Interview - Graham Bright

Q Global trade transactions have traditionally been seen as complex, costly and timeconsuming, but in just five years Euro Exim Bank (EEB) has helped to change the way people see and manage their trades. What can be done to make borderless trade even more popular and accessible?

Borderless trade, with its complex ecosystem, is not just about payments. What businesses across the globe crave is good transport systems, faster access to verified data, fewer intermediaries, seamless exchange and inter-operability of IT processes, transparent transaction and settlement times, and above all, reasonable fees. There are consistent barriers and challenges, but borderless trade can be improved with the following considerations:

More use of Free Trade Agreements (FTAs) Today more than 400 agreements are in place across the globe, designed to improve the flow of goods and funds between groups of neighbouring countries, by unlocking tariffs, freeing up movement across once-complex borders, reducing the bureaucracy and tightening trade alliances. FTAs are a valuable and significant component in assisting frictionless trade, and companies should be encouraged to seek out and participate where possible.

Improving liquidity Availability of funds and access to foreign currency continue to be a barrier to successful borderless trade. Banks in smaller countries with lesser-traded local currencies are not as able to support large foreign transactions requiring access to costly fiat currencies. By using Ripple as a provider of almost unlimited liquidity through the On-Demand Liquidity system and without the requirement to use costly fiat currency, companies in countries that depend on local currencies can transact seamlessly with one another, with an underlying use of XRP cryptocurrency supporting the trade.

Use of alternative finance providers A growing market has emerged in the form of financial technology companies offering alternative financing options to those of traditional banks. Often unencumbered by local restrictions and with cloudbased systems built with non-legacy technology, they provide online cash management, crowd funding, FX Risk Management, Trade Finance and foreign exchange hedging, all of which are essential to companies trying to improve their cash flow, compete, and be successfully paid in international markets. These innovative, blockchain-enabled payment platform technologies enable companies to access and maintain a full suite of cross-border capabilities and supply chains in one digital space. Clearly, those companies working with a payment/service provider with the right technology and local expertise are more likely to maintain and grow market share.

Understanding the culture Localisation is critical for any company selling to another country or region. Understanding the culture, market and customer needs, and ensuring that their marketing, websites and customer experience encompass appropriate language, prices in local currencies and customised contractual issues.

Understanding customs regulations Incorrect documentation that causes customs to hold shipments usually incurs excessive demurrage, which then compromises cash flow and causes many small firms to struggle or even be forced out of business. By ensuring a focus on understanding local regulations, companies can control excessive operating and warehousing costs, reduce wasted time, product delays, emergency shipments and logistical disruptions, as well as avoid costly penalties issued by customs agencies.

Q The dynamics of global trade have changed, and technology now has the promise of improving crossborder payments even more.

AI, DLT, blockchain, Big

Data implementation – in your opinion, how will these technologies impact the trade finance industry in the near future?

AI Artificial Intelligence is intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans. At EEB, AI is used within applications to aid our staff in reviewing trade transactions faster, identifying exceptions and supporting complex risk-based decisions. Unlike the programmed, automated trading systems prevalent in high-volume, real-time derivatives and equities markets that are employed to capitalise with competitive advantage, our ultimate decision-making process remains in experienced human hands. AI has helped to streamline time-consuming, highly manual processes associated with reviewing growing volumes of global trade transactions. And, its implementation and continual refinement ensures a better operating experience internally, expanding the use of digitisation and advanced analytics.

DLT The case for using Distributed Ledger Technology is well proven for payments where structured data is standard, and we see that it may also be successfully applied when assessing the issues and possible remedies in tackling fraud with KYC/ AML and compliance.

DLT can also provide the technology to improve heavy non-standard data-bound processes. Addressing the fundamental issues of internal, intra and interbank data sharing, DLT may assist submissions and oversight with regulators, and more rapidly identify activity in foreign accounts used for illegal and fraudulent drugs- and terrorist-financing transactions. For KYC, AML and due diligence across an enterprise, the proliferation of paper, identification of false positives, multiple submissions of data, uncertainty in identity assurance and manual reconciliation times may be drastically reduced. Combined with a more efficient verification of KYC data, rapid cost-effective client on-boarding, faster loan servicing, and efficiency in creation, communication and one-touch handling of trade documents will enable banks to offer long-lasting cost-effective customer experiences. Whilst banks should not underestimate the investment and commitment in terms of budget and resource to implement such DLT/ blockchain technologies, failure to plan, act and compete will have a serious impact on long-term institution viability.

Big Data Big Data is a massive volume of both structured and unstructured data that exceeds processing capabilities of traditional database and software techniques. In trade, with the complexity and scope of the ecosystem, it is easy to see how multiple parties, goods, services, buyers, sellers, freight specialists, insurers, inspectors, customs regulations and compliances across more than 200 cultures and jurisdictions can create data on a massive scale. And volumes are growing year on year. We have identified 12 distinct Big Data “V’s” common to our business, namely: Volume, Variety, Veracity, Velocity, Viability, Value, Variability, Visualisation, Validity, Venue, Vocabulary and Volatility. Finding individual data elements and understanding the impact on operations and management is challenging, and we are fortunate in that today we deal with relatively small trading volumes, where identification, measurement and management are relatively simple. For larger companies, having a meaningful high-level view and understanding all the elements and getting value from the data is a major challenge. The only way to ensure effective management is investment in and implementation of technologies where standardisation, data normalisation across platforms, rationalising of systems and re-usability of information are commonplace. As part of our “future-ready” system capabilities, our Simplex trade platform embeds DLT/blockchain technology with payment APIs and more automated, digitised and integrated processes covering identity assurance, real-time company data access, PEP and sanction lists, with the benefits of full compliance and due diligence.

Q You once mentioned that Euro

Exim Bank’s participation with Ripple has been game changing when it comes to liquidity for cross-border trade. What problems and challenges has this partnership solved so far?

Firstly, it is important to remember that Ripple is not just about cryptocurrency. It is an innovative technology company with a financial network capability (RippleNet) handling real-time, frictionless transmission of payments across a secure de-centralised DLT infrastructure, covering both fiat and non-fiat currencies. Implementing any new service can be time-consuming and problematic, however, rather than

encountering problems and challenges, our participation with Ripple was smooth due to managing expectations and planning and taking time for learning, collaboration, investigation, integration and a careful ramp-up. From the earliest conversations, we structured our on-boarding as a phased approach, getting to grips with each service before venturing onto the next, and taking time and consulting with experts in our IT teams and Ripple technical teams to ensure that our investment was on time and on budget. For clients facing problems of moving funds fast, this cost-effective foreign exchange, real-time view of where the funds were throughout the payment life-cycle, and fast access to almost unlimited liquidity easily resolved their issues of getting value and immediate credit to their accounts. We provided clients with two unique Ripple services, namely xCurrent: speeding up and securing real-time payments, and subsequently ODL (On-demand Liquidity): enabling pay-outs in local currencies without the need for exchange into dollars, fiat currency or the need for traditional correspondent banks, through the use of the XRP digital asset – ultimately reducing capital liquidity requirements. Whereas in the past client access to funds and foreign currency meant competition in world markets was impossibly expensive and restrictive, through service delivery with other RippleNet participants, customers can achieve high-volume, frictionless, low-cost, secure, fast, guaranteed payments and instrument movement across the globe. We have always seen the value and impact of technology, and as such continue to automate and improve our internal Simplex trade finance platform capabilities, and importantly, keep extending real-time payment functionality with Ripple for an enhanced customer experience. Additionally, we are creating sophisticated mobile apps, and in light of recent crypto-currency regulations and opportunities, are building a crypto exchange. Today, innovation is the answer to serving the world's 3 billion unbanked people, with better identity checking, faster remote account opening and access and control through mobile phones in developing markets allowing more control to the end-user. Ultimately the partnership with Ripple will lower account maintenance costs and increase overall coverage with immutable blockchain-enabled technology, making delivery, maintenance, security, trusted services and banking-system participation easier.

Q We cannot ignore the fact that as global trade becomes more sophisticated and markets become more diverse, so do the cyber-criminals. How is

Euro Exim Bank preparing for these possible threats?

Excellent question. Aside from securing our networks with more IT spend to protect us from a new and constantly evolving set of cyber threats and assault from fake emails, our due diligence and KYC processes start from first receipt of a proforma invoice (PI). Throughout a transaction, we take extreme care to analyse the elements of the trade and also look “beyond” the paper. It is amazing how many PI documents have been fraudulently manipulated with the intent to deceive, and we have become adept in spotting problems at the earliest opportunity. We investigate how documents have been printed, company letterheads, addresses, style of writing, position of text, multiple font sizes and typefaces, photoshopped elements and use of colour, trying to make a document too perfect, and generally assessing if the paper itself is genuine. This is followed by further checks for unusual marks or text positioning, and then checking the text itself: the buyer and seller details, phone numbers, descriptions of goods and so on. Only once the first checks are all complete does the document become the first part of the trade and we create a first draft for the buyer. This is still subject to scrutiny, and only once all indemnity and KYC documents are completed, notarised and confirmed do we proceed to level 2 compliance. We check shipping records, vessels, containers, history of transactions and the like, and by the time we get to issuing an instrument, with the appropriate collateral and fees paid, we can be fairly sure that the trade will be successfully completed. We also verify that the buyer has the means and intent to complete and settle once the conditions of the Bill of Lading and the instrument (LC or SBLC) have been completely fulfilled. Identity, passports, financials, PEP records, sanctions, AML and KYC checks are carried out as a matter of course, and our team have had to

apply forensic investigation in some cases, where everything adds up but there may be continued causes for concern. Our trade platform provides us with the workflow tools, document repository and action processes to ensure safe, trusted store and action on viable trades, with full audit record for regulators. With many people involved in the process we remain vigilant at all times. As risk, trust and reputation are vitally important in this industry, we must be pragmatic, report suspicious activity (SARS) and refuse to trade where any suspicion arises.

Q In your opinion, what are the biggest challenges in the current world environment when it comes to reaching the dream of true borderless trade?

The challenges are many and various, especially for SMEs and specialist providers, from rising geo-political threats such as nationalism, protectionism and self-interests, to slow settlement, lack of trust and handling complex paper-based processes. Coupled with lack of experience in international trade, ever-complex instruments and costly fiat currency and exchange, companies are seeking alternative sources of liquidity and the ability to compete effectively across continents and borders. Even with the good intentions of Free Trade Agreements, more alternative finance providers and a growing global mindset to enter international markets, trade barriers and trade wars are still prevalent, as witnessed with the ever-changing tensions around US–China trade. When trying to establish a trusted foothold in international supply chains with cost-effective goods, the ability of small companies to become anything more than an afterthought remains untenable for many, as governments, not markets, dictate the movement within international trade. Protecting home industries by imposing additional costs or limits on imports may direct larger economies (i.e. the US with its Trump mantra of “Made in America”), however, this is heavily disadvantaging emerging economies, specifically in Africa, rendering their goods non-competitive. Other challenges for SMEs can be categorised as follows: • Corruption – still a factor wherever foreign currency is involved. • High shipping costs – transporting small volume is not always economically viable. • Poor infrastructure – road and rail is often low-speed, over large distances from land-locked countries to ports. • Lack of access to capital – local banks in domestic retail markets are not immediately supporting the financing of international transactions with large values.

Cost of obtaining fiat currency can be prohibitive. • Inability to compete with bigger firms – pure economies of scale in manufacturing, and having skilled experienced people to undertake business in differing supply chains. • Trade bureaucracy – the complexity of the ecosystem, terms and conditions, timings and obligations can put off potential importers and exporters such that even with world-beating products, they find the process too onerous and expensive to progress.

Q The cross-border payments market is growing fast, and it is valued at nearly $21 trillion with a 90% compound annual growth rate. At this point, responding to the growing demand and customer needs is crucial. How does the Euro

Exim Bank manage to stay on top of the game?

Staying on top of the game requires constant review, specialisation and differentiation.

Striving to be the best you can be in a focused area of operation requires management vision, ambition, direction and hands on participation. Being all things to all people does not work in a global economy, and as such we have purposefully identified our market and created the solid foundations and infrastructure for long-term sustainability and support. We are serving markets such as India, Africa, UAE, Singapore and China, where we are offering competitive rates with appropriate collateral, enabling smaller corporates which may not have imported before to compete and perform in their local markets. Unlike a high-street bank with retail outlets, we exist to serve the corporate community in facilitating global trade by providing the following services: a Financial instruments facilitating trade for importers – such as Letters of Credit and Standby

Letters of Credit providing rapid processing of digitalised documentation with minimum time on paperwork. b Bank Guarantees – enabling customers, or debtors, to acquire goods, buy equipment or draw down a loan. c Performance Bonds – to guarantee satisfactory completion of a project by a contractor. d Online Bank Accounts – with 24/7 availability, providing safe banking facilities. e Merchant Bank Accounts – for buyers and sellers who operate across the globe, the merchant account facility accepts online payments, using any type of card, with low rates and safe, secure transactions.

Q Let’s talk about the future.

Financial institutions are expected to play an important role in creating a sustainable and socially responsible future.

What practices does Euro Exim

Bank use to achieve that?

Euro Exim Bank is already known for fundraising efforts in St Lucia, the UK and for international charities across Africa and Asia. Over the past three years, we have sponsored major fundraising events with themed concerts in London, resulting in donations of thousands of pounds to local and international charities. Some of the organisations that have already benefitted include, The Cerebral Palsy Association of St. Lucia, Montgomery Heights Children’s Foundation in Zimbabwe, UK Downs Syndrome charities, London's Great Ormond Street Hospital, and the Maa Kupa Foundation which assists local charities for the poor and needy in the UK, India and Africa. With our strong CSR policy, we had already seen incredible results and built local respect and trust. Today, we are all too aware of restrictions and difficulties that COVID-19 has made on everyone, and we are especially humbled to share the latest experiences from our India team on their philanthropic work in Chennai: Whilst starting up a new commercial business venture, Fasta Pizza, all efforts have been diverted from the initial profit goals into a philanthropic operation instead, providing and transporting vitally important free meals to essential workers, vulnerable groups and the poor. The entire product and distribution network ramped up production, and is now able to supply over 300 units per day, proving the production process and creating a readiness for post-COVID operations at an even greater volume. This gift of food, now in its eighth week, is providing a lifeline for people unable to return to their own villages as a result of the severe restrictions of lockdown, and where work and the opportunity to earn a daily wage has, for many, been taken away in the short term. We are justly proud of our affiliate company in India and their contribution to the local community.