Software firm sees opportunities in banks' globalization

Tom Kilroy, chief of staff at Misys

Misys ramping up investment in China as markets internationalize

The internationalization of the renminbi represents a huge opportunity for Chinese businesses and financial markets to become far more globalized. That will change the nature of global finance, said Tom Kilroy, chief of staff at Misys, a United Kingdom-based financial services software company.

"We are going to see more and more cross-border trade financing as opportunities for Chinese companies to expand internationally, using the renminbi internationalization as a bridge for that. I think what it's creating is China as a core center of global finance internationally, not just within the region," said Kilroy during an interview with China Daily in Beijing.

As the Chinese companies expand, they want to be able to see all of their positions, such as cash positions, liquidity positions and foreign exchange positions, summarized for them. Misys will try to offer Chinese banks an overall view for corporate customers of what their bank positions are, no matter which banks they use, so that banks can help those customers as they go international.

"As Chinese banks become more internationalized, the retail and corporate market is going to become more globally important. We recognize China's economic strengthening as a long-term trend, which will continue for decades to come. The internationalization of its financial system is only going to increase," Kilroy said.

With more than 2,000 clients in 130 countries, his company recorded triple-digit software revenue growth in China in the last financial year, which in part is a reflection of the growth of the market. It also shows that the increasing pressure from regulators on risk and cost reduction is making banks think hard about buying more standardized software off the shelf, he said.

Traditionally, financial services companies have developed a lot of their own software rather than buying it from vendors. But now, the market is becoming more dependent on third-party software and banks are finding that they will get a better result if they deploy software in more standardized ways.

He said there are two principal ways to reduce bad debt. One is to use robust loan-servicing software to manage a loan portfolio efficiently. The other is to make credit decisions more accurately at the beginning.

"What we want to have more success with here in China is to help banks make the loans at the start and manage them through the life cycle of the loan, so that they have clarity about how the loan is progressing all the way through it," Kilroy said.

Misys has been in the Chinese mainland for about 15 years. At present, the company's operations in China represent about one-fifth of its business in Asia.

That proportion will go past 50 percent quite quickly, he said. Its investment in China over the next three years is expected to be three times as big as it is now.

"For us, it's a long-term investment. Chinese economic growth may have slowed from 9 percent to around 7.5 percent but it's still very rapid, and the underlying strength of the Chinese financial services system and its expansion is something we feel good about," he said.

As the Chinese financial service sector becomes more internationalized, it will become less dependent on China and more dependent on international trade. That provides additional opportunities for traditional banks. Even as the market changes around them with an increasing number of new entrants such as Internet giant Alibaba Group Holding Ltd, banks still have some areas of deep strength and competence, Kilroy said.

He advised banks to modernize the offerings they have for retail customers to make people feel that interaction with the bank is easy.

"The principal thing they have to do is to adapt to the changing world around them. People want to bank in a different way and banks have to respond to that. They have some catching up to do, but they are working very hard at it now," he said.