Why leveraging emerging technologies is the future of trade finance
10 September 2018
Robert Barnes, CEO, TradeIX
For most people, trade finance is associated with antiquated funding solutions from the old world offered on legacy infrastructure and systems, but it is actually the lifeblood of most companies and – with over $8trillion – one of the largest financing markets.
The market has traditionally been paper-based with manual intensive processes and siloed and aged IT systems. However, tremendous changes are currently happening via the introduction of new technologies by fintech providers and enhanced financing solutions offered by banks to their corporate clients.
It has become clear that the digitisation of trade finance and blockchain technology are no longer just buzzwords. Today, they are already starting to change how banks and credit insurers interact and provide their services to their corporate clients more efficiently with less risk, and with a far better user experience.
This new wave of trade finance solutions is based on better connected, highly automated and far more open infrastructure and new technologies such as:
- APIs (Application Programming Interfaces), allowing simple integrations and sharing trade finance data between the different participants in the trade ecosystem
- Distributed Ledger Technology (DLT) transforming the way we establish trust and transfer value by providing a new technology backbone for financial services
- Distributed platforms such as the TradeIX Trade Finance platform
- Applications embedded into the client’s ERP systems allowing corporates to access multiple trade finance solutions directly form their own ERP system
One example, offering such solutions and at the forefront in this market development, is TradeIX. The company’s Distributed Trade Finance Platform is modular and based on an open infrastructure, leveraging new technologies such as cloud, APIs and blockchain.
The TradeIX Platform is offered to banks, allowing them to seamlessly connect with their corporate clients. By using these new technologies, corporates have a simple, highly secure and efficient way to access trade finance and interact with their banking partners and trade ecosystem.
If you are interested to learn more about the future of Trade Finance, please click here.
Hello, and welcome to Business Reporter's Digital Transformation 2018 campaign. I'm Alastair Greener, and today, I'm talking to Robert Barnes from TradeIX.
Good morning, Alastair.
In an ideal world, how should an organisation obtain trade finance today?
First of all, very easily, right? To do that, they should be able to go into their ERP system, be able to click on the information they need to share, to access that, and they should be able to wait for a response to their request for trade finance. The bank should be able to consume all of that information and return a response within seconds to them. Clearly, that doesn't happen today.
Give me an idea of these more legacy systems, if you like, and how they and the technologies that are around at the moment are actually obstructing that ability to get trade finance in the easy way that we were hoping for.
OK, so the legacy systems. Actually, at both sides, if you think about you've got the corporate here and you've got the bank. Now, the ecosystem is truly just not the corporate bank. It could be suppliers and customers, insurers, et cetera, but let's just take the corporate and the bank.
The issue is that the banks have multiple siloed products, which, in some cases, are over 30 years old, that deliver trade products the way they prescribed them 30 years ago to the customer. The customer, on one hand, being the corporate, could be dealing with information that's locked within siloed systems with-- on their premises, and they have to get information to the bank into these legacy systems-- which are not just one, could be many-- for the bank to consume that, make decisions, and then return a result to them. This, in some cases, takes months, at the worst case. Whereas I described at the beginning, we believe this happening in seconds, not months.
Despite the fact that that does sound like something that is difficult, as you say, it's got a lot of friction in it and it's not easy, there are going to be some sceptics out there who still will maintain that actually the older systems are better, that actually the simple thing of just going to the bank is easier. And there could be a CEO out there who's thinking, you know what, I'm going to stick to what I'm familiar with and what I know. What would you say to them?
Well, I think we'd take two approaches to that. One is seeing is believing. So the first thing I would do is I would switch on my computer, I would go on and I would show them a really live case of setting up and accessing a bank within a matter of a few minutes, and getting that information to the bank and creating a transaction and showing a response.
And then I would ask a lot of questions of the CEO as to how long does it take you today? How many people do you have involved in getting that information? What is the risk and the risk of-- and the transfer of that information to the bank? And how fast does a bank respond to you? And then I would ask the last question and say, discounting all of that, are you going to get the best pricing based on the way you currently work with the bank today and the way you can work with a bank in the future?
You're advocating a fresh approach. You're talking about probably quite a different solution to what many people will be used to, that involves seamless communication, it's transparent, it's easy, it's fast. What are the key ingredients to make that solution work?
The key ingredient, really, is the use of technology and the technology that we use as we apply that technology to how a customer, being the corporate, and how a bank actually operate themselves. So you hit on one thing by saying it's transparent, and it's fast, and it's easy, right? Well, the technology has to drive those three things. So the technology around cloud computing, the technology around blockchain, the technology around application programme into phases, and the technology around machine learning and actually having a lot of the processes move away from human intervention actually facilitate a better experience for the customer.
Tell me a little bit more about TradeIX. Where do you fit into all of this, and how do you do what you do?
TradeIX, we are not an Amazon, we are not a platform. We're not running any information ourselves. We are basically a technology provider providing what we call a distributed platform architecture using distributed ledger technology and the cloud, allowing banks to provide a better customer experience to their customers, working with ERP providers such as Oracle, Microsoft, SAP to deliver an integrated experience into the systems that corporates use today to the bank. So in many respects, we're providing open banking for trade finance.
Talking now about blockchain, of course, is the big buzz word, at the moment. Everyone is talking about integrating blockchain into their systems. Tell us how it helps in this environment.
If I'm a corporate, the last thing I want to do is go and log on to five different bank's portals to do what I have to do, and have five different pieces of information everywhere. It becomes massively difficult for me to manage that, costly. It's not very secure, et cetera.
Using blockchain technology, what we've done is we've said, hey, guess what, we don't all have to sit on one platform. The platform can be distributed, right? So the bank has-- it's running its platform, its services, and it's connecting through a distributed ledger technology to a corporate, which is permissioning what each bank-- or in fact, not just the banks, what everybody in their trade ecosystem will see, from insurers, logistics providers, et cetera. So by doing this, by the use of the distributed ledger technology and blockchain, it's allowing us to stop having a customer or a corporate have to log on to a lot of different applications. They can go to one application, being the ERP, and access many different services within their trade ecosystem.
We've talked a lot about this different approach, this new approach, a fresh approach to obtaining trade finance. For anybody who's watching who's a key decision maker, what key takeaways would you like them to remember from this interview?
Trade finance and working capital optimization is going digital. It's going to be easy to access. It's going to be highly secure through the security. It's going to be a lot less risk, operational risk, as well as transactional risk. And it's going to deliver greater access to products and pricing when they need it, at the time that they need it.
And all of which is great news for any organisation trying to obtain trade finance. And you've given us a bit of a glimpse into the future there, and it's great to see how technology is going to be enabling this sector too. It's been great finding out more.
Robert Barnes from TradeIX, thank you very much, indeed.
Alastair, thank you very much.