One of the downsides to trading overseas is the danger that the customer finds itself unable to meet its contractual obligations for one reason or another. For this reason, many companies seek a bank guarantee that ensures they receive payment even if the debt cannot be repaid.
Demand guarantees and documentary trade solutions support businesses trading across the world by mitigating risk and providing confidence to both buyers and suppliers.
HSBC recently introduced a new ‘fast track’ digital trade finance demand guarantee to help customers trade internationally in a more seamless, secure and efficient way.
The first transactions of this kind took place late last year with HSBC issuing a tender bond for consultancy and accounting firm KPMG in Qatar and an advance payment guarantee for UK-based Russell Finex, a worldwide leader in fine mesh separation technology.
Russell Finex designs and manufactures market-leading vibratory sieves, separators, ultrasonic mesh deblinding systems and liquid filters for use in virtually every industry around the world. With annual sales exceeding £47m and more than 250 direct employees covering more than 140 countries, the company has six dedicated support offices worldwide and a global network of agents.
“This guarantee enabled a key contract to be realised, provisioning cutting edge sieving and filtration technology to support the processing of chemicals for the customer,” explains Ken Armour, Finance Director, Russell Finex.
“Given no manufacturing can start until the guarantee is in place, this enhancement supports working capital optimisation and presents growth opportunities based on the timely finalisation of all contractual obligations,” he adds.
KPMG Qatar was recognised as ‘Best Digital Transformation Corporate Advisory Firm’ at the International Finance Awards 2023 for its expertise in guiding organisations through the complexities of digital transformation. The firm achieved double digit growth across all three service lines last year.
“Digital transformation, innovation and technology solutions are key items on our agenda,” says Wassim Maksoud, Director – CFO, KPMG Qatar. “Partnering with HSBC Qatar to process the first straight through processing or STP bank guarantee issuance globally – with zero human intervention and in a matter of minutes – marks a significant leap in the digitisation of trade finance.”
“The introduction of the STP capability addresses a crucial challenge (meeting the timeframes set for submission of bank guarantees) thereby enabling us to proceed with our project proposals at pace,” he adds.
The solution allows customers to issue digitally processed guarantees that can be issued to a beneficiary in real time, reducing issuance times from three or four days down to potentially minutes.
The guarantee is available to customers via HSBC Trade Solutions, the bank’s digital trade finance platform which was first introduced to customers in its two largest markets – the UK and Hong Kong – in late 2022 and is being deployed globally in 2024 and 2025.
“The digitisation of world trade is a driver of economic success,” says Vivek Ramachandran, Global Head of Global Trade and Receivables Finance at HSBC. “We have spent considerable time with our customers to understand how we can help their businesses succeed and then brought together the best people and technology to design and build a capability that we genuinely see as a ‘game-changer’ in the industry.”
