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CROSS-BORDER TRADE FINANCE TRANSFORMS THE SME INDUSTRY.

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Trading

Cross-border trade is as old as trade itself. Some features haven’t changed over the centuries: astonishingly large volumes with often eye-watering risks and rewards. In 2011, the World Trade Organisation estimated that around $17.8 trillion (USD) was traded globally. To put that in perspective, the value of global trade in 2011 in one year was approximately twice that of all the US dollars on the planet!

Unsurprisingly for such a large industry, the complexities of world trade have become mind-boggling, as interminable rounds of trade negotiations between nations bear witness. . The fundamental principles and hence challenges for traders remains the same, despite attempts to create universal frameworks, protect national economies and reach agreements.

The value of goods or services in one place can have a different value elsewhere. A profit can be made by purchasing from abroad and selling at home. The problem is that purchase and sale take place in different places and different times. The seller needs to be paid before releasing the goods and the buyer won’t get paid till he sells them at home. Bridging that gap – “financing the trade” has become a huge and diverse collection of businesses. And rather than becoming simpler, the techniques have, rather like evolution, tended to become increasingly complex.

Toby Lanyon

Toby Lanyon

As the complexities increase, so do the risks – and the transaction costs. These risks (dispute, credit, documentary, process, execution, currency and fraud) must be mitigated or eliminated for trading to function properly. But with the maxim that “no two deals are identical”, today’s “traditional” cross-border trade facilities frequently generate mountains of paper, defying all attempts at simplification.

The problems are part logistics, part bureaucracy and part finance. While the first two are being well addressed by advances in technology, a fundamental problem means the same cannot be said for the finance.

The money involved has had to be connected to the physical goods or services traded. “I will only lend you, the buyer the money if I, the lender can either get hold of the goods (or equivalent value assets) until you pay me back”. This link between money and goods has remained intractable, and is largely responsible for the continuing complexity of trade transactions. If this link could be broken, goods could move more freely, benefitting fully from today’s advances in logistics management, while the money could flow freely and quickly from buyer to seller.

One company has broken this link and aims to change fundamentally the way in which cross-border trade is conducted. TradeRiver, a supply chain financier allows its enrolled buyers to purchase goods for cash in local currency anywhere in the world without getting involved in the location, state or condition of the goods or, importantly the value as agreed between buyer and seller.

Provided the buyer commits to repaying TradeRiver the value of the goods in the future, TradeRiver will release full payment to the seller at any point determined by the buyer without reference to the goods beyond ensuring that the goods are not illegal and that buyer and seller satisfy the relevant anti money-laundering and company ownership due diligence legislation.
Using a simple online process, buyer and seller create the details of their trade and each party agrees to and signs for the details digitally. At the point the buyer agrees to repay TradeRiver on a buyer-determined date in the future, TradeRiver immediately pays the seller the full transaction value in local currency. In this way, a buyer can effectively purchase for cash on the other side of the world at a point that he, the buyer determines. The process is the same for every transaction and is used by buyers to pay at any point, from pre-manufacture to post-delivery and inspection.

For the first time, goods and their payment are completely separate, making cross-border trade arguably no more complicated than an online credit card purchase from an overseas retailer. As TradeRiver’s COO, Toby Lanyon, says: “our solution works equally well within the UK or from overseas, but in many cases our cross-border customers access financing which, quite simply, would either not be available at all from traditional facilities, or which would be fiendishly complex and expensive to put in place.”

“Our challenge”, he continues “is to change the way trading partners look at their cross-border transactions. As the number of customers using our solution grows, it is possible to imagine a global network within which, since everyone is using the same process, the flow of trade goods and services becomes no more complex than any other online purchase.”

Five reasons why alternative finance is great for importers and what this means TradeRiver can offer.

TradeRiver offers many advantages for UK importers wanting to purchase goods and services not only from the UK but also from abroad.

Here are the top five reasons why alternative finance is great for importers…

1. Pay suppliers easily and quickly with the confidence of a cash buyer

Via a secure online platform, a transaction can be immediately confirmed online.
The supplier will receive payment for their goods or services, – wherever they are in the world.
Using TradeRiver gives Buyers the confidence of a cash buyer, allowing them to negotiate better pricing and terms with their suppliers.

2. Payments and administration are paperless and transparent

Paperwork and administration costs are reduced and payments accelerated by creating and executing the entire transaction on our secure online platform.

3. No restrictions

There are no restrictions on the type of business financed: whether a retailer, manufacturer, wholesaler or service provider, TradeRiver can provide buyers with a pre-approved revolving facility. There are also no restrictions of where the goods or services are imported from – the supplier can be from the UK or from anywhere else in the world and TradeRiver is financing imports from Asia, South and North America and Europe.

Finally, TradeRiver does not restrict transaction size, supplier concentration or the point in the trade cycle at which suppliers are paid.

4. Flexible trade finance

Buyers need only use their facility when needed: interest is only charged on amounts drawn and there are no costs involved for setting up a TradeRiver facility and no non-utilisation or management fees.

Because buyers are in control of the funding, they can pay different suppliers within their credit limit and enjoy up to 120 days to settle the balance.

5. The TradeRiver Finance solution is uncollateralised

TradeRiver facilities do not affect existing loans, credit facilities or finance arrangements and are secured against credit insurance which TradeRiver puts in place. TradeRiver is a trade finance specialist, not a bank – so working with them causes no conflict with existing banking and finance relationships.

Written by Toby Lanyon, COO

Chief Operating Officer – Toby Lanyon

Managing Director and Head of the Middle East at European Islamic Investment Bank Plc in Bahrain from 2007 – 2009, Toby has 15 years broad-based investment banking experience throughout the Middle East. Previous roles also include Head of Equity Derivatives marketing for BNP then BNP Paribas from 1995 until 2005 as well as being a Director at Nomura Investment Bank from 2005 – 2007. With degrees in electrical engineering and aeronautics, Toby started his professional career as a Royal Naval Officer and Fleet Air Arm research and development test pilot.

About TradeRiver Finance (TradeRiver)

TradeRiver is an online funding solution that provides trade finance for SMEs, allowing them access to working capital at any point in the supply chain to help support and grow their business. It works by providing the buyer with a pre-approved revolving facility that can be used to finance trade with multiple suppliers. Payments and administration are paperless and transparent via our secure online platform.

Established in 2009, TradeRiver has attracted a fast-growing community of forward-thinking businesses looking for an alternative to traditional trade finance. Buyers and sellers in any supply chain can now benefit from a level of flexibility, responsiveness and agility that simply isn’t available from traditional bank-based finance.

By offering this service, TradeRiver helps provide the life blood of economic small business growth in the UK. In an environment where mainstream lending to UK businesses is in decline, TradeRiver provides a viable alternative for SMEs looking to plug funding gaps in their supply chain, having loaned over £30 million in the last two years.
www.traderiverfinance.com

Finance

Beyond Transactions: The Payment Revolution

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Beyond Transactions: The Payment Revolution 1

By Marwan Forzley, CEO of Veem 

The uninterrupted disruption brought on by the pandemic accelerated the need for robust, digital-first tools created to support remote teams and accelerate online commerce.

As offices across the US moved to work from home for indefinite periods, specialized back office departments handling sensitive information have had to go a layer deeper to find tailored solutions that support the transition of their in-person workflow. For finance teams, payment approvals, issuance, and general management became a challenge overnight. Particularly for those who — even in 2020 — continued to send and receive paper checks through the mail.

For years and even to this day, millions of small business owners around the world have relied on slow and confusing bank processes to manage their business finances. Every day, they spend valuable time using old, complex and expensive platforms to transact with domestic and international vendors — never knowing where their payment is or even when it arrives at its destination.

With ongoing economic and logistical uncertainty looming as we move into 2021, this old norm should not be expected for much longer. This year has seen small business owners wear more hats than ever before, and has influenced a mass adoption of online financial applications that offer heightened security, save more time, and provide more value as budgets tightened.

A study conducted by Mastercard earlier this year saw online business-to-business payments skyrocket in popularity with more than half (57%) of small business owners across North America turning to digital services since the start of the pandemic to improve cash flow and modernize their payment processes.

If this study is of any indication, the days of making an appointment with a banker or sending a wire transfer through an outdated web portal have passed. And the time for the payment revolution is here.

Putting the user in the driver’s seat

Major world events have always acted as a catalyst for innovation and change. As of a result of the growing pains we experienced this year, in 2021 businesses can finally say goodbye to huge transaction fees and bank-imposed gatekeeping when it comes to managing their financial processes.

The financial technology firms, in partnership card and local bank networks and sometimes even each other, have been building and iterating on products over the past decade that were created to work flawlessly from a desktop or smartphone.

For the first time, small businesses have access to needed, user-friendly financial tools packaged to make their lives easier. No longer reserved for major enterprises, those previously underserved by traditional banks can sign up for applications that consolidate billing, payments, working capital and more to one central dashboard.

With the owner in the driver’s seat, they can better communicate with vendors and customers and reallocate their time previously spent manually sending, receiving and reconciling payments toward growing their business — without ever stepping foot out of their home.

Marwan Forzley

Marwan Forzley

Genuinely seamless and automatic integrations with complimentary functions aligned to core financial activities mark a fundamental change in how businesses will choose to operate moving forward. Not only should experiences be integrated, but the entire lifecycle of the transaction should be digital.

Consider a freelance contractor that uses a time tracking and invoicing software to invoice a client. Through an integration between the time tracking tool and Veem (a complete online business payment tool) the client receives and captures the invoice within their Veem payment dashboard. Because Veem and Quickbooks are integrated partners, as soon as the invoice is received, a bill is automatically created, marked as paid, and reconciled on the client’s accounting software as soon as the funds are issued.

In this flow, the contractor only needs to send an invoice, and the client only has to approve the payment for everything else to move. Thoughtful integrations like these empower businesses to log-in to one application, but benefit from several, ultimately eliminating inefficiencies.

Relentless transparency

Understanding that old habits die hard, it’s expected that businesses of any size have questions when it comes to moving payments from a bank to an online provider.

Answering these questions with unprecedented product value and relentless transparency is the best way forward to bring more businesses onboard in 2021.

This means providing up front pricing, tracking, choice and flexibility to users. Before, during and after the pandemic, cash flow management remains the most critical part of running a small business. Digital payment providers enable the entrepreneur to have unparalleled insight, visibility, and control over their cash flow.

Through non-bank payment options, businesses can secure their information over a secure data network, watch their money move from origin to destination, and choose the speed at which they would like funds to move. By these tools working in harmony, the user can remove friction and spend more time focused on their business.

Separating the signal from the noise

2020 is a year that changed everything for the global small business community. In a report by Veem issued at the start of the pandemic, an overwhelming 80% of businesses shared that they anticipated COVID-19 to impact their business over the next 12-16 months. Problems surfaced that many didn’t even realize they had. And in finding those problems, businesses turned to technology to support them.

As enabling technology, it’s our job to listen and bring clarity and solutions to those contributing to and growing our local and global economies despite the hurdles and challenges they’ve faced.

Right now, small businesses deserve more. More access, more choice and more credit. In the road ahead we expect online payments and bundled user friendly financial services to play a pivotal role in the recovery of small businesses. The payment revolution will see the continuation of important and meaningful products that value the users time and enable businesses to launch, grow, and scale regardless of what’s to come in 2021.

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Finance

The UK’s hidden payments crisis: why businesses should rethink their payments strategy

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The UK’s hidden payments crisis: why businesses should rethink their payments strategy 2

By Edwin Abl, Chief Marketing Officer at Modulr.

As the economic conditions imposed by the Coronavirus endure, businesses are facing a dilemma about how to reduce operational costs while meeting customer needs in as economical a way as possible. And all without compromising on their quality of service.

A recent survey of 200 payments decision makers across the UK, revealed there are hidden costs of payment processing which will have an exponentially greater impact on wider businesses if left untreated. It found, UK businesses are spending an average of £1.5m a year in costs attached to payments – money they simply cannot afford to lose to inefficient processes in these uncertain times.

Businesses need to plug any holes in their boat to avoid sinking. And for many this includes the examination and recalibration of their payments strategy.

The research reveals that the payments process now represents a huge 12% of a business’s total operational expenditure. With two-thirds (64%) of all businesses expecting the cost of payment processing to increase over the next two years.

Two thirds (67%) of payments decision makers surveyed believe the way they process, and service payments has had a direct impact on their customer experience. In fact, 62% of respondents believe the hidden costs of poor payments outweigh the hard costs. This indicates that a poor payments strategy is no longer something business leaders can ignore, as it now has a far greater and unseen impact on wider business mechanics.

The top three hidden costs attached to inefficient payment processes were ‘impact on customer experience/satisfaction’ (38%), ‘influence on relationships with other teams and departments (35%) and ‘impact on competitor differentiation’ (31%).

These findings suggest there is widespread consensus that getting payment operations right, directly creates performance boosts elsewhere in the business. When asked to estimate, as a percentage, the business performance boost received if hidden payment inefficiencies were resolved, the average margin for improvement was +14%, with traditional banking the sector most likely (31%) to predict a performance gain greater than +15%.

The 5 key steps UK businesses can take to drive payment efficiencies

There are five key areas payments decision makers and tech leaders should be looking to change, so that they can drive end-to-end payment process efficiencies:

1 – Locate hidden payment process inefficiencies

Visibility is a key issue. Respondents across large (46%) and small businesses (47%) say they have very clear metrics directly related to payment process costs. Only 8% say that they don’t understand the costs involved. Yet, businesses know they could do better with improved visibility of costs. Both large and smaller companies cite ‘lack of visibility for operational costs’ as the top challenge when it comes to achieving strategic goals around payment process and money services provision.

Digital banking companies, including lenders and FinTechs, identified ‘lack of visibility for operational cost’ as a challenge when it comes to increasing payment services revenue (37%). This is in comparison with all respondents mentioning other issues such as lack of skills (25%) and constrained resources (25%) as secondary and tertiary challenges respectively.

For many businesses, developing a cost model for current and projected payment process costs, both hard and hidden, is a top priority.

2 – Make payments key to stakeholder experience management

Customer, departmental and even supply chain partner experiences are increasingly intertwined. There is no doubt that customer experience is a top priority for payment services strategy. But enhancing the broader stakeholder experience is a close second, and certainly complements the former.

Employee experience affects customer experience. So, payment services innovation must extend beyond customer touchpoints. Happy employees who feel they are working with effective and efficient payments systems will be best placed to enhance the customer experience. And, employees in commercial roles who have bought into the benefits of efficient payments will naturally want to extoll those benefits to customers.

Edwin Abl

Edwin Abl

Companies with a sophisticated and integrated supply chain are likely to be the frontrunners in implementing the integrated payment services that benefit all stakeholders, due to their historic experience. As customer experience management evolves into a broader discipline of stakeholder experience management, including employees and supply chain partners, it will become more crucial than ever to include payment services experience

3 – Integrate and automate to support payment innovation

Payment innovation is driving a culture change, connecting previously siloed functions such as IT and finance. There is increasing integration of systems from customer relationship management (CRM) and enterprise resource planning (ERP), into accounts and payments. The research tells us that payment processes are impacting nearly every department, affecting areas including customer experience, brand, leadership, business agility and ultimately, revenue. Integration enables new business models for paying suppliers and customers.

Automation is key to driving efficiency, replacing manual error-prone and time-consuming processes with real-time and responsive, digital ones. This is particularly the case when it comes to operational and payment processes.

Indeed, 52% of large companies say that team hours spent on payment processes was their biggest hard cost attached to payments, compared with 26% of smaller companies who share that view. This suggests that automation could contribute more to cutting the cost of payment processes in large companies.

A host of payments-as-a-service providers (including Modulr) are supporting customers to do just this by enabling them to stream a whole unified product ecosystem of payments functionality directly into their own software.

4 – Bring business leaders together

Payments innovation is driving systems integration and creating a more collaborative stakeholder ecosystem. As all the C-level roles become increasingly focused on the customer experience, the finance remit now includes overall business operations and its associated risks and opportunities. The role is evolving beyond just accounting, tax liability and funding. Therefore, closer collaboration between senior leaders is key to driving efficiencies and enhancing customer experience.

5 – Innovate by adding finance and payments to vertical services

Companies with a vertical focus are well placed to innovate by offering new payment services. In many vertical sectors, especially employment services, software vendors are increasingly embedding financial services facilities, such as payments, into their technology platforms. Employment services SaaS providers, across payroll, accounting, bookkeeping and more are offering financial services to existing and new customers within their specific ecosystem.

This means they can develop hyper relevant, convenient and delightful financial products and services for their end users through highly flexible, ‘plumbed in’ payments. This creates an ecosystem of stickier products while boosting the lifetime value of each end user.

Moving forward – engaging technology to drive efficiencies

If the onset of the Coronavirus crisis has taught us anything, it is that there are many advantages to investing in technology and having a digital infrastructure as responsive as your customer-facing experience.

However, whilst digital technologies enable companies to provide customer service in new ways during lockdown. These same businesses are failing to transform their digital strategies, with the biggest priority still being cost reduction (41%).

By not shedding legacy technology and shoring up operational efficiency, UK businesses are following an increasingly risky strategy. And one which will have an exponentially greater impact on the wider business if left untreated. Particularly when this widespread failure to act concerns the customer experiences that sit at the very heart of a proposition – the payments.

To find out how you can drive payment efficiencies into 2021 and beyond, download the full report here for all the insight you need.

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Finance

Gain financial regulation qualification online

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Gain financial regulation qualification online  

Warwick Business School in partnership with the Bank of England are delighted to offer two online specialist Postgraduate Awards, which are perfect for anyone working in financial regulation to evidence their professional development.

  • Financial Conduct, Leadership & Ethics – Starting in February 2021
    You will debate and cover questions such as how do financiers judge ethical questions in financial markets? What are the implications for regulators and for clients?
  • Financial Regulation & Supervision – Starting in June 2021
    You will develop a comprehensive understanding around financial regulation by looking at topics such as its tools, benefit and practical application.

Studied online over a period seventeen weeks, you will gain a detailed knowledge of the subject, learn industry best practice and gain a qualification to evidence your understanding.

The wider Global Central Banking & Financial Regulation qualification offers three start dates and four qualification levels.

Gain financial regulation qualification online 4

Invest in your career

Find out more about these Awards and the qualification levels offered by Warwick Business School in partnership with the Bank of England, by downloading the brochure here.

This is a sponsored feature

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