Krungsri) in Thailand, Delta in Vietnam, and Security Bank in the Philippines. 

Now, the region is “young, mobile, and cross-border oriented,” according to Vanessa Manning, EMEA Head of Transaction Banking at MUFG. Speaking to Trade Finance Global (TFG) at the 2026 BAFT Europe Forum, Manning elaborated on the relationship which Japanese banks tend to form with clients and banking partners alike to make money flow, and how they navigate trends facing the industry. The key takeaway is that this navigation must happen in sync with clients.

Demand creates supply

For Manning, approaches to innovation must be customer-led. 

In response to customer demand, platforms must keep progressing internally. “You have to augment the platforms that you have while building extraneously,” said Manning. Foreign exchange (FX) encapsulates this duality: there is global standardisation for rates and risk, but local execution and flexibility is crucial in the fast-moving industry. 

The same is true for cross-border payments, which remain slow, expensive, and inefficient – especially when compared with increasingly effective domestic payment systems. 44% of consumers in APAC expect same-day or faster funds transfers from banks; in emerging markets like Vietnam, Thailand, and Indonesia, the majority of banking customers expect payment receipt within 24 hours. 

The corporate treasury function is where this pressure is most acutely felt; banks, in turn, must respond to a client that is asking more sophisticated questions. This year, treasury management increasingly includes real-time cash visibility, application push interface (API)-based bank connectivity, and instant payments.

Embedding FX

Within the Asia Pacific (APAC) transaction banking landscape, customers are starting to expect FX embedded directly into workflows, not just into products. For Manning, this means instead of approaching FX as a vertical, like “FX for payments or FX for receivables”, it should be taken as a horizontal: “in the way that our corporate clients, for example, buy”.

“I think that would represent one of the largest changes both in bank delivery, but also customer expectation,” said Manning. Clients want to see FX embedded into enterprise resource planning (ERP) or treasury management systems (TMSs).

The underlying logic is that a corporate does not experience FX as a financial product. They experience it as an interruption to a process. A company buying goods from a supplier in a different currency (a procure-to-pay cycle), or collecting payment from an overseas customer (an order-to-cash cycle), does not want to step outside their workflow to manage a currency conversion.

The APAC region is home to the third-largest FX hub in the world – Singapore. In 2022, the country’s share of global FX volumes rose to 9.5%.

APAC is also home to characteristically volatile FX markets, a fragmented regulatory landscape, and restrictions and limits on how much certain currencies can be transferred. Unlike regions with unified oversight (such as the eurozone), APAC currencies are regulated individually by national authorities; furthermore, commonly used currencies like the yuan, rupee, and ringgit are often subject to restrictions, which can increase costs and complexity in cross-border payments.

Client kaizen, constant evolution

The concept of kaizen was coined in 1947 by Edward Deming, a statistician who thought to apply this numerical analysis to quality control. Working for car manufacturer Toyota in Japan, he would record product defects painstakingly, and fix these defects down to the most minute. Documentation was important, as was the notion of incremental change: an idea refined into what Deming termed ‘total quality management’, and one which evolved into the just-in-time manufacturing synonymous with the Toyota Production System.

Deming was an American trying to popularise his ideas during the postwar US boom, when mass production was prioritised over quality. In this context, Japanese manufacturers were far more receptive. Not only was the country severely damaged by the war, but Japan has long had a tradition of handiwork with close attention to detail. 

The concept of kaizen – continuous, ongoing refinement, and enhancements of the customer journey – carries through to modern transaction banking. “We don’t believe in big-bang migration to a customer,” Manning explained. “It’s about continuous refinement, meeting customers’ demands on the ground and at headquarters, and making sure that we deliver on a continuous basis.”

Another feature of Japanese banking culture is transparency, which brings about trust over time. “By being very transparent about the pace, timing, and cost of capital change, it allows clients to work with us on the basis that they know we add value and are committed to those product lines where the cost will increase over time,” said Manning.

Japanese attitudes towards banking regulation encapsulate this sentiment of kaizen and transparency to customers. While most European and American banks are bracing for the implementation of Basel III Endgame – with regulators likely finalising rules by 2026 and implementation beginning in 2027– MUFG went through this transition years earlier. 

Japanese banks were required to adopt Basel III ahead of their Western peers, forcing a reckoning with the cost of capital (with banks required to maintain a minimum capital ratio of 8%) and return expectations that European and US banks are only now beginning to work through.

Manning acknowledges that the shift was not painless and made MUFG “a little bit more uncompetitive in short-duration trade flow” for a period. For trade finance specifically, the sector is considered relatively resilient given its low-risk, highly collateralised nature and default rates under 0.25% – but the shift still demands transparency with clients about changing pricing.

“That’s a lesson learned for many other banks as they deploy [Basel] from next year,” said Manning.

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In short, future planning is not necessarily buying the latest technology and implementing it at scale. Much more, it’s incremental, the kaizen of everyday business. For international banks, it involves “helping clients to simplify and optimise their treasury and commercial goals in very challenging markets,” summarised Manning.