Transaction services was affected by the pandemic in two significant ways. One was on the cash management side, where there was a forced acceleration of digital initiatives and of their take-up by corporate clients. That was interesting, but by and large it was happening anyway.
The other, which was particularly important in Asia, involved trade finance, that most stubbornly paper-based activity and the only reason anyone still owns a fax machine. Trade flows, already disrupted by US-China geopolitics, were disrupted once again by Covid. It was both a painful situation and a huge opportunity: could trade finance finally be dragged into the digital world?
HSBC receives the award as Asia’s best bank for transaction services for its efforts in this area. HSBC is a comfortable leader in Asia in Euromoney’s annual trade finance survey, leading on almost every metric we evaluate including, and this might surprise some, digital.
HSBC’s trade transaction volumes, something of a proxy for Asia generally, bounced back remarkably quickly from Covid: the bank’s fourth quarter of 2020 was its best for eight quarters. By April 2021 monthly transaction volumes were up 44% year on year. That’s obviously from the trough, but it’s also up 36.6% on the same month in 2019.
Trade, and HSBC’s slice of it, has more than bounced back. Although precise data can’t be published, Euromoney understands the bank’s share of trade finance grew in both Hong Kong and Singapore during the review period. And generally speaking, all 19 Apac markets the bank covers in the region – the greatest penetration of any bank – are doing well.
It’s got scale, but did it advance the industry? It did and there are several examples. HSBC has been a key backer of Contour, the blockchain platform that provides digitized letters of credit, which are at the heart of paper-based trade finance. HSBC is not the only peer bank in Contour, but it has been central in the development of the initiative from its origins as Voltron and went live on the platform in December. Ajay Sharma, HSBC’s regional head of global trade and receivables finance, considers it ready for commercialization.
The review period also brought the first digital end-to-end trade finance transaction riding on the connectivity between the eTradeConnect blockchain trade finance platform and a customer’s enterprise resource planning system, with HSBC completing the transaction.
Although trade is the area we are focusing on this year, HSBC did plenty more. Examples include: the development of an e-CNY digital version of the renminbi, with HSBC helping clients build more than 90 renminbi cash pools to date; new systems for working capital management; a new global wallet project for business banking clients, launched first in Singapore; and a venture with Temasek and the Singapore Exchange to launch a distributed-ledger technology platform for tokenized fixed income securities, the first of its kind in Asia.
In securities services the bank has rolled out its custody trade and holding application programming interfaces (APIs) to 11 Asian, Middle Eastern and north African markets; and it is making progress in using big data to improve client experience.
The background to all of this is the promise of more investment as part of HSBC’s Pivot to Asia strategy, with a particular focus on expanding areas outside Greater China.
