DBS and Standard Chartered make strides to overhaul their trade finances operations
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Trade finance has conventionally been a lengthy and paper-heavy process, and it has come under the spotlight as many banks look to revamp it. Last week, two banks in particular made strides to overhaul such processes by joining networks and forging partnerships.
DBS has completed the first digital trade financing settlement on Singapore's Network Trade Platform (NTP), per Finextra. For the transaction, DBS worked with NTP to offer the digitized service to Audi and its local distributor Premium Automobiles on a $3.5 million letter of credit.
NTP aims to help streamline the trade finance and supply chain industry: By using the platform, companies don't have to physically present paper-based trade documents to complete a letter of credit transaction and can instead do so online by leveraging NTP's features like its online cloud-based repository offering, and an SFTP connection or API integration for document sharing. Using this process, DBS can complete the financing in under one working day, down from the conventional processing time of around one week.
Standard Chartered has teamed up with software provider Infor Nexus to overhaul its supply chain finance process, per Finextra. Manually matching data for supply chain finance is a time-consuming undertaking as it often includes documents from third parties, which can result in delays of the trade finance process, and potentially reduce the working capabilities of suppliers.
However, by using Infor Nexus' network, which includes over 65,000 business members across various industries, Standard Chartered is able to digitize data matching across documents like purchase orders, invoices, and transport documents, thereby speeding up its trade finance processes.
While a number of banks have explored blockchain-enabled solutions to streamline trade finance, these two examples illustrate an alternative. Over the last few years, we've seen banks explore and implement blockchain technology to digitize trading processes, including HSBC settling $250 billion in forex trades using blockchain technology throughout 2018.
And there are reportedly 30 consortia globally, such as R3, looking to leverage blockchain for trade finance. But while blockchain is often praised for streamlining conventionally tedious processes, it has also met a fair share of criticism within the industry, with Bank of America's tech and operations chief Cathy Bessant expressing skepticism about the benefits of blockchain (despite the bank holding numerous patents for the technology) and regulatory uncertainty posing a big barrier to blockchain adoption, according to global finance executives surveyed by PwC.
Hence, options outside of blockchain to overhaul trade finance processes, such as the NTP and Infor Nexus' offering, could be worthy alternatives for banks to consider.
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