HSBC was the world’s largest trade finance bank by revenue last year, according to Coalition Greenwich competitor analysis for clients and corporates with annual sales turnover of more than $5 million to $10 million. It facilitated an eye-popping $800 billion of trade globally, all the while looking for new solutions to the challenges presented by the dominant themes in this business of sustainability and digitalization.
“At HSBC, we are focused on digitizing our global trade business at scale,” says Vivek Ramachandran, head of global trade and receivables finance at HSBC. “We are not just running pilots but trying to ensure all our clients see the benefits.”
And they seem to be. HSBC has also been voted the best bank in trade finance globally in Euromoney’s benchmark survey for the last six years in a row. Central to the business is HSBC Trade Solutions (HTS), which was launched in 2022 and leverages an application programming interface (API)-native, modular design and flexible tech-stack.
Shortlisted
- BNP Paribas
- Citi
HSBC reckons that the platform has improved its market response time by 300% at a much lower cost of servicing. The bank is now scaling this globally, offering intuitive digital journeys and faster processing.
“This is transformation done at scale. It is genuinely industry game changing,” says Ramachandran.
HSBC differentiates itself in trade finance by not only the scale but also the scope of its activities. The business is in the bank’s DNA.
“If we are in a particular country, transaction banking is a central part of our proposition there. If we are there as a wholesale bank, it is because of trade opportunities,” says Ramachandran.
Over the past year, it migrated more than 9,000 customers to the HTS platform, which was launched in Hong Kong and the UK – nearly all Hong Kong clients have now been migrated.
With 15,000 companies on the platform, the ambition is no less than to change the world of trade. The platform will be launched in new markets across the Middle East and the Americas this year.
The awards period was characterized by rapid, earlier and deeper financing of supply chains. At HSBC, examples of this include customizing a structured supply-chain solution for Segi Fresh in Malaysia, offering simplified documentation and competitive pricing for the supermarket chain, whose customers are in the bottom 40% segment of the population.
HSBC is also going deeper into supply chains, offering multi-tier finance. It is the first bank in China to integrate with China Supply Chain Cloud, implementing a multi-tier supply-chain finance solution for a platform that has 250,000 anchor buyers and suppliers. It has also partnered with Alibaba in China to offer a digital documentary credit solution for online merchants.
A key area of innovation is digital receivables finance, where HSBC’s platform is now live in nine sites, with around 275 corporates involved. The bank’s ethos is that innovation needs to touch more than one big client, and these types of applications – where indicative decisions now take two days rather than six to eight weeks – have potential across the world of trade.
“Doing one smart deal is easy,” says Ramachandran. “Doing it globally across thousands of small and large clients isn’t as easy.”
Ramachandran is intensely focused on the speed with which this industry is changing and the financing needs that go with that.
“The world of commerce is moving faster than the world of banking,” he explains.
HSBC has long emphasized the need for trade finance to develop as an asset class in order to attract institutional money to the sector. Drawing on synthetic securitization technology, the firm has developed a portfolio non-payment insurance product, which will insure a portfolio of granular trade finance transactions rather than individual deals.
This is transformation done at scale. It is genuinely industry game changing
Vivek Ramachandran
This should provide a simpler and faster way of distributing trade loans at scale and will extend insurance solutions to other parts of trade finance. The first such deal involved the distribution of trade loans in Hong Kong, achieving an 85% reduction in risk-weighted assets on the portfolio and freeing up capacity to lend.
While the application of distributed-ledger technology to trade finance may not be taking place as fast as many had originally hoped, HSBC remains at the forefront of developments in the field.
In August, it participated in Project mBridge, which experiments with cross-border payments using blockchain technology. It is a joint project between the BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China.
Between August 15 and September 23, 2022, 20 commercial banks conducted payment and foreign exchange transactions using the central bank digital currencies issued on the mBridge platform by their respective central banks. HSBC worked on the pilot involving a trade loan with a Hong Kong based company selling in China, an exercise that validates the proposition of cross-border payments in real time.
