Technology giant Siemens has been at the forefront of efforts to digitise corporate finance over recent years, most notably through its issuance of digital bonds. It should therefore come as no surprise that the company has now turned its attention to trade finance.
In conjunction with Bayerische Landesbank (BayernLB) and the platform-based communication channel Digital Vault Services, Siemens issued its first digital guarantee in August. The guarantee is in favour of industrial engineering and steel production multinational Thyssenkrupp for the delivery and installation of a voice alarm system in the buildings on its campus.
This step towards digitisation significantly reduces bureaucracy and eliminates the risk of loss compared to paper-based guarantees. It streamlines and accelerates processes for all parties involved since the guarantees can now be issued and received in real time.
“This transaction marks an important milestone in the digital transformation of the Siemens trade finance sector and is in line with our vision of a fully digital and paperless guarantee business,” explains Gerhard Heubeck, Global Head of Trade Finance Advisory at Siemens.
“We look forward to establishing digital guarantees as a new standard for us and working on new innovative solutions for the trade finance business that will lead to both smarter processes and greater customer satisfaction.”
Matthias Öffner, Head of Trade & Export Finance at BayernLB says digitisation of trade finance is an important topic for the bank.
“The fact that digital guarantees are now being used by large companies such as Siemens and Thyssenkrupp shows that the technical implementation works smoothly and the digital guarantees are considered legally tenable and enforceable,” he says. “By using digital guarantees, Siemens is advancing its fully digital end-to-end trade finance business, underlining the company’s commitment to digitisation and sustainability.”
When asked to outline the most effective way to ‘sell’ sustainable trade finance to corporates who have not used this type of finance before, a spokesperson for the bank added that its strategy with regards to digital solutions is to use solutions and partners that bring added value to customers.
“Of course, implementation cost is a big issue as well, but the additional value is the main selling point. We support our clients by embedding ESG requirements of export credit agencies into the financing and in addition we advise on green/taxonomy aligned cornerstones.”
A spokesperson for Thyssenkrupp said the company selected this transaction with Siemens as a pilot in order to take a first important step towards the digitisation of the guarantees business and it wanted to strengthen the perception of the possibility of digital guarantees among its suppliers and customers.
“We are setting an example for increasing the acceptance of digital guarantees among our customers and suppliers, thereby further improving the efficiency of our processes and contributing to cost savings,” says Dieter Herzberg, Senior Manager Intercompany Financing & Credit Finance Reporting at Thyssenkrupp.
Thyssenkrupp is currently in talks with its group companies to follow up with further transactions.
