Despite the current climate of economic nationalism, there is still a lot of trade to be financed, and with a renewed Sibos focus on this foundation of the global economy, digital paths will make it happen, reports Clarissa Dann
Globalisation and inclusion
In 2014 at Boston and at Singapore in 2015 (before the great trade silence in Geneva) the digitalisation of trade, along with opportunities arising from south-south trade filled conference rooms. Now there is less focus on trade corridors than on its longevity – the language of trade has shifted and is, says Dr Rebecca Harding (a Sibos speaker and contributor to flow) “it becoming used as a tool of state strategy and foreign policy” Joined by Daniel Schmand in a video interview with Finextra, she says, “trade growth has stayed flat for a long time, which is a concern,” and both commented on the conundrum of there being a lot of trade finance liquidity in the market – but that none of this is plugging the trade finance gap (estimated by the Asian Development Bank poll of 500 banks to be around US$1.5trn now). One Belt One Road, said Schmand is a significant trade finance opportunity because “it’s not just the infrastructure, but the content – the supply of technical equipment such as cranes and machinery from developed economies - that brings the financing opportunities”. This is the new globalism, both Schmand and Harding agreed, that counters the economic nationalism epitomised by Brexit and Trump.
Financial inclusion came up at Innotribe, developing Bill Gates’ call to action in the Sibos 2014 closing plenary, with a demonstration of the open source platform mojaloop connecting financial providers and customers in emerging economies. And it is this area of financial isolation that Schmand is leading the ICC Banking Commission on – with solutions. “My big hope is that in the next five years we will have so-called ‘blockchain’ or ‘smart contract’ rules. The technology is there. What is missing is the legal ecosystem and framework to support smaller players to engage in an easy access platform,” he said. Schmand will be talking more about this at the United Nations event he is addressing in New York on 16 November 2017.
De-risking, rulemaking and collaboration
Tackling financial inclusion is one of three pillars of the ICC Banking Commission’s ‘Strategy 2020’ which sets out to address the problem that financial institutions are stepping down from trade finance because “they consider that it is no longer a straightforward business”. The other two are rulemaking and advocacy. Former BNP Paribas trade banker Olivier Paul heads ICC Policy and set out plans to revise and expand the scope of UCP600 when more is known about digitalisation trends. A more immediate priority is the reissue of eUCP, “a limited basket of rules”. Following the publication of the supply chain finance definitions in 2016, the industry can expect “further rules and guidance in the SCF space from the ICC”, he added. Senior Policy Manager David Bischof also made the point that “we have a very inclusive consultative process but an ambitious time line, especially for eUCP and collections”. Four-year gestations for rules and guidance just won’t do in such a fast-moving environment. Advocacy continues with regulators with the Trade Register as the main tool used to argue for the favourable treatment of trade finance as an asset class under the Basel accords. ICC Banking Commission Chair Daniel Schmand brought the session together with a reminder that despite the fall in commodity prices and certain countries becoming “unbankable”, “there is still a lot of trade out there to be financed”.
Digitalisation of trade
It was time for some action rather than another round of discussions, and this was why it was refreshing to have Roberto Mancone, Head of Disruptive Solutions and Technology from Deutsche Bank’s Chief Digital Office talking about something that was actually about to happen, and clearly others felt the same as Conference Room 4 was full. Eight founding banks (including Deutsche Bank) are developing a shared platform designed to improve the experience of domestic and cross-border commerce using blockchain technology. “We have worked on the user experience to make it more intuitive than what is around at the moment in the world of supply and trade finance,” said Mancone (with Apple-like fervour). Clients of these banks will be testing the platform from February 2018 and it will be commercialised by Q2, said a press release. Other banks are welcome to join in the action. KBC’s Hubert Benoot reflected on how what has now become rebranded as we.trade from the former Digital Trade Chain had started out as a “smart potato export contract”.
André Casterman’s popular SWIFT Auditorium session that showed how the Intix Transaction Tracker could be enriched with SWIFTgpi to analyse cross-border transactions. ING’s Dermot Canavan (Head of Trade Finance Services Product Management) wowed fintech enthusiasts over in the fintech theatre with a presentation on how his bank had introduced OCR and user supervised machine learning to digitise trade documents for sanction screening and compliance controls.
New industry blueprint
It fell to the panellists at the final trade session of Sibos Toronto 2017 (‘Building a new industry blueprint in trade and supply chain’) to sum up progress so far. J.P. Morgan’s Mike Quinn, responsible for global trade and loan products pointed out the obvious but unarticulated thought, “None of us make money from processing paper but financing and risk mitigation. There is a lot of paper in the system. The challenge is how we take it to the next level and create capability.” But the mood was upbeat. Mike Lim, Head of Trade and Supply Chain at ANZ summed it up. “It feels as if we have the greatest momentum and best chance of success at the moment.”
Sibos 2017 Toronto was held at the Metro Toronto Convention Centre, Canada between 16 and 19 October 2017 with more than 8000 attendees
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