15% of RMB payments get lost in translation

Differing payment messaging formats used in China and globally increase the complexity of settling renminbi-denominated trade, leading to the rejection or delay of some transactions, say experts.

  • 20 Jun 2013
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The complexity of transacting cross-border renminbi payments goes beyond just the numbers. The differences between the messaging formats of onshore and offshore clearing systems bring about language barriers that could result in payment rejections and delays.

Swift estimates that there is a 15% rejection rate in renminbi-denominated payments, which is fairly high given that the normal rate of rejection for all other currencies would normally be a third of that. The US dollar – the most commonly used currency in trade – has a relatively low rejection rate of around 3%.

“It’s the dynamics of a growing new market,” said Lisa O’Connor, director for renminbi internationalisation at Swift to Asiamoney PLUS. “It’s just a process of growth that the banks have and corporates have to go through to why might it take a bit longer for their transactions be processed.”

One of the pain points that foreign companies have to deal with when transacting in the renminbi is the fact that the payment systems’ messaging formats differ onshore and offshore.

This is only true for transactions going into the Mainland, which need to convert internationally-recognised Swift messages into a format that is recognised by the China National Advanced Payment System (CNAPS), highlight transaction bankers.

“Every bank that has a connection to this platform assigned to an identifier, which is a CNAPS bank code. It is used to identify the bank that will be receiving the payment,” said Frankie Au, head of renminbi products, East for transaction banking at Standard Chartered (StanChart). “The challenge is that the CNAPS code table is not available in English, and is also not one-to-one mapping with Swift's Bank Identifier Code.”

This is a problem for multinational corporations (MNCs) that have extensive business in the world’s second largest economy. Just like the internationally-recognised Bank Identifier Code (BIC), the CNAPS code is required in order for the payment to reach the right clearing bank and eventually, the beneficiary in the Mainland.

Also, Swift’s list of bank addresses does not tally with that available on China’s CNAPS system. Instead of being able to identify the beneficiary’s financial institution on a main branch level, the latter system identifies a bank branch on a local level.

“It creates some complexity and very often the sending bank outside China may not be able to specify the CNAPS code in the message accurately,” said Au. “The payment will either be delayed or it may be rejected because the bank is not known at the receiving end.”

To make matters worse, experts note that in some cases the details of the renminbi-denominated transaction are spelled out in Chinese characters, including the recipient’s bank as well as the beneficiary’s name. This creates another level of complexity when it comes to converting the message to become CNAPS-friendly. It also does not help when the receiving party’s company name is registered in Chinese characters.

“The market adopts a different way to recognise and read those characters,” said a Hong Kong-based renminbi transaction banking expert to Asiamoney PLUS. “There is the Chinese Commercial Code, but it comes in many different versions and other banks on the receiving could use a slightly different version.”

The Chinese Commercial Code (CCC) – also called the Chinese Telegraph Code (CTC) – is a four-digit decimal code for electronically telegraphed messages written in Chinese characters. A codebook is provided for encoding and decoding these numbers.

Because of this, renminbi-transactions have a relatively high reject rate when compared with other currencies. And while the goal is to have as much Straight Through Processing (STP) as possible, Swift notes that it is not yet possible for payments denominated in the Chinese currency.

As a result, a lot of manual intervention is required, which increases operational risk.

“We are trying to work with our renminbi banks in the Mainland to try to get the Chinese companies to register both the Chinese and English name if possible,” said Swift’s O’Connor. “As payments to more medium and small sized corporates in the Mainland start to happen, this is where a lot of the challenge will be.”

“There needs to be an intermediary there that can translate and the translation is not always perfect,” she added. “When that happens, it falls into something that is called the ‘repair queue’ at the banks and the banks would have to manually intervene.”

In situations like these, corporates are advised by their bankers to liaise closely with their Chinese counterpart in order to ensure that the information provided is accurate.

“It is important to ask for the CNAPS bank code because the corporate may not be aware that they need to get this information. Once that is done, the scenario of rejection can be avoided to a certain extent,” said StanChart’s Au.

Additionally, industry experts are closely working together with Chinese regulators to address these issues. One of the solutions around this is to help the Mainland launch its widely-anticipated China International Payments Solution (CIPS) in 2014.

While experts note that it is far too premature to be fully confident in CIPS as there are just too many unknown factors, the system will supposedly be more efficient and stable than the current platform.

“The CNAPS platform is originally defined as a domestic platform is not supposed to be used for international renminbi payments,” said a transaction banker. “The CIPS will use a structured code, where it will help the system recognise the information in a more effective manner and at the same time, they will be able to have a more structured mechanism to indentify the banks in the system.”

During the last nine months (July 2012 – April 2013), 16 more countries used the renminbi for more than 10% of their payments with China and Hong Kong. The growth has brought the total to 47 countries worldwide, according to Swift’s RMB Tracker.

  • 20 Jun 2013

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 Citi 38,857.97 184 9.39%
2 HSBC 38,447.58 227 9.29%
3 JPMorgan 34,744.34 142 8.40%
4 Bank of America Merrill Lynch 28,556.15 119 6.90%
5 Deutsche Bank 18,270.77 72 4.42%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 13,268.07 33 6.30%
2 Bank of America Merrill Lynch 11,627.56 29 5.52%
3 Citi 11,610.06 30 5.52%
4 HSBC 10,091.34 29 4.79%
5 Santander 9,533.17 25 4.53%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 Citi 13,617.40 57 11.05%
2 JPMorgan 12,607.77 55 10.23%
3 HSBC 9,327.72 50 7.57%
4 Barclays 8,643.78 30 7.02%
5 Bank of America Merrill Lynch 6,561.15 18 5.32%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 UniCredit 3,966.12 27 13.01%
2 SG Corporate & Investment Banking 2,805.90 16 9.20%
3 ING 2,549.27 20 8.36%
4 Citi 2,526.98 15 8.29%
5 HSBC 1,663.71 16 5.46%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 19 Oct 2016
1 AXIS Bank 5,944.45 123 18.53%
2 HDFC Bank 3,792.05 100 11.82%
3 Trust Investment Advisors 3,390.86 145 10.57%
4 Standard Chartered Bank 2,299.63 31 7.17%
5 ICICI Bank 1,894.86 51 5.91%