Join the dots digitally for better trade financing
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Join the dots digitally for better trade financing

Technology that joins up every stage of a trade and brings together a wealth of data will one day help businesses make fast financing decisions and borrow cash the moment they need it.

George Evers,
Head of Channels, UK

Although some years away, companies will have easy access to a wealth of transaction and supply chain data – enabling trade-by-trade financing and eliminating the need for less efficient tools like overdrafts. It will make day-to-day operations more capital and cost efficient and trade financing more agile and accurate.

This will become possible as banks and their technology partners continue to work towards a single digital ecosystem that integrates their supply chains into one, easy-to-access platform.

There will be lots of niche players in financial services, all very good at what they do, but their systems will be connected together and companies will access them through banks.

As the focal point for this ecosystem, banks will be ideally placed to link together key business processes so that corporates and their customers can experience seamless trading.

Such an ecosystem will enable treasury departments to get all the fiscal, currency and share price information they need in real-time, in one place. It will provide instant access to all their outgoing and incoming trade flows, including currency flows, enabling them to hedge their positions accurately and make fast financing decisions.

In turn, this means that when they want to borrow money, they can ask for the exact amount they need when they need it.

It will also make it much easier for companies to manage their supply chains, commodity structures and monetisation quickly and efficiently – making the most of their balance sheets while minimising third-party risk.

But for full integration to work, businesses need to ensure their systems can support rapidly emerging standards – established ‘norms’ within technical systems – which will make it possible.

Currently, technology platforms are too fragmented and different, with companies needing multiple log-in details for multiple systems, sometimes even within the same bank.

Pressure on margins, and the resulting demand for more flexible and efficient operations, underpins a drive to change this and join up all elements of a transaction under one digital umbrella. Businesses want to handle everything from funding a purchase, managing the associated risks and settling the payment in a single system.

The banking industry is responding to this and has already made progress. It is increasingly focused on delivering new approaches to design and deployment and embracing a common set of standards.

For example, working with technology provider SAP, RBS is one of a number of banks enabling companies to use a range of services securely ‘in the cloud’ with just one log-in. It creates a one-to-many integration model that makes it faster and easier to access those services and eliminates the need for a company to integrate their systems with numerous organisations.

As for standards – regulation is embracing them while technology is making them easier to adopt. As a result, their use is growing – predominantly in transaction services and particularly in payments and collections.

They are central to the Single Euro Payments Area (SEPA) regulation – a drive to simplify and harmonise payments across Europe by developing common financial instruments, standards, procedures and infrastructure.

But standards will be central to all aspects of e-commerce – now developing off the back of SEPA.

They form a core part of e-invoicing platforms for example. Banks are building these platforms to connect their clients with suppliers and enable them to share information quickly. This easily accessible flow of invoice information could lead to businesses making early payments and enjoying the associated favourable terms.

Standards are also crucial to the electronic bank account management (eBAM) initiative, which enables companies to manage all elements of their bank accounts digitally, including corporate signatories and exposures.

One simple but highly effective benefit of it comes when a company appoints a new finance director. Currently, the new person’s name has to be added to every system the company uses to connect with each of its banks.

But with eBAM, and the standardisation it brings, the company only needs to make the change once, as it filters through to all platforms.

Most companies’ treasury management platforms are provided by a third party. Businesses need to understand the emerging standards that those third parties are using and where they are on the road towards their adoption.

We are on the cusp of enormous technical change that will give businesses unprecedented access to financial information – while making their processes across the board far more efficient and cost-effective.

Businesses that make the right decisions on this and adopt the right standards will reap the rewards for years to come. 

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