What would an automated picture look like in the long run for trade, commodity and supply chain finance?

The shift away from traditional trade / supply chain finance instruments to automation has been a continuous trend for over a decade now – with companies, both large and small, drawn by the appeal of increased speed, simplicity, and reduced transaction costs. In response to this transition, banks are naturally opening up to new technologies and partners.

With fintechs multiplying in recent years and transforming the way we do business, banks must ensure that they understand client needs and can anticipate their future demands. By embracing innovative new working capital tools, investing in new technology, and increasing cross-industry collaboration, banks – and their corporate clients – can ensure success in a changing landscape.

Along this theme, we have already co-operated with several fintechs to offer clients innovative solutions, ranging from supply chain finance portals that auction approved supplier receivables, to those that are able to rapidly on-board thousands of suppliers from all over the world.

Moving forward, blockchain-enabled systems could prove a truly transformational technology for companies of all sizes trading on open account terms. Substituting large numbers of proprietary, centralised databases with one open-source, relatively simple, protocol would provide corporations with a more comprehensive and real-time view of supply chain flows – dramatically driving down infrastructure costs for both banks and corporations.

What are the challenges in setting up an end to end digital platform?

Developing and implementing digital technology on the required scale hinges on collaboration and dialogue between the various participants in the trade finance ecosystem, many of whom could be non-bank stakeholders, heralding from different spheres of industry.

With so much pressure for innovation, budget constraints are liable to put a strain on banks, who simply cannot afford to provide each and every one of their clients with bespoke solutions. The challenge therefore can often lie in creating flexible solutions that can be rolled out on a large scale whilst still retaining commercial viability, or in finding appropriate partners.

Recognizing the importance of such collaboration, we signed an agreement with eight other banks last year to develop and commercialise the ‘Digital Trade Chain’ solution (now known as we.trade) – a new cross-border trade finance platform for SMEs based on distributed ledger technology. We were able to confirm earlier this month that the first live trades had taken place on the platform, signifying the first commercially viable open account trades harnessing blockchain.

Of course, we.trade is just one example of a new digital platform for simplifying trade finance processes. A number of similar initiatives, such as Marco Polo, and the Global Trade Connectivity Network, are also being developed – potentially creating a fragmented network of networks in which viable technology is established and available, but the client base is split so that no one system has a critical mass of users.

What is the impact of digital transformation on your business and on your clients?

Technological change is coming thick and fast – banks need to find the right balance between innovation, co-operation and competition in order to provide clients with effective solutions.

Closer to home, banks, corporations, and third-party providers must also remain wary of allowing long-term visions to cloud their view of solutions that can offer benefits to their clients in the here and now. Technological innovations, such as artificial intelligence (AI) and enhanced data intelligence, could have a more significant impact in the near term. Indeed, a number of providers are now exploring how AI could be used to enhance the efficiency and accuracy of KYC and risk management processes and, in turn, improve overall process speed and cost-efficiency.

What would you like to achieve by attending the ‘Digitalizing Trade, Commodity and Supply Chain Finance Conference’?

As client needs evolve and banks adjust to keep up, pooling the resources, expertise and outlooks of a range of industry participants will help foster digital innovation in a way we’ve never seen before.

I hope the event facilitates a meaningful dialogue, bringing together banks, fintechs, and regulators to discuss common objectives that may hold the key to developing a new generation of trade finance innovations.