Trade Finance Métier is ready for disruption: Pressure on margin, emergence of new products, new technologies, new players, and heavy regulatory constraints…The landscape is quickly shifting. We propose to focus on 3 levers to keep one step ahead.
- Clients First! – Invest in Client Portal
In a highly competitive environment, Corporate Banks must offer best in class digital services.
Client portals are the avenue to meet client expectations for customizable reporting features, auto-filled L/C or guarantees issuance requests, real time transactions tracking, ability to simulate billing and costs… And all that with seamless integration into their own environment.
An efficient Client portal requires a smooth FO to BO chain, with flexible and integrated IT solutions and shared Referential Data sources. In turn, those investments will enable access to Big Data management, real time transactions monitoring, and optimization of internal processes, benefiting the bank as much as their clients.
- Aim For Paperless – Reduce Costs and Turn Around Time
Trade Finance is a heavily paper-based, labor-intensive activity. Huge operation teams, often based in offshored centers, are dedicated to printing, documents checking and compliance screening.It can take up to 20 minutes for an operator to complete the compliance checks for a Letter of Credit, with about 15 documents to manage. The average time for the complete checking of this kind of L/C can vary from 4 to 5 hours to one day depending on the SLA with the client.
The digitization of the process, at least with scanned papers, or – even better – with electronic documents, associated with screening capabilities, would drastically reduce the Turn Around Time and workload of the transaction processing. OCR technologies adapted to Trade Finance processes are still work in progress, but significant results are already achieved, intuiting that it is just a matter of time before having fully efficient tools. Current experiments show that with text recognition the time required for the screening of L/C documents in the Back Office can be reduced by an estimated 40%.
- Experiment with Blockchain – Corporate banks are best positioned to promote new models based on secured distributed ledger technology
Trade Finance is one of the most advanced use cases for Blockchain in Finance, with initiatives already launched by several Corporate Banks, in collaboration with other banks or with Fintechs (Barclays and Wave announced this September 2016 to have completed the first blockchain transaction on a L/C); in association with governments, especially with Singapore (TradeSafe for DBS, Standard Chartered or more recently the first Trade Finance App prototype for HSBC and BofAML) or with in-house prototypes.
Some Fintechs position themselves as an alternative to banks, leveraging on their capacity to innovate and shorter time to market and propose – today – electronic platforms and – tomorrow – blockchain solutions. However as a Trusted Third Party between buyer and supplier, Corporate banks might be best positioned to promote new models based on secured distributed ledger technology. Additionally, their access to large banking network and their expertise on core banking activities such as financing services are key competitive
advantages over new players.