Transaction banking

Transaction Banking (TB) can be defined as the set of instruments and services that a bank offers to trading partners to financially support their reciprocal exchanges of goods (e.g., trade), monetary flows (e.g., cash), or commercial papers (e.g., exchanges). TB allows banks to maintain close relationships with their corporate clients, so banks don’t want to be disintermediated by other players.[1]

The transaction banking division of a bank typically provides commercial banking products and services for both corporations and financial institutions, including domestic and cross-border payments, risk mitigation, international trade finance as well as trust, agency, depositary, custody and related services. It comprises the Cash Management, Trade Finance and Trust & Securities Services businesses. Although some business banking depends on a third party for 3-5 working days, others take over 10 working days.

A number of global trends are leading to a renewed focus on the transaction banking sector. These trends include the globalization of trade, the increasing importance of liquidity management and a heightened emphasis on securing relationships in a world where both competition and clients are becoming more global and sophisticated. Transaction banking is also particularly attractive in the current economic context because it often has relatively low regulatory capital requirements.[2]

References
  1. "Finextra: Finextra blog: Something New Happening in Transaction Banking?". Finextra Research.
  2. Demonetization in India in November, 2016 (in which the then existing notes of denomination of Rs.500 and Rs.1000 were demonetized), digital revolution in payment and settlement systems that India witness during 2010-2020, India witnessed in the activities of transnational banking. Banks offered a number of industry and business specific solutions, including end-to-end digital capability for the capital market industry. The ICICI Bank in its Annual Report for the year 2020-21 gave information of such activities under the caption- Transaction Banking'. The Report inter alia, states that "with a focus on capturing the entire 360° banking opportunity, the Bank continues to create best-in-class digital solutions to meet the varied requirements of our customers.... these solutions range from industry shaping initiatives such as the first 'e-bank guarantee with e-stamping' issuance in collaboration with the stateof Uttar Pradesh, thus creating a pathway for complete paperless bank guarantee issuance and advising, and amendments to operational efficiency-enhancing solutions for our customers such as a simplified digital payment solution for 'Multi-state GST'. Customisation at a scale is a key factor in our approach." Citation: https://www.icicibank.com/aboutus/Annual-Reports/2020-21/AR/assets/pdf/ICICI-Bank-Annual-Report-FY2021.pdf. Lal, Akash (September 2012), "Rising to the Challenge: Transaction Banking in Asia-Pacific", McKinsey on Payments, archived from offices/singapore/mop15_rising_to_the_challenge_transaction_banking_in_asia-pacific1.ashx the original on 8 May 2015, retrieved 2 August 2020 {{citation}}: Check |url= value (help)
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