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Going digital in trade finance: A corporate case study

Going digital in trade finance: A corporate case study 3

Going digital in trade finance: A corporate case study 4By Jacco de Jong, Global Head of Sales, Bolero International

Digital transformation has been a widely talked about topic closely linked to blockchain, AI, machine learning and especially in the realm of international trade and trade finance. But at the end of the day that is what it has mostly just been, talk. The questions that blockchain, for instance, have presented to the market have outweighed their original answers by ten-fold. In the world of trade finance every week there seems to be another POC or fintech partnership, which admittedly no one is completely innocent of, but ultimately what are the actual benefits to the corporates?

Therefore, in this article we take a step back and explore a case study of one of our customers, a multinational corporate (MNC) mainly using Bank Guarantees, who made the change over to digital. Specifically, a SaaS multi-bank trade finance solution, delving into the reasons for this change beyond just a corporate policy to go digital by x or y year.

To go back to the very basics the core purpose of digital transformation is the use of technology to overhaul and optimise processes, operations, and organisational changes. This may sometimes get lost in the excitement of adoption of a new technology for adoption’s sake but, at its heart that is what it is. Looking at our specific example the focus is on a process change of the communication, organisation and application for trade finance solutions. The company we are looking at is a telecoms multinational with multiple departments that deal with numerous Bank guarantees globally and many different financial institutions.

The somewhat ironic start of this story is that although this is SaaS solution is deemed to focus on trade, the search for a solution by said corporate was non-trade related at all,. its purpose was to handle their rental guarantees for stores globally. Therefore, given the wide use of guarantees for local divisions in several countries, the first key point of change needed was a central repository to show a complete list and monitor these transactions. Theoretically this could be done in an excel spreadsheet but the task of manually copying and pasting from several bank portals with several different divisions around the world to reconcile is enough to make anyone develop a migraine.

This brings us to the second point, the need for an open and direct digital channels between the different divisions and financial institution which aligns with SWIFT messaging formats. It’s hard to have a central repository without reliable channels to feed them instantaneously and with a well formatted solution ensuring these messages don’t get lost in translation from one institution to another. Now internal workflow management can be established between various teams to deliver accurate requests to banks and other financial institutions.

Overview of active transactions

A single platform for managing all, and in this case Bank Guarantee, transactions offers numerous benefits: It allows companies to manage transactions across the global supply chain, reconcile operations with all banks, streamline communications with financial institutions and consolidate guarantees on a regional or even global scale.

Also treasury departments of this multinational corporation are able to see, manage, and edit their bank guarantees if needed. This is particularly important because the corporation has subsidiaries or divisions distributed across the globe. The treasury departments needed greater visibility across borders and organizational boundaries in order to provide efficiencies at scale in use of credit lines, working capital and transaction management.

Ultimately, we have seen the centralisation of these transactions improve communication and coordination between parties, streamlining the use of credit lines and other forms of capital while facilitating a more efficient transaction process.

Enhanced features, continuity and innovation

One of this global corporation’s primary concerns was the phasing out of outdated but important solutions. This is an issue for all businesses, and in particular with this corporate, since the bank solution that they worked with before would  eventually be phased out.

When you work with a dedicated fintech, you should expect continuity, regular updates, and better features. The right solutions provider is constantly working to keep their products up-to-date and offer new features that their customers will love. In addition to this, because they will have replicated the process multiple times, they can offer their products at a lower cost than if it were to be bespoke developed in-house.

As a business, you want to be able to solely focus on your operations and workflows. Therefore you should make sure that the providers of those solutions have a vested interest in keeping everything running smoothly.

A global, robust an internal workflow management tool

Workflow management tools are being adopted in today’s workplace to streamline internal processes and increase efficiency. As organizations grow more complex, employees take on a growing number of tasks, and the need for automation becomes increasingly apparent.

This is particularly true for distributed organisations; where employees are dotted around the world, working from different locations, time zones and these days often from home. While this can be an advantage, it also means that there is a greater chance for the lack of cohesion when managing transactions in multiple ways.

In many cases, trade finance solutions can be used to keep track of deadlines and transactions across not only departments but also regions. This has the added benefit of improving transparency throughout the organization; particularly useful when trying to ascertain how workflows are operating across teams. In fact, another common benefit is that it can encourage collaboration; bringing people from different departments to work on transactions together whilst still maintaining secure levels of access and approval.

By utilizing this solution as an internal workflow management tool, this MNC has a reconciled and consolidated view of their bank guarantees for the banks they deal with as well as greater visibility across borders and organisational boundaries. This provides efficiencies at scale in use of credit lines, working capital and transaction management that were impossible to reach previously.

In conclusion, working with this global telecommunications company, we have seen trade finance solutions are important for corporations from different industries and verticals that are managing large volumes of financial instruments across the globe.

This corporate and many others are now able to employ one tool and one repository when managing their transactions and at the same time facilitate seamless communications with all their banks, a far cry from their scattergun manual approach.

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