Trade makers: unlocking the future of trade finance
Published: Jan 2020
For many stakeholders in trade finance, digitisation of its paper-bound processes cannot come soon enough. But every successful transformation needs expert guidance. Treasury Today sought counsel from a trio of BNP Paribas’ trade specialists.
When it comes to digitisation, trade finance is lagging behind other business activities, such as cash management, notes Marie-Laurence Lepetit-Faure, Head of Digital Trade. In the context of a truly global theatre of operation, there are a number of explanations for this.
The complexity of the trade ecosystem, the lack of an overarching legal and regulatory framework, applicable to digital exchanges, and slow progress towards the adoption of open systems, in particular, are all acting as an anchor on progress, impeding trade efficiency. It is, she notes, still a manually intensive and paper-based process from end-to-end, and this is driving costs and turnaround times ever-higher.
In terms of digitisation, open systems – APIs, for example – can resolve issues to an extent, says Alain Verscheuren, Head of DLT, Trade & Treasury Solutions, but interoperability is essential for full digitisation to be unlocked. And that, he says, demands standardisation and appropriate legislative adaptation.
Fortunately, there is a demonstrable will within trade to move towards standardisation. Indeed, with many initiatives in this space drawing voices from right across the ecosystem – from banks and fintechs, to shippers and logistics firms – a collaborative mood is already at work, notes Verscheuren. With support from domestic trade authorities and the wider ICC community, standardisation amongst existing mechanisms, such as UTN, is becoming a distinct possibility.
It’s not an overnight fix, and all stakeholders must continue to think collectively, he warns. But when the stars align, he believes that every trade stakeholder will benefit. Paper will be eliminated to a large extent. Transactions will speed up as straight through processing becomes increasingly possible: technologies such as APIs and cloud are facilitating easier integration, lowering the number of touchpoints and reducing risk of error. Improved traceability, transparency and compliance management can be anticipated too, as the potential of blockchain is unleashed.
Before this transformation can occur, businesses must first map their trade pain points to their digital ambitions, says Bruno Francois, Deputy Global Head of Trade Finance and Network Management. Top of the agenda, he says, is likely to be visibility over aspects such as trade risks, exposures, and maturity dates, across the entire organisation.
Closely following– again, across the whole organisation – will be control, ensuring all trade participants are compliant with internal expectations. A third vital component will be cost-efficiency. As with every major capex, the cost-benefit of digitisation must be tightly managed, says Francois. To this can be added the importance of allotting sufficient time and securing on-tap expertise for every project.
To help treasurers through this critical transition, BNP Paribas is prioritising the immediate short-term corporate pain-points, investing heavily in its trade platform. It is tackling medium-term issues by offering, for example, connectivity to multi-bank solutions such as SWIFTNet Trade. Looking to the long-term sustainability of trade, Francois reports that BNP Paribas is actively exploring the potential of distributed ledger technologies, such as blockchain. This, he feels, could finally eliminate trade’s paper lock-in, letting it flourish.