BANKING ON TRADE: A MARKET OF OPPORTUNITY

Dominic Broom, Global Head of Trade Business Development, Treasury Services, BNY Mellon, and member of the ICC Banking Commission’s Executive Committee, examines the evolving world of trade, and how harnessing data is key to enhancing the trade experience.

Global trade has undergone significant change in recent years, resulting in a positive, robust marketplace and presenting new opportunities for businesses across the globe. This new trading landscape has been driven by two key factors.First, has been the rapid evolution and development of new economies. The continuing integration of emerging markets –most notably in Asia and, to a degree, Latin America – onto the world stage is fuelling a shift in trading dynamics. Not only are we seeing new trading corridors, which are opening doors to new trading partnerships, but further evolution is at play.

For example, in a short space of time, China has come to dominate world trade in terms of volumes of goods shipped and imported, driven by the low cost production of goods and its integration into the world economy following WTO accession. However, as China becomes a middle market economy, its focus is moving towards higher value goods production – including LED screens, automotives and jet engine components. This has meant that the manufacture of cheaper goods has been diverted to new markets, such as Indonesia and Vietnam. Subsequently, this is opening up the potential for additional new trading partnerships.

Secondly, technology is having a profound effect on the physical supply chain; altering how we trade almost beyond measure, by enabling the trackingof containers, the effective, efficient management of shipping lanes, and the development of logistic hubs around the world.

The power of data

Technology is also playing an increasingly important role intrade finance, where it is creating opportunities to transform existing processes– including the interchange of data, data analytics to unlock value throughout the supply chain, documentation exchange and approval, as well as the adoption of common documentation standards to help ease the passage of goods, materials and services across the globe. What’s more,an increasingly holistic view of data points enables transparency over transactional detail, from an end-to-end standpoint.

Technology can also improve the ease of doing business. The development of digital platforms for use by trusted user groups – environments where counterparties are known to each other, and where trade data and information can be exchanged and used by different participants across the trade finance arena, to enhance existing processes – is a potential area where the industry could evolve and see significant benefits.

Effective, efficient data management is integral to improving standardisation and enhancing trade.However, of course, increased regulation introduced following the financial crisis has meant that data sets have become more complex, with far greater Know Your Customer (KYC) and regulatory-led analysis necessary. Again, collaborative databases could help to streamline existing processes by removing the need for multiple banks to duplicate due diligence; reducing costs, ensuring data integrity, whilst maintaining the probity and sanctity of the global financial ecosystem.One such example is the Global Legal Entity Identifier (GLEI) initiative.

In turn, this could potentially help to alleviate an issue which is having an adverse impact on the true potential of global trade: the trade finance gap. Currently standing at US$1.5 trillion, this is having a particular impact on SMEs in emerging markets. But by harnessing technology, the industry could look to support business growth and unlock new global trade opportunities.

Together for trade

Trade finance is becoming a data-led, data management business. With new digital capabilities being developed, banks need to be able to provide effective solutions that are robust and meet both evolving market, and client, needs.

Not only can technology investment enhance the transaction experience by delivering improved speed and transparency, it can be used to identify opportunities and to help nurture existing relationships. For example, banks can use technology to leverage data and gain insights into business trends and client behaviours – enabling an enriched understanding of clients’ businesses.This enhanced level of understanding is also particularly important with respect to country- and region-specific requirements and preferences, and is how banks can add real value to the individual client experience.

Investment into new technology can, however, present significant challenges for many banks, but correspondent banking partnerships between local and global banks can provide the answer. Such non-compete alliances are powerful means by which banks can share technology capabilities – as well as knowledge and expertise – in order to provide the very best service and solutions for clients.

The trade landscape is evolving at an astonishing rate, driving a globally dynamic, vibrant marketplace where transactions can be carried in a more seamless and streamlined manner than ever before. Trade finance has never been more broad reaching and data-led, soby leveraging new technology capabilities, banks can adapt to the new landscape, deliver optimised solutions to their clients, and capture the true breadth of global trade opportunities on offer.

Dominic Broom will be participating in two panel discussions at the ICC Banking Commission’s 2018 Annual Meeting in Miami, taking place from 3-6 April. Register now to catch these panels, and other key discussions reflecting on and influencing the global trade finance landscape: https://iccwbo.org/event/icc-banking-commission-annual-meeting/#1483539125972-12de17fa-1034cc7e-5a0dece0-8b5e4357-bde48474-13102dd1-317a

The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.