Trade Finance Talks by Trade Finance Global

ISSUE 1

TRADE FINANCE TALKS

SPRING 2019

TOP HIGHLIGHTS OF 2018

Trade finance trends in the last year

CHINA’S TRADETECH SCENE

Rising Competition in Blockchain Consortia

TRADE FINANCE A TO Z

A Guide to Trade Finance Terms in 2019

ANNOUNCED: TRADETECH40

Who’s leading the digital trade revolution?

TRADETECH PROFILES

INTIX, Taulia, Bolero, Tradeshift

ITFA FINTECHS

6 Interesting Trade Finance Fintechs and What They’re Doing

MARKET FOCUS

Betül Kurtulus – Eastern Europe and the Middle East Mr. Lin Hui – China

TRADE SECURITISATION

An Interview with Finacity’s Charles Nahum

FEATURES

AIG’s Marilyn Blattner-Hoyle on Blockchain Tech Commerzbank – is the BPO a Gateway for Trade Tech? Inside the Mind of the TradeIX Leadership Team

INTERNATIONAL TRADE FINANCE AWARDS 2019 Winners Announced

tradef inanceglobal.com

TRADE FINANCE TALKS

THANKS TO MOORGATE COMMUNICATIONS ANDRÉ CASTERMAN JUHIE KAPOOR IAN KERR CHRISTIAN LANNG PETER MULROY GWENDOLINE DE VIRON BETÜL KURTULUS, LIN HUI CHARLES NAHUM MARILYN BLATTNER-HOYLE ANGELA KOLL OLIVER BELIN DESIGN AND LAYOUT JERRY DEFEO PHOTOGRAPHS AND ILLUSTRATIONS ADOBE STOCK FREEPIK COMPANY S.L. ADDRESS 2ND FLOOR 201 HAVERSTOCK HILL BELSIZE PARK LONDON NW3 4QG TELEPHONE +44 (0) 20 3865 3705

© Trade Finance Talks is owned and produced by TFG Finance Limited (t/a Trade Finance Global). Copyright © 2019. All rights reserved. No part of this publication may be reproduced in whole or part without permission from the publisher. The views expressed in Trade Finance Talks are those of the respective contributors and are not necessarily shared by Trade Finance Global. Although Trade Finance Talks has made every effort to ensure the accuracy of this publication, neither it nor any contributor can accept any legal responsibility whatsoever for the consequences that may arise from any opinions or advice given. This publication is not a substitute for any professional advice.

TRADE FINANCE TALKS

NOTE FROM THE EDITOR

Welcome to the first edition of Trade Finance Talks by TFG, a new supplement featuring the top stories, trends and insights into financing international trade. 2018 saw an unprecedented pace of change in trade, driven by geopolitics, sweeping regulatory changes and technological developments across tradetech. Moving into 2019, in a climate of uncertainty, there are three main themes emerging: trade wars and sanctions, the regulatory treatment of trade, and the digitisation of trade. The decisions and advances being made right now will affect global trade - and its $9tn contribution to the global economy - for decades to come. In this first issue, we recognise some of the institutional and non-bank players entering the trade market and championing trade finance as an asset class. We feature some of the game changers in digital transformation, and detail how they are adding efficiencies in the industry. We also explore the usecases of AI and DLT in trade credit insurance, as well as the ever-changing role of securitisation within the trade space. I hope you enjoy this first issue and please do let us know if there are any topics you would like to see covered in the future.

DEEPESH PATEL Editor

TRADE FINANCE TALKS

CONTENTS TOP HIGHLIGHTS OF 2018 06 Trade finance trends in the last year

CHINA’S TRADETECH SCENE

Rising Competition in Blockchain Consortia

TRADE FINANCE A TO Z

A Guide to Trade Finance Terms in 2019

TOP HIGHLIGHTS OF 2018

MR. LIN HUI

CHARLES NAHUM

ANNOUNCED: TRADETECH40 16 Who’s leading the digital trade revolution?

TRADETECH PROFILES 19 INTIX, Taulia, Bolero, Tradeshift

ITFA FINTECHS 24 6 Interesting Trade Finance Fintechs and What They’re Doing

MARKET FOCUS 29 Betül Kurtulus – Eastern Europe and the Middle East Mr. Lin Hui – China

TRADE SECURITISATION 34 An Interview with Finacity’s Charles Nahum

FEATURES

38-47

AIG’s Marilyn Blattner-Hoyle on Blockchain Tech Commerzbank – is the BPO a Gateway for Trade Tech? Inside the Mind of the TradeIX Leadership Team

INTERNATIONAL TRADE FINANCE AWARDS 49 2019 Winners Announced

ABOUT TRADE FINANCE GLOBAL

48 4

TRADE FINANCE TALKS

INTERNATIONAL TRADE FINANCE AWARDS

CHINA’S TRADETECH SCENE

BETÜL KURTULUS

MARILYN BLATTNER-HOYLE

INSIDE THE MIND OF THE TRADEIX LEADERSHIP TEAM

ANDRÉ CASTERMAN

CHRISTIAN LANNG

IAN KERR

ANGELA KOLL

TRADE FINANCE TALKS

2018

For trade and receivables related financings, 2018 was a year of volatility and unexpected developments. From the explosion of digitalisation to sweeping regulatory changes and the growth of non-bank finance in the mid-cap space, 2018 was eventful. We take a look at top trade trends of 2018.

2018 TOP HIGHLIGHTS AND TRENDS IN TRADE FINANCE M&A ACTIVITY GREW 2018 marked a year of mergers, acquisitions and growth. We saw the IPO of alternative financier Funding Circle which, within 3 months of floatation, made the FTSE 250. Smaller mergers and acquisitions include: •

January 2018 – Investec acquires Amicus – £20m loan book

•

January 2018 – Enra Group acquires Vantage Finance – undisclosed sum

•

September 2018 – Klarna, a payments giant turned fintech bank, acquires Close Brothers Retail Finance (CBRF) – £66m loan book

•

November 2018 – Cabot Square Capital takes a majority stake in MSP Capital – £150m loan book

LARGE NON-BANK PLAYERS PROVIDE TRADE SOLUTIONS On the topic of commercial finance providers, 2018 also saw larger brands dipping their toes in the water to help service financing for mid-caps and SMEs. Most notably, we saw Maersk, IBM, GSBN and Accenture forming consortiums and even jumping on the bandwagon to offer trade finance to their clients. Large brands are now starting to leverage their customer base to maximise and diversify revenue streams. In developing markets across Latin America and Africa, we’ve seen growth in trade volumes. More non-bank 6

TRADE FINANCE TALKS

funders and fintech platforms have risen, actively seeking to bridge the $1.5 USD trillion gap. The origination platform model, which has become popular in other areas of commercial debt and finance, has helped distribute trade risk amongst different liquidity providers. The opportunities in self liquidating, high yield debt are likely to continue to draw in additional funds and fintechs.

DIGITALISATION OF TRADE At the start of 2018, we spoke about the cautious optimism in the industry for blockchain and distributed ledger technology (DLT) to facilitate trade. 12 months on, and looking back, we have certainly seen advances in both fintech and DLT, so we’ll address both. The investment into trade finance fintech continued in 2018. One notable highlight in this space was SWIFT’s new gpi initiative, according to Andre Casterman, CMO at INTIX and Chair of the ITFA Fintech Committee. There was a clear move away from traditional messaging platforms such as SWIFT, ABEX or FTP, on the payments and treasury side, towards real-time data feeds. The SWIFT Global Payments Initiative (gpi) was launched in 2018 with 120 banks across 200 countries to facilitate track and trace functionality across cross-border transactions. As a result, SWIFT gpi now collects real-time payment data and provides a cloud-based end-to-end customer friendly view of payment information.

HIGHLIGHTS DLT BECAME REAL

REGULATORY CHALLENGES

Distributed Ledger Technology (DLT) became real in 2018, moving from proof of concept (POC) to real world transactions. The first live transaction with ING and HSBC in trade finance was facilitated with the R3 consortium of 13 banks (and growing). Dubbed ‘Project Voltron’, the first live trades are forecasted to start in early 2019, using the Corda blockchain platform.

2018 was certainly a year of challenges from regulators, including continued discussions on Basel III and unfunded credit risk mitigation (CRM) through the PRA paper and EBA responses.

There are two challenges which we believe need to be addressed when it comes to DLT and e-authorisation in trade: standardisation and legal framework. The US legal framework does not yet allow for electronic signatures and documentation, so it does not enable this type of trade. Despite tremendous efforts from the ICC Banking Commission relating to e-bills of lading, these international frameworks still need to be adopted by local governments around the world. Enabling interoperability between platforms requires standardised data formats and fields. For DLT, there are already two different networks which banks have partnered with to enable blockchain based trade. Establishing consortia such as the Trade Information Network and the Universal Trade Network are critical to set common standards for data exchange, and integrate between different platforms as a multi-bank solution. TIN and UTN are ultimately helping create a registry of open account transactions, which we’ll definitely see more of in 2019.

GEOPOLITICAL AND ECONOMIC PERSPECTIVE Trade certainly faced its challenges in 2018. As Chris Southworth said at TFG’s ‘Brexit Business’ event in October: “We’ve seen a change in political view on a higher level; a polarisation of left and right. This has led to the liberal middle vanishing. Instead, there are national leaders coming into power with widely varying points of view on how they are going to negotiate with global partners.”

Despite the implementation of Basel III, the position of the regulators has been strict and bad news for banks. The Basel IV idea of a ‘level playing field’ is potentially dangerous. Basel IV is currently at the directive level, so it’s not too late to act, as highlighted at a Sullivan & Worcester Seminar in January. Anti-money laundering (AML) and counter terrorist financing rules continued to be strengthened in 2018 through the 5th and 6th Money Laundering Directive. There was also debate around whether trade finance is particularly vulnerable to money laundering. Yes, according to regulators. Showing that due diligence has been conducted, showing obligations to counterparties have been fulfilled and ensuring appropriate wording in key documents are general take homes here.

2019: C’EST LA VIE? At the end of the day, trade continues to be an engine for economic growth, the backbone of all markets and a part of every person’s life. Whether through a different trade route, under alternative tariffs or via a transformed supply chain, cattle need soybean, Soybean use fertilizers and fertilizers require machinery; all complex supply chains that will continue to move forward. So, for practitioners, traders, producers and financiers, no matter what challenges and headwinds we face into 2019, trade will still continue. As an industry, the advances we make in terms of technology, experience and ease will only help to facilitate trade.

Trade wars, Brexit and similar geopolitical tensions in both established and developing economies prevailed, and sets global trade (hailed universally as an economic force for good) with a considerable headwind as we go into 2019. TRADE FINANCE TALKS

CHINA’S TECH SCENE RISING COMPETITION IN BLOCKCHAIN CONSORTIA Heading towards the end of 2018, we thought that China’s developments in blockchain and trade finance were fairly subdued in comparison to the rest of the world. But just when we thought their contribution to distributed ledger technology was slow and infrequent, China Banking Association announced the launch of their China Trade and Finance Interbank Trading Blockchain Platform.

TRADE FINANCE TALKS

2018 showcased significant steps forward in the development of other blockchain consortia for banks, such as R3’s Marco Polo solution based on the Corda blockchain, and We.Trade’s Hyperledger platform. The development of equivalent platforms in Singapore and China will surely bring competition, choice and friction in the race to offer blockchain based trade finance solutions through banks and funders.

providing a network for transactions and encryption through a closed blockchain platform.

WHAT IS THE CHINA TRADE AND FINANCE INTERBANK TRADING BLOCKCHAIN PLATFORM?

Will it work? The key with many of these platforms is implementation, and working with multi-bank systems, figuring out a way to share data in a compliant way. Rather than changing individual processes within each bank, these platforms allow for competitive neutrality and seamlessly digitized processes.

The China Banking Association announced that it wants to speed up financial reform, payments and control financial risks. A platform such as the Trade and Finance Interbank Trading Blockchain Platform will assist with data-storage,

Fang Xiao, VP and Head of Industrial and Commercial Finance at HSBC (China) has said: “The establishment of this inter-bank platform can be described as extraordinary, opening up barriers between different banks and realizing the interflow of information flow”.

THE CHINA TRADE AND FINANCE INTERBANK TRADING BLOCKCHAIN PLATFORM

THE MARCO POLO CONSORTIUM

THE WE.TRADE CONSORTIUM

INDUSTRIAL AND COMMERCIAL BANK OF CHINA

NATWEST

DEUTSCHE BANK

AGRICULTURAL BANK OF CHINA

BNP PARIBAS

HSBC

CHINA CONSTRUCTION BANK

COMMERZBANK

KBC

BANK OF COMMUNICATIONS

ING

NATIXIS

CHINA MERCHANTS BANK

STANDARD CHARTERED BANK

RABOBANK

CHINA EVERBRIGHT BANK

NATIXIS

SOCIÉTÉ GÉNÉRALE

SHANGHAI PUDONG DEVELOPMENT BANK

BANGKOK BANK

UNICREDIT

CHINA POSTAL SAVINGS BANK

SMBC

CAIXA BANK

PING AN BANK

DNB

EUROBANK

HSBC BANK (CHINA)

OP FINANCIAL GROUP

ERSTE GROUP

ANGLO-GULF TRADE BANK

NORDEA

DANSKE BANK

SANTANDER

LBBW

UBS

Other platforms include the Hong Kong Monetary Authority blockchain trade finance platform (HKTFP) with 7 initiating participants: ANZ, Bank of China, Bank of East Asia, DBS, Hang Seng Bank, HSBC and Standard Chartered Bank.

COMPETITION OR COLLABORATION? It’s certainly plausible that global banks will have more than one solution for facilitating trade finance transactions through blockchain networks, given the diversity of risk, geography and legal framework under which each operates. However, the cross-border international nature of trade finance would certainly favour one global solution to enable trade.

That said, platforms such as Hyperledger are helping to facilitate the technology between some of these platforms. PeerSafe, a China based fintech startup using Hyperledger’s technology are behind CBA’s trade finance platform.

So the race to the top continues, we may well see an ‘Uberisation’ of trade finance blockchain platforms in 2019 and 2020, perhaps even the consolidation or merging of consortia to grab market share. TRADE FINANCE TALKS

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TRADE FINANCE

AZ TO

A GUIDE TO TRADE FINANCE TERMS IN 2019

Do you know why AI is poised to disrupt international trade? What on earth is a borrowing base? In this series, we took a moment to demystify some of the buzzwords and 2019 trends in an A to Z around trade, tech and finance.

TRADE FINANCE TALKS

C CREDIT INSURANCE

A ARTIFICIAL INTELLIGENCE (AI) AI took centre stage once again last year with companies like Tradeteq, who challenge traditional credit scoring techniques to increase the accuracy of predicting credit events for companies (vs the Altman Z-score). Using neural networks and machine learning, AI has proven better techniques for making accurate credit decisions, allowing lenders to reject fewer loan applications and directly support global growth – a force of good for trade, in our opinion.

B BORROWING BASE Borrowing Base – a familiar term amongst producers, traders and commodity financiers – is used to describe a company’s pool of assets available, from which a finance facility from a bank can then be determined. In other words, the amount of credit or working capital that can be granted to a company, based on the value of their assets (for example, collateral can include: receivables, inventory and equipment).

HSN CODE

INCOTERMS (2020)

HSN is short for ‘Harmonized System Nomenclature.’ A World Customs Organization (WCO) project, the HSN is a form of nomenclature for the classification of around 5000 products and goods, which is useful for taxation purposes, universal import and export data to provide comparable data sets across different countries, and for customs and tariffs declarations. Established in 1988, there are now over 200 participating countries using the HSN naming convention.

A large proportion of international trade is facilitated by a set of universal rules, originally established by the International Chambers of Commerce. First developed in 1936, Incoterms have undergone several developments and changes, marked by the way commerce has evolved over the past 8 decades. 2019 will mark the release of the 2020 Incoterms, applicable from the 1st January 2020. The key changes for Incoterms 2020 are likely to be around simplification, removing superfluous phrases, as well as addressing nonEnglish speaking markets. We’ll be among the first to report the new changes to Incoterms 2020, but for now, Incoterms 2010 apply for international commerce.

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Short-term credit insurance plays a significant role in crossborder trade finance, thought to stand at around $1.6tn USD per year. Credit insurance helps businesses transfer risk over to an insurer, protecting the policyholder in the event of the business or customer becoming insolvent or failing to pay its trade credit debts. In recent years, there has been a large appetite amongst credit insurers and banks to standardise wording across the board, with the BAFT Master Risk Participation Agreement being a great example of the end goal for standardisation, we hope that trade finance follows similar routes in terms of standardisation.

D DISTRIBUTED LEDGER TECHNOLOGY (DLT) DLT was once something we were cautiously optimistic about at TFG, but given the initial proof of concepts in the trade finance sector, it now has real potential. DLT can help enable paperless trade by digitalisation of documentation (such as Bills of Lading), as well as reducing data errors, but the implementation sees challenges around scalability, interoperability and privacy issues. The current adoption of distributed ledger technology has been fairly slow and limited in its application. It’s important that we don’t create data silos and ensure different pilot ecosystems can connect.

J JOINT COMPREHENSIVE PLAN OF ACTION (IRAN SANCTIONS) In October 2018, we spoke to Lord Lamont, the UK trade envoy for Iran, but more famously, Chancellor of the Exchequer in the John Major Government. The Joint Comprehensive Plan of Action (JCPOA) for Iran, was set up in the US before Trump’s presidency, retaining primary sanctions, which meant that it was illegal for US companies to deal with Iran across most sectors and services. This included the banking sector, meaning that many European banks who dealt with American banks could no longer operate or deal with Iran. The result? – there are enormous difficulties for Iranian businesses around accessing trade finance and forming correspondent banking relations, the inability to open Letters of Credit, and making payments through BACS systems. With full sanctions now in play between the US and Iran, the Iranian economy continues to struggle, with the Iranian rial losing some 70% of its value, stimulating a flight of capital, and creating a very serious situation of inflation in the country.

G GUARANTEES E E-DOCUMENTATION In a similar fashion to DLT, electronic documentation (or the digitalisation) of trade is a shared goal for many in the international trade industry. As commerce goes back thousands of years, the paper-based nature of trade finance is inevitable, and instruments such as the Documentary Letter of Credit go back hundreds of years and are still a well-practised method of risk mitigation today. In today’s open account world, the adoption of technology and IT systems which are interoperable, have allowed for instruments such as the Bank Payment Obligation, SWIFT MT 798 and International Chamber of Commerce Rules around Uniform Rules for Bank Payment Obligations (URBPO) to transform and increase efficiencies in the financing of trade. One of the largest challenges within e-documentation however, is the acceptance of e-signatures in particular markets. Many laws still do not accept electronic signatures as guarantees, and since 2001, a UN working group continues to influence local legislation around the global adoption of electronic signatures, also known as the UNCITRAL Model Law on Electronic Signatures.

F FREE ON BOARD (FOB) Free on Board (FOB) is the most commonly used International Commerce Term (Incoterm) for containerised goods, particularly for commodities. When a seller exports goods by boat in a container, they are responsible for those goods up until the point they are on board the ship, at which point, the responsibility of the goods then transfers over to the buyer. This means that the seller must also obtain necessary export licenses or local authorisations for exporting goods, but they’re not responsible for insurance or risk whilst the goods are in transit.

KYC: KNOW YOUR CUSTOMER (TRADE FINANCE COMPLIANCE)

LETTERS OF CREDIT (LCS)

Financial institutions today are required to ensure

Letters of Credit (like Bank Guarantees) are trade finance products which assure payment to a seller within a time period if obligations are met.

their customers are not engaged in illegal activities around money laundering or terrorist activities. Compliance activity within banks is continuing to rise according to Thomson Reuter’s Cost of Compliance Report (2017), where 60 percent of firms expect the cost of senior compliance staff to increase either slightly or significantly in the next year. For customers, however, some 89% of corporate customers had an unsatisfactory KYC experience and 13% moved financial institutions as a result. In 2019, we could see blockchain and distributed ledger technology offer such transparency in transaction data in terms of the movement of transaction and company information and identity, as well as the storage of sensitive assets on ledgers. Although still at a very nascent stage, the KYC use case might be able to allow the movement of information and identity between numerous parties given the immutability of shared transactions.

When a buyer and supplier enter into a contract of agreement, the buyer’s bank (issuing bank) will issue an LC in favour of the supplier, normally via its local advising bank in their home market. As soon as goods are shipped and shipping documents are presented to their advising bank, they are verified by the issuing bank. Payment is then made to the advising bank and then on to the seller.

A guarantee (or Bank Guarantee) is a financial undertaking from a bank or lender on behalf of a borrower, in favour of the supplier or seller of goods and services. A type of trade finance product, if the borrower cannot make payment to the supplier, who has produced and/ or shipped the goods as requested, the guarantor bank will take the risk and make the payment.

M MARCO POLO Marco Polo is an Italian Merchant from the late 13th century, most famous for his c.1300 book: The Travels of Marco Polo, describing Europe’s wealth and China’s size. For trade financiers though, Marco Polo is more commonly known as an initiative to utilise distributed ledger technologies (DLT) to power an open account trade finance platform on R3’s Corda blockchain network, running on the TradeIX Platform. The consortium currently comprises 13 leading member banks, with a shared aim of sharing data across one secure platform, which in turn reduces risk, costs and time when executing cross-border trade. At Trade Finance Global, we believe that interoperability is the key to the success of using DLT to enhance trade. We have seen the rise of several consortia around the world, and eagerly await the move from proof of concept to real-time trade on DLT.

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O OPEN BANKING

N NO DEAL With the news changing every day, we wanted to keep this term fairly vague, although the rhetoric that has led businesses into a period of uncertainty, is that as it stands, Britain could default to leaving the European Union on ‘no-deal’ terms, which means defaulting to fairly unfavourable WTO trading rules. For importers, trading with EU counterparts on WTO terms after March could mean additional tariffs, delays in shipments and stockpiling. Given that the UK is highly connected with the EU in terms of complex networks and supply chains, it is imperative for business owners to be prepared to treat doing business with the EU as though they are from any other country outside of the EU. At Trade Finance Global, we put together a whole hub of content for business owners and FDs to help mitigate risk and manage some of the uncertainties around Brexit.

T TREASURY AND CASH MANAGEMENT For any business, managing the flow of cash, assets and treasury is a key component. The ever-changing role of treasury and cash management within a business is often understated, but in a world of ever-tightening margins, increased regulatory requirements and accounting necessities, as well as the need to forecast cash flow, manage volatility and minimise shortfalls, treasury management is critical for success.

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Open Banking came to the UK at the start of 2019, alongside a piece of regulation called PSD2. In plain English, the advent of Open Banking means that the customer of any regulated bank has the right to access, transfer and share personal banking data if they allow this. With the idea of authorised providers using your personal information to provide money management, budgeting or consolidating banking apps, it leads to more competition, increased innovation, and more transparency in and among banks and their products.

UCP 600 AND URDG

VOLTRON

UCP600 stands for Uniform Customs and Practise for Documentary Credits – a set of rules put together by the ICC. The latest version, the UCP 600 replaced the UCP 500 in 2007, and it incorporates and standardises rules around Letter of Credit issuance, terminology and Bills of Lading in a hefty 37 articles.

We mentioned Marco Polo earlier, which is a 13 bank consortium looking to use blockchain technologies to power open account trade finance on R3’s Corda blockchain network.

URDG stands for Uniform Rules for Demand Guarantees, another set of ICC rules governing the obligations and rules under which guarantees and bonds are undertaken. The latest version is URDG 758.

Voltron is a project stemming out of 12 banks which are part of the R3 consortium, aiming to digitize Letters of Credit. With around 40% of trade finance using Letters of Credit, the consortium aims to use R3’s Corda technology to pilot Letters of Credit, using the neutral party, Voltron to facilitate the instrument. The banks that are currently involved in Voltron are Bangkok Bank, BBVA, BNP Paribas, HSBC, ING, Intesa, Natwest, Mizuho, Scotiabank, SEB, CTBC, and U.S. Bancorp.

P PLATFORMS RECEIVABLES Receivables platforms allow corporates to reduce friction in crossborder payments with customers, suppliers and other proponents of the supply chain. We believe that global receivables platforms can seriously streamline B2B payments reconciliations, through matching invoices, paying in real time, and reducing late payments. Both Demica and Prime Revenue offer receivables and payables platforms to corporates which helps provide cash flow, sell invoices on early payment terms across multiple jurisdictions and numerous customers.

W WORLD TRADE ORGANISATION The World Trade Organisation is an intergovernmental body which deals with trade rules between nations. With 164 member states, members are responsible for 95% of world trade. The WTO principles are based on non-discriminatory trade agreements, this means, if one country does not have a free trade agreement with another country and imposes import tariffs, the other must treat that country in exactly the same way. Currently, global tensions lie between the US and China, both playing tit-for-tat in terms of imposing trade tariffs on one another.

Q QUOTAS AND TARIFFS In trade finance, understanding customs tariffs and import/ export quotas is key for success in cross-border trade. When importing goods from outside of the EU (although this landscape could affect EU countries in the case of a no-deal Brexit), companies will often have to pay taxes and customs duties at the border. A tariff is a protectionist government move on imported goods to prevent exploitation of home markets. It is closely linked to the theory of comparative advantage and globalisation.

R RECEIVABLES FINANCE Receivables finance (also known as receivables factoring, accounts receivables finance and payables finance) is a type of asset finance used by businesses to release early payments from outstanding invoices. A receivable can often be defined as future receivables, that is, debt owed to the company from end customers. Receivables programmes are often used to service cash flow gaps and the flow of working capital so that the business can use its funds more efficiently.

S SECURITISATION Securitisation helps companies raise finance against their receivables portfolios on a non-recourse basis. In the case of securitisation, a lender will normally purchase the receivables through a special purpose vehicle (SPV), which is often completely unlinked to the company. In the case of less creditworthy companies, this form of financing can often be less prohibitive and still offer financing to more risky firms. Another benefit of trade receivables securitisations is the off-balance sheet treatment of the receivables, under IFRS requirements. We spoke to Finacity’s Charles Nahum about the use of securitisation within the trade space and how it helps corporates release working capital. The interview is included in this issue.

XENOCURRENCY AND FOREIGN EXCHANGE

YIELD

ZIMBABWE

Xenocurrency is a fairly infrequently used term but generally refers to currency circulating in markets outside of its domestic country. A more preferential term is foreign currency / foreign exchange. For any company trading goods or services in currencies other than their own, understanding FX is crucial. One should take into account the cost of paying suppliers or consumers in other currencies, as well as volatility in currency markets which could make a meaningful impact on the balance sheet. As an example, suppose you’re a soybean producer, getting paid in GBP, but paying your workforce / day-to-day operations in USD. If the pound were to strengthen versus the dollar between the time your order was placed and the time your end customers pays, the real value and profit would decrease. Mitigating currency risk should be an important consideration for any treasury manager or FD.

The yield offered by lower value trade finance facilities is often too small to interest banks, given the risks associated and Basel III regulations. That said, trade finance is often seen as a short-dated asset, meaning trade finance portfolios can yield higher expectations which some investors are comfortable with. With the Asian Development Bank recently reporting on the low-risk nature of trade finance as an asset class, we’ve seen alternative investors and non-bank funds move into the trade finance space, often more comfortable than banks with the risk and yields of trade finance, which have also helped plug the estimated $1.5tn trade finance gap, largely stemming out of Asia and amongst SMEs.

Zimbabwe saw a notable recovery in the economy towards the end of 2018, driven largely by a recovery in commodity prices (metals and oils), which has shifted the political outlook to a more stable, certain environment, which marks positive rhetoric to investors. The key for success in many African markets has been to open up foreign investment, allow for government reforms which reduce corruption and bribery. Zimbabwe is a shining example of this, although continued uncertainty around recent internet shutdowns and corruption has dampened investor confidence at the start of this year.

TRADE FINANCE TALKS

TRADETECH 40 In the same way that “Insurtech” and “Regtech” have developed in recent years, a new wave of fintech is trending – that of “Tradetech”. Trade Finance Global investigates the Top 40 rising fintechs supporting international trade.

What is “Tradetech”? As cross-border trade has digitalised, so an ecosystem has built up to support it – especially with respect to trade and supply chain finance, although also around logistics and in connecting key parties in the cross-border supply chain. Given this, the Tradetech 40 for the first time brings together this rising fintech sector’s leading companies and initiatives – representing every aspect of the technological advances being made to support today’s international trade. The Tradetech 40 includes names that are instantly recognizable – such as Demica, Finastra (a merger of D+H and Misys) and China Systems. Yet it also includes initiatives such as Marco Polo (a trade network connecting banks, corporates and third party providers) as well as relatively new players such as Tradeteq (a trade finance assets marketplace) and TradeLens (a blockchain based platform jointly developed by Maersk and IBM). The Tradetech 40 looks across the sector – grouping the companies and initiatives by their offering into five categories. These are: IT systems, asset distribution platforms, supply chain finance platforms, blockchain initiatives and those aiding the digitalisation of trade.

THE EVOLUTION OF TRADETECH in relation to a timeline, IT systems began to revolutionise how banks offered trade finance back in the 1980s with the digitalisation of some trade finance processes beginning in the 1990s (via initiatives such as Bolero). Supply chain finance initiatives also date back to the 1990s though only made a market impact after 2000. More recently, the market has seen the emergence of asset distribution platforms, which have helped attract new pools of liquidity into the trade finance market, while the blockchain phenomenon’s impact is only just starting to be felt. 16

TRADE FINANCE TALKS

IT SYSTEMS China Systems was one of the first IT systems developed specifically for the trade finance market. Stretching back to 1983, it developed Trade Finance and Payments Solution, a Java EE-based back office solution for trade and supply chain finance, open account, and payments transactions. The company also developed an integrated system that automated and audited the complete cycle of trade finance, open account, and payment transactions in real time.

DIGITALISATION Then came the era of digitalisation. Providers such as Bolero developed solutions enabling financial institutions to offer buyers and sellers the ability to digitalise and automate their accounts payable and receivables processes. Purchase orders, invoices and other trade documentation became available for electronic uploading and automatic validation, processing, matching and approval.

SUPPLY CHAIN FINANCE PLATFORMS In 2006, Demica launched Citadel SCF, an innovative supply chain finance tool bringing unprecedented cash-flow benefits to buyers and suppliers, as well as a simple, automated transaction management solution for financiers. Citadel SCF streamlines the execution of a supply chain finance solution through the complete automation of the financing process. It provides a transparent window

into the financing process, giving the buyer, supplier and lender the capacity to track individual invoices, payments and final settlements in real time.

risks associated with trade finance – allowing new sources of liquidity to invest in trade without the need for expensive credit analysis teams.

ASSET DISTRIBUTION PLATFORMS

BLOCKCHAIN INITIATIVES

An obvious step but one that took time to win traction has been the advent of asset distribution platforms. Complementing the trade finance syndications teams within banks, these focus on marketing sellable trade finance assets, mostly originated by banks (as well as some alternative providers). Yet the technology here is not simply focused on a buy-sell trade. It is on helping the trade finance market overcome a major hurdle to the wider distribution of assets – the problem with credit scoring trading entities. Innovative companies such as Tradeteq have developed AI-driven technology that overcomes the complex credit

Complementing the digitalisation of asset distribution in trade finance is blockchain technology, which can greatly simplify the direct transfer of trade assets while increasing confidence in their provenance. This is achieved through providing unique, non-forgeable identities for assets, along with an inviolable record of their ownership. The result is an opportunity for additional financing services based on the trade of physical goods – an example of which is Marco Polo. This is a banking initiative for trade finance powered by R3’s blockchain technology.

Who are the Tradetech 40?

TRADETECH 40 Asset Distribu on Pla orms

hain Finance Pla orms Supply Chain

Blockchain Ini a ves

IT Systems

Digitalisa on

What’s next? Of course, the Tradetech sector is constantly updating itself, meaning that the Tradetech 40 of 2018 will not be that of 2019, and certainly not that of 2029. What is clear from recent initiatives is that these five elements will somewhat converge. Even now, they are learning to collaborate – as initiatives such as Marco Polo attest. Another likely innovation will be a more direct role for the banks. While many are involved in critical digitalisation initiatives (such as the development of the electronic Bank Payment Obligation or BPO), they have so far collaborated with specialist IT providers rather than taken the lead. Leaders

in this space – such as Deutsche Bank, UniCredit and Citi – will increasingly look towards proprietary solutions, however. Certainly, from an industry perspective, to increase the impact of Tradetech in the trade finance industry, these 40 companies and initiatives should make a concerted effort to work even more collaboratively – both with each other and with the more traditional players such as banks. If they can, the Tradetech 40 will soon become the Tradetech 100, and include some very familiar names indeed. TRADE FINANCE TALKS

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TOP PREDICTIONS FOR 2019

TRADETECH 40 INTERVIEW Following on from the release of Tradetech40, TFG interviewed some of the experts and leaders behind the represented companies, finding out about their plans for 2019 as well as their thoughts on the digitalisation of trade and receivables.

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INTIX’S ANDRÉ CASTERMAN ON BANKING TECHNOLOGY An interview with André Casterman, Chair, Fintech Committee, International Trade and Forfaiting Association (ITFA) and CMO, INTIX André Casterman is a fintech consultant, advising financial institution and fintech clients on data management, trade finance and capital markets innovations. André spent more than 20 years at SWIFT, leading various innovations in the inter-bank payments, corporate treasury and trade finance markets. During that time, he established an institutional partnership between SWIFT and the International Chamber of Commerce (ICC) and created the first digital trade settlement instrument which is in use by major banks around the world. André chairs the Fintech Committee of the International Trade and Forfaiting Association (ITFA) with a focus on helping banks take advantage of fintech innovations to automate trade finance operations and establish the business as an investable asset class through use of data analytics and artificial intelligence. ANDRÉ CASTERMAN CMO, INTIX

INTIX helps financial institutions become data centric. INTIX addresses the challenges faced by financial institutions such as capturing data from multiple data sources and aggregating it to produce dynamic analytics and insights. INTIX shields end-users from the complexity of internal systems, transaction semantics, messaging formats and e-channels. Thanks to real-time access to financial transactions and related processing events, banks can serve their clients better and track service delivery performance more effectively. They develop a competitive advantage which drives client satisfaction and business growth. INTIX helps its clients transform data into a new economic asset.

HOW IS INTIX USING TECHNOLOGY TO DISRUPT, ENHANCE OR GROW INTERNATIONAL TRADE? INTIX is helping incumbent institutions such as banks and non-bank financial institutions to enhance their service proposition by making increased use of transaction data. INTIX technology is non-intrusive which means INTIX clients can seamlessly integrate it into their existing infrastructure, even if this is made of various technologies and systems.

WHY DO YOU THINK INTIX IS REPRESENTED IN THE TRADETECH 40? The INTIX team has strong transaction banking technology expertise, which means the team sees the critical role that 20

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data will be playing to enhance critical processes such as transaction-level credit scoring, trade distribution, liquidity monitoring, transaction tracking, … INTIX is also collaborating with value-added fintechs in the area of credit scoring, trade distribution and trade finance automation.

WHAT ARE YOUR BIGGEST PLANS FOR 2019? The INTIX team is expanding rapidly across various transaction banking domains, and 2019 will demonstrate how our technology can support trade finance processes, in addition to payments and liquidity management processes.

TAULIA’S JUHIE KAPOOR ON TOP PREDICTIONS FOR 2019 An interview with Juhie Kapoor, Director of Global Content and Communications for Taulia on supply chain optimisation, early payments and working capital solutions using AI and technology.

Taulia delivers working capital solutions that make it easy for businesses to free up cash, accelerate payments, and improve supply chains.

HOW IS TAULIA MAKING A DIFFERENCE AND WHAT PROBLEM IS IT SOLVING? With an estimated $14tr trapped in supply chains, Taulia are helping all businesses along the supply chain to release this capital through greater efficiency in the AP/AR process and providing the option of early payments. Working capital optimisation is further enhanced by the use of AI, which takes data from our network of 5.2 million connections and over 1 million daily interactions to enhance the understanding of supplier behaviour and the predicative ability of when a supplier will opt to take early payment.

on-the-spot, real-time decisions, and thereby optimize discount rates and payment terms.

WHAT WERE THE BIGGEST CHALLENGES IN 2018? In a highly competitive and maturing market place, Taulia’s greatest challenge will be to keep innovating and bringing value to our clients. In 2018 we brought the value of AI to clients fingertips by revolutionising our Buyer UI which allows clients to model and understand their supplier’s behaviour.

WHAT WAS THE TOP HIGHLIGHT OF 2018?

WHAT ARE YOUR BIGGEST PLANS FOR 2019?

In 2018, Taulia accelerated almost $24bn in early payments and expanded its network to over 5.2m connections around the world. The company also announced that it was opening its first Asia Pacific office in Sydney, Australia, with plans to expand the team rapidly during 2019.

Taulia has expanded into APAC and will continue to rapidly expand in the region. This with continual product innovation will ensure that Taulia has a successful 2019

In August, Taulia also signed a major £30m contract with the UK government’s procurement organization, Crown Commercial Services (CCS). Consequently, Taulia can now provide early payment solutions to central government, local authorities and the National Health Service (NHS). Taulia plans to build upon this contract – the largest in the company’s history – by expanding its solutions further into the public sector.

1. With the continuing economic uncertainty, companies will need to keep the focus on their working capital and their ability to be adaptable in the face of global challenges. Moreover, businesses will not be able to weather this storm in silos. They will have to work with their suppliers and buyers to make sure that no part of the supply chain is adversely affected. This means that it will be supply chains that complete and not individual businesses.

As always, Taulia’s success in 2018 was underpinned by the company’s continuing commitment to technological innovation. As well as introducing a new buyer user interface, Taulia has empowered clients by giving them direct access to the company’s award-winning AI-powered platform. Clients can access the insights needed to make

2. Technology will be the greatest game-changer in the working capital space. It will no longer be acceptable to have partial visibility over global cash positions and not be able to access liquidity in the touch of a button.

WHAT’S YOUR TOP PREDICTION FOR 2019?

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BOLERO CEO IAN KERR ON ELECTRONIC DOCUMENTATION An interview with Bolero’s CEO Ian Kerr on E-Bills of Lading and Electronic Documentation.

Ian Kerr joined Bolero as CEO in May 2014 and has over 30 years’ experience in financial technology. Ian has the responsibility to lead Bolero through the next phases of global growth with the development of the company’s trade digitisation solutions. He has been based in the US and Singapore as well as the UK through his career and is a regular speaker at international trade and technology events.

IAN KERR

CEO, Bolero

Bolero is a Software as a Service (SaaS) platform for the digitisation of global trade. Headquartered in the UK Bolero provides solutions for multi-bank trade finance, the electronic presentation of trade documents based on electronic Bills of Lading (eBLS) and in Supply Chain Finance.

HOW IS BOLERO USING TECHNOLOGY TO DISRUPT, ENHANCE OR GROW INTERNATIONAL TRADE? Bolero was formed 20 years ago and has been a pioneer in trade digitisation. The Bolero platform includes components that enable the secure processing of trade transactions between counter-parties. The electronic presentation of trade documents has been proven to complete transactions far more quickly than conventional paper-based, manual approaches leading to reduced DSOs and faster access to cash.

WHY DO YOU THINK BOLERO IS REPRESENTED IN THE TRADETECH 40? Bolero was a pioneer in trade digitisation and has leveraged its experience and proven components to support many firsts. We were the first organisation to support an industry approved eBL in the commodities industry and have now 22

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taken this solution to the carrier community to broaden the reach of the benefits of digitisation to a wider community of Sellers and Buyers. We are also supporting the processing of trade transactions through blockchain/DLT with our partners R3 in the Voltron network for Letter of Credit execution.

WHAT ARE YOUR BIGGEST PLANS FOR 2019? We are excited about the opportunity to grow our activities with Carriers and Freight Forwarders who are trusted to transport goods between Sellers and Buyers. Their relationships, access to data and the physical goods themselves puts them in a unique position to open up digitisation opportunities that could really change the world of trade.

WHAT’S YOUR TOP PREDICTION FOR 2019? We need to see the various blockchain/DLT initiatives move from Proof of Concept to wider adoption.

TRADESHIFT’S CHRISTIAN LANNG ON SUPPLY CHAIN INNOVATION An interview with Christian Lanng, Founder, CEO and Chairman of Tradeshift, talking about supply chain innovation and digitalisation for trading corporates and SMEs.

Christian Lanng is CEO, co-founder and chairman at Tradeshift. He started his first technology company at age 19 and was the youngest Head of Division in the Danish Government, National IT and Telecom Agency, where he co-founded and led the Danish Nemhandel Project (EasyTrade), the world’s first open-source peer-to-peer trade platform. He is a member of the Global Agenda Council on the Future of IT Software and Services, World Economic Forum, as well as a recognized thought leader and Fortune 500 adviser.

CHRISTIAN LANNG

Founder, CEO and Chairman, Tradeshift

Tradeshift drives supply chain innovation for the digitally connected economy. As the leader in supply chain payments and marketplaces, the company helps buyers and suppliers digitize all their trade transactions, collaborate on every process, and connect with any supply chain app. More than 1.5 million companies across 190 countries trust Tradeshift to process over half a trillion USD in transaction value, making it the largest global business network for buying and selling.

WHY DO YOU THINK TRADESHIFT WAS REPRESENTED IN THE TRADETECH 40? Continued exponential growth, including $430 million in funding, enables Tradeshift to remain at the forefront of supply chain payments and marketplaces. YoY new bookings grew 250 percent, adding a record 49 new customers, including Fortune 500 companies Charter Hall and HSBC in the last quarter alone.

WHAT ARE YOUR BIGGEST PLANS FOR 2019? With the globalization of technology comes the continued globalization of jobs. In 2019, Tradeshift will further expand our international footprint, with plans to open a new office in Aarhus, Denmark.

WHAT’S YOUR TOP PREDICTION FOR 2019? Brexit uncertainty will influence an increased cross-sector drop in purchase orders across UK based manufacturing, retail and logistics industries. TRADE FINANCE TALKS

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INTERESTING

TRADE FINANCE

FINTECHS AND WHAT THEY ARE DOING

Trade Finance Global heard from 6 interesting fintech startups in the trade and receivables ecosystem, talking at the ITFA Fintech Discovery Day in Helsinki.

The International Trade and Forfaiting Association, ITFA, previously known as IFA, is the worldwide trade association for companies, financial institutions and intermediaries engaged in trade and forfaiting. Founded in 1999, and with members all over the world, the ITFA brings together banks and financial institutions who are engaged in originating and distributing trade related risk and finding creative ways to mitigate risks. Expanding from its original focus on the purchase and discounting of simple but robust payment instruments, such as negotiable instruments and letters of credit, the forfaiting industry has embraced new instruments and created new structures to become a prominent part of supply chain finance. The ITFA acts as a valuable forum for its members to interact and transact business together profitably and safely.

The ICC estimates around $9 USD trillion of global trade finance is done each year, yet non-banks and institutions only provide $250 USD billion of this. Amongst banks, there is often a lack of resource and internal knowledge to finance smaller ticket deals, such as the provision of liquidity to trading SMEs. In addition, the regulatory landscape around Basel iii and iv capital requirements have hindered bankâ&#x20AC;&#x2122;s ability to finance and service smaller companies. Fintechs are trying to make it easier for banks to do lower value ticket deals by making the process easier to extend payment terms and create efficiencies in doing the paperwork for SMEs, as well as managing exposures and documenting transactions. This also makes pooling of trade finance books, securitisation and bringing in non-bank investors easier and more feasible for investors.

It is often difficult for banks to onboard SMEs due to the high opportunity cost (relative to reward size). Fintechs are tending to focus on agile customer on boarding, automation and e-KYC. Fintechs in the cross-border trade finance space are addressing three opportunities for banks, corporates and businesses: KYC and the provision of quality information about the customer, onboarding journey time, and integration with bank systems. How can banks as well as their clients and risk/ liquidity partners benefit from these fintechs?

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MITIGRAM Mitigram has been operational for around 3 years. A Nordic fintech based in Stockholm, Mitigram is a networking and communications tool aimed at helping corporates facilitating trade finance, through finding out confirmation prices for Letters of Credit, guarantees, receivables and performance bonds. Mitigram is the world’s first global trade finance collaborative platform for corporates, commodity traders and risk takers/ liquidity providers to access counterparties in funding and hedging risk of trade transactions. By capturing and centralising trade flow data in a structured format, Mitigram’s dashboards can then show additional information around share of wallet in certain markets, reasons for rejecting trade or receivables applications, potential revenue lost based on risk / market and the bank’s efficiency metrics. Mitigram currently concludes around $1.7bn USD of transactions per month.

TRADETEQ Tradeteq is a London based fintech which allows bank and non-bank investors to connect, interact and transact. Trade finance is deemed a reliable asset class, known to achieve consistent yields even during macroeconomic events. With low default rates, high yields and high recovery rates, trade finance has been named an asset class deemed for growth by many. Tradeteq partners with banks to provide them with a platform to connect, interact and transact with Non-Bank Financial Institutions. Tradeteq transforms trade finance in to an investable asset for traditional credit investors such as pension funds and insurance companies. This process creates greater capacity within banks, subsequently generating more financing for SMEs. Tradeteq uses various machine learning and AI specialists to deploy tools for nonstandard data. Rather than using outdated statistics methodology to determine risk and credit score (such as the Altman Z-score), Tradeteq uses network data and real-time payment behaviours to form a more accurate representation of credit scoring and tools to monitor investments.

LEVANTOR Levantor is a London based fintech focused on helping enable sales. Supply chain finance programmes have proven very successful amongst corporates and their suppliers when it comes to managing working capital and providing some level of payment terms to suppliers. However, on the sales side, sometimes a supplier’s standard payment terms (e.g., 30 days) aren’t sufficient to cover inventory and debtor time scales. In contrast to supply chain finance, Levantor focuses on sellers. The credit is not on the large corporate buyer, instead, on a diverse portfolio of buyers. Levantor helps simplify credit terms between the seller and the buyer, by providing extended payment terms. There is no recourse to the seller, and banks can access this pool of assets. For sellers and corporates, they can enable sales with no recourse back to them.

TRAYDSTREAM Traydstream is designed to speed up and make trade finance processing more efficient by looking at the process of document checking, compliance and scrutiny. According to Traydstream, currently, physically checking an LC takes around 2 hours. With Traydstream’s technology, this can be reduced to 45 seconds. Using an OCR engine that extracts data from the LC, Traydstream conducts the document scrutiny – which includes resolving issues around missing fields, ensuring consistency and compliance regarding ISBP and UCP rules. Traydstream is also integrated with various vessel and journey checks, as well as risk / sanction checks. With around 250k algorithms on the platform, Traydstream is a SAAS based ecosystem designed to ingest and make trade processing data more efficient. 26

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TRADEASSETS Tradeassets focuses on financial inclusion. The risk of financial exclusion at the corporate and bank level can have huge implications to trading businesses in emerging markets, but the effect of financial exclusion at the institutional can have an impact and disconnect at a level that is much greater to entire nations. Tradeassets is a Dubai based digital ecosystem which looks to address and enable financial inclusion, focussing on digitilisation within the secondary trade finance market.

INTIX INTIX is a data centric fintech providing data capture functionality at all levels of a trade transaction. By transforming data into a new economic asset, capturing datapoints from many areas of a transaction banking business can help enhance processes such as credit scoring at a transactional level, trade distribution, liquidity monitoring and trade finance automation.

COMPETITION OR COLLABORATION? So, who owns the customer relationship and to what extent are fintechs disrupting here? Itâ&#x20AC;&#x2122;s often easy to have the impression that fintechs are taking away market share. However, the idea of partnership and collaboration, crossselling and offering a fuller suite of products, as well as fintechs powering the backend (rather than front end) systems for banks is much more plausible.

Financial institutions and banks are however looking at addressing the market through open banking and platform initiatives where they offer finance through newer players, the key challenges remain however, in terms of kyc and money laundering. Ecosystems between fintechs and banks, banks and customers, and fintechs and fintechs continue to develop in the trade finance space.

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MARKET FOCUS

FCI

Trade Finance Global recently announced a strategic partnership with global receivables association, FCI. Working closely with industry, policymakers and stakeholders worldwide, FCI promotes best practice in the receivables finance industry. The team at TFG will be working closely with FCI to strengthen its core trade finance education proposition, as well as promote local trade, factoring and receivables finance. Peter Mulroy, Secretary General at FCI, said: â&#x20AC;&#x153;Partnering with Trade Finance Global is a next step in developing strategic partnerships for FCI. The agreement will help FCI to promote Factoring and Receivables Finance among TFG members but also develop more awareness on the solution in the world through the TFG website. The agreement is in line with one of the key pillars of FCI: to support the growth of the industry.â&#x20AC;?

PETER MULROY

Secretary General, FCI TRADE FINANCE TALKS

FACTORING MARKET OVERVIEW IN EUROPE AND THE MIDDLE EAST Following the FCI’s recent appointment of Ms. Betül Kurtulus, Chapter Director of Central & Eastern Europe, South East Europe (Balkans), and the Middle East, we asked her about some of the factoring trends and a market overview in these areas as she embarks on her new role at FCI.

MS. BETÜL KURTULUS Regional Director of Central & Eastern Europe, South East Europe (Balkans), and the Middle East

Betül comes to FCI with 26 years of experience in the factoring industry. Her previous position was General Manager and member of the Board of Strateji Faktoring in Turkey, overseeing all areas of operation. She also served for the past five years as member of the FCI SCF Committee and more recently FCI Marketing Committee.

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WHAT ARE THE KEY TRENDS IN EUROPE AND THE MIDDLE EAST IN RELATION TO TRADE RIGHT NOW AND WHAT ARE THE BIGGEST CHALLENGES FOR SMALL TO MID-SIZED CORPORATES? The factoring industry has been growing continuously. As reported by FCI’s 2017 Global Factoring figures, the world factoring statistics indicate that the industry experienced another strong year in 2017 and initial data shows that the industry will continue to grow in 2018. World factoring volume was over €2.598 trillion in 2017, with €1.701 trillion of this generated from the Eurozone, that’s some 65 percent of the total turnover during 2017. Economic indicators show that the expectation of global growth will be close to 3% in 2019 from the expectation of 3.2% last year. The highest decline has been expected from the Euro area. The expectation shows that growth in the Euro area has been cut sharply to 1.4% this year from 1.9% last year. For the last 10 years economic and financial volatility and also global risks are very high but even in that period, the factoring industry is growing more than the growth rate of the Eurozone. The receivables finance industry has a very important role in the growth in global trade by continuing to finance SMEs during this volatile period. Factoring is a direct channel for SMEs to access capital. These engines of growth are supporting the economy around the world especially in the emerging countries like in the CEE and SEE region and also in the Middle East. In the Euro area, the realized and expected GDP growth rate and the potential growth rate of some of the countries will be over 3 percent like Bulgaria, Poland, Romania, Serbia and also a smooth growth rate in Baltic countries. The share of factoring in GDP is expected to be higher than 3-4 percent in 2018 in many of the region countries. Compared to the European average there is still the potential for growth, especially in standard factoring products. Turkey will likely slow down sharply in 2019, but in the long run, we think we will be facing economic recovery with prudent policies from the Central bank. The expected growth rate

of Turkey will still be promising and over 4% during 2020. In the Middle East area, some of the governments like Dubai have committed itself to increased infrastructure developments, along with the growth of the SME sector. We see growing awareness and requirement for structured trade finance products and for the improved technology to drive it in the Middle East area. Preparing the ground for 2020 sustainable growth can only be reached by the transformation of business models that holds digitalization effectively. Besides digitalization, the growth of the sector also depends upon the regulations and the expertise of the sector in export factoring. Even though Turkey’s factoring activities are mostly dominated by domestic transactions, there is great potential to grow in export factoring. With strong export factoring expertise, the great success of the Turkish factoring industry will continue with the impact of technology on the receivables finance industry. Over the last decade, the Turkish factoring industry invested in IT-based projects intensively and established: Receivables Recording Centre, Private Integrator system and Trade Chain Finance Platform (TCFP) under the management of the Association. I believe that Turkey expertize on export factoring and investments on IT based projects will have a crucial role in the future of factoring industry. FCI has invested and launched a new business line of FCIreverse. The development of new markets and new technologies plus the continuing growth in trade means that the future is bright for the industry. My key objective is to get the tail winds in the region with a new product like FCIreverse, implementation of Islamic factoring and investments on other IT solutions.”

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INSIDE THE MIND OF MR. LIN HUI ON TRADE TRENDS IN CHINA FOR 2019 Following the FCIâ&#x20AC;&#x2122;s recent appointment of Mr. Lin Hui, Chapter Director of NE Asia, we asked him about some of the top trends in China and beyond, the impact of the BRI on exporters, and his new role at FCI.

MR. LIN HUI

Regional Director of North East Asia

Mr. LIN has over 20 years of experience in the Chinese factoring and trade finance market. He had launched two leading bank factoring divisions with Bank of Communication and China Minsheng Bank, and one commercial factoring enterprise located in mainland China and Hong Kong.

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WHAT ARE THE KEY TRENDS IN CHINA IN RELATION TO TRADE RIGHT NOW AND WHAT ARE THE BIGGEST CHALLENGES FOR SMALL TO MID-SIZED CORPORATES? The most obvious trend is that China is transforming its economy into a consumption-driven growth model from export-led growth. With One Belt One Road initiative, this trend will have a significant and direct impact on the trade in the region. We will see more demands and innovations rising from its import and domestic supply chain and trade finance area.

China’s SMEs particularly in the export sector are mostly vulnerable to the US-China trade war. However, SMEs are also vibrant elements in many industries. During the transition process of the world’s second largest economy, there will be huge risks as well as opportunities to the SMEs. Factoring has proven its role in SMEs financing. FCI aims to develop closer ties to our members in the region and to promote the best practice supporting their SMEs clients.

WHAT ARE THE GENERAL ASIA TRADE FINANCE TRENDS AND WHAT ARE CFOS/ TREASURERS THINKING ABOUT, WITH REGARDS TO RISK, DIGITALISATION AND SUSTAINABLE TRADE FINANCE? According to a recent survey by the Shanghai National Accounting Institute, Financial Cloud and E-invoicing are ranked top two influential technologies in the year 2018 by the CFOs/treasurers in the region. Technology is changing the business world.

FCI will work closely with our members in the region, to reflect and support their interests and concerns in the digital era, and to facilitate the sustainable growth of the industry.

WE’VE SEEN HUGE CHANGES IN THE RECEIVABLES SPACE THROUGH NEW TECHNOLOGY AND THE DIGITALISATION OF TRADE. WHAT ARE THE BIG OPPORTUNITIES AND HOW WILL YOUR ROLES AT FCI HELP ENCOURAGE TRADE AND EDUCATE BANKS AND CORPORATES? FCI offers the standardized receivables solution through the network of our 400 members around the world, including cross-border factoring, invoice verification, purchase order management, FCIreverse, as well as the EDIfactoring infrastructure. The FCI network also facilitates the sharing of know-how and best practice of the industry worldwide among our members. Standardization, network, and

know-how sharing are the three advantages to be an FCI member. So far we have 49 members in Mainland China, 20 in Taiwan, 13 in Hong Kong, 3 in Japan and 2 in Korea. Most of them are banks. I am going to encourage our members in the region to fully utilize these FCI facilities, to contribute and to benefit each other from the network effect.

WHAT ARE YOUR KEY OBJECTIVES AS YOU STEP INTO YOUR NEW ROLES? My key objectives are to help FCI to take a leading role in building a healthy, vibrant environment for factoring and receivables finance services in the region, and to support

our members’ business growth and the benefits from the FCI network. TRADE FINANCE TALKS

HOW DOES TRADE SECURITISATION WORK? AN INTERVIEW WITH FINACITYâ&#x20AC;&#x2122;S CHARLES NAHUM

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he world of securitisation in trade and consumer receivables is complex, yet benefits to corporates are being increasingly realised as liquidity tightens and access to traditional forms of finance becomes more challenging. We spoke to Charles Nahum, Independent Managing Director, Europe at Finacity about the ever-changing role of securitisation within the trade space, and the benefits of securitisation on trade and receivables to help release working capital in corporates.

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WHAT IS ACCOUNTS RECEIVABLE SECURITISATION, AND WHY DOES IT HELP CORPORATES?

after the company came out of administration.

Securitisation is the mechanism for companies to raise capital against their receivables portfolios on a non-recourse basis. By securitising accounts receivable, financers are able to provide funding with reduced credit risk, therefore companies’ access to finance can be much more favourable than raising finance through more traditional means such as revolving credit facilities and bond issuances.

ACHIEVING IFRS OFF-BALANCE SHEET TREATMENT IN TRADE RECEIVABLES SECURITIZATIONS

HOW DOES IT WORK? Receivables can often be seen as money owed to a company by customers. In the case of accounts receivables securitisation, receivables are legally purchased from the company to a special purpose vehicle (SPV), and will be legally ring-fenced from the risk of future bankruptcy of the company. These receivables, typically purchased daily, form the collateral against which funding is provided. This has permitted competitive pricing and committed financing, often to less creditworthy firms. SECURITISATION IN ECONOMIC DOWNTURNS Securitisation lends itself well to cyclical business sector downturns and liquidity tightening from banks. The secured committed financing provided against short term receivables provides firms continued access to finance even when they experience sustained losses and banks are no longer willing or able to lend money through alternative means. SAVING COMPANIES? As an example, the first ever receivables securitisation in Mexico, implemented by Finacity in 2006 for Vitro SAB (Mexico’s largest glass producer) proved to be a lifeline for Vitro when it went into administration a couple of years later. Other lenders took a hit while the receivables securitisation, an investment grade structure rated ‘AAA’, continued funding throughout the administration process and beyond. In fact, the facility size was increased soon

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What we have seen in 2018 is an increasing demand by corporates to achieve off balance sheet treatment of receivables, under IFRS. Removing receivables from the balance sheet allows for improved financial and performance ratios. This is not so much driven by ‘window dressing’ of company accounts, but rather by bank covenants on their other debts, linked to these financial and performance ratios. The breaching of these covenants can lead to increased borrowing costs and reduced funding on this other debt. SO HOW DO THEY ACHIEVE THIS OFF BALANCE SHEET TREATMENT? Under the latest IFRS requirements, to achieve off-balance sheet treatment, the company should not retain ‘substantially all of the risks and rewards associated with a sale of assets’. To ensure that auditors are comfortable in applying this treatment, the transfer of risk and risk mitigation is critical. Corporates have two choices here, either (i) to credit insure their accounts receivables or (ii) to sell a junior note representing loss from invoice payment defaults. Finacity has worked with the leading international audit firms in establishing a cost efficient solution to this second approach. In this Finacity solution, the company retains the ‘expected’ loss but sells to Finacity the second loss junior note, representing the ‘volatility’ in losses. This is acceptable to the auditors because they associate the risk on the asset with the volatility in losses rather than on the expected loss.

ABOUT CHARLES Charles has over 30 years’ experience leading international business development and process change initiatives across a range of business sectors, including structured finance, credit insurance, automotive and transportation. Based in London, he has been heading Finacity’s European activity

and

driving

its

business

development

efforts

since 2006. He has been instrumental in establishing the company’s European presence and track record in receivables securitization, its core business. Charles has been engaged in Finacity since its inception in 2001, when he was appointed to Finacity’s Supervisory Board, representing the interests of Euler Hermes, an investor and strategic partner.

CHARLES NAHUM

Independent Managing Director, Europe Finacity

ABOUT FINACITY Finacity’s notable founding shareholders include Bank of America, ABN AMRO and Euler Hermes. The relationship is non-captive allowing Finacity to partner openly with investors, insurers and other service providers best suited to the client. Now 18 years since Finacity was created, Finacity currently facilitates the financing and administration of an annual receivables volume of approximately US $100 billion. With resources in the USA, Europe and Latin America, Finacity conducts business throughout the world with obligors in 175 countries.

WHAT ARE THE KEY TRENDS FINACITY IS SEEING IN THE SECURITISATION MARKET? 1. Risk is underrepresented in price The banks are heavily competing for business, driving down the pricing of securitisation and other debt facilities. There is an increasing market view, shared by Finacity, that pricing is too low compared to corporate default risk. There could well be another bubble waiting to be burst – let’s see what happens in 2019. Something might click this year which readdresses pricing in securitisation.

look at financing their companies through more traditional forms of finance such as syndicated revolving loan facilities or bond issuances, before looking at securitisation as these alternatives are perceived to be simpler and quicker to implement. Although the availability of finance in the market has led to firms using more traditional forms of financing, we anticipate a new demand for securitisation, as the market turns.

4. Geographies

What we have seen in 2018 is the increasing demand by corporates to achieve off balance sheet treatment under IFRS. This seems to be driven by increasing use of loan covenants applied to financial and performance ratios.

We’ve seen credit insurers and securitisation houses shying away from some of the emerging markets over the past 3+ years. As examples, there has been reduced appetite for a number of jurisdictions notably Turkey, Eastern Europe and the CIS. This is largely driven by the political uncertainty and reduced investor appetite.

3. An increase in the requirement for securitisation

5. Brexit

There is currently a lot of liquidity in the market. Companies aren’t necessarily doing securitisations, partly because of the abundance of liquidity, but also due to the complexity in implementing securitisations. Many corporates would

The UK has traditionally been a market with significant credit alternatives available to corporates. The impact of Brexit could make credit tighter and further open opportunities for receivables securitisation.

2. Off-balance sheet requirements

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AIGâ&#x20AC;&#x2122;S GLOBAL HEAD OF TRADE FINANCE,

MARILYN BLATTNER-HOYLE ON BLOCKCHAIN IN 2019 We spoke to Marilyn Blattner-Hoyle on Blockchain and Trade Finance, taking a look at some of the real world applications of blockchain in trade finance, specifically how AIG are utilising distributed ledger and other technologies to increase transparency, reduce friction and help streamline cash flow and working capital solutions in terms of payment terms and trade finance in the insurance world.

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AIG TRADE FINANCE AND BLOCKCHAIN AIG Trade Finance was established in 2007 to develop and promote an innovative new way to align trade credit insurance more effectively with trade finance products and to deliver real added value solutions for corporates, banks and other funders. AIG innovates to support funders and corporates by using blockchain and distributed ledger technology as well as other technologies to increase efficiency and scalability of working capital trade solutions, supported by Basel III-compliant limited conditionality AIG trade finance insurance. AIG has recently further broadened its trade finance capabilities to better partner with banks and other funders on their trade finance/ working capital flow transactions across the trade product spectrum including receivables finance, supply chain/confirmed payables finance and other working capital products. When consider blockchain and DLT, AIG focusses on client needs and the technology solving the same. For example, the interesting attributes are the ability of the blockchain/ DLT to increase transparency, remove friction and identify provenance of data in an invoice life cycle.

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WHAT ARE YOUR THOUGHTS ON DISTRIBUTED LEDGER TECHNOLOGY (E.G. BLOCKCHAIN) AS A DISRUPTOR TO TRADE FINANCE? I believe blockchain or similar technology applications can solve many of the issues that are widespread in the trade finance industry such as paper-driven and documentation heavy transactions, lack of data transparency, numerous different platforms that do not connect. Adoption and scalability is key though and I think that will be driven by proven examples of increasing the speed with which transactions are executed, decreasing errors, and then of course the holy grail would be to do all of these things, and using the data to make it easier and safer to include a wider remit of participants in the trade finance ecosystem including SMEs. However, so far adoption has been slow and limited in its application. It is key that we do not create further data silos via blockchain and think carefully about how all these different pilot ecosystems can connect. Corporates can streamline their working capital solutions improving payment terms, and funders can benefit from targeted insurance supporting a funder’s capital risk mitigation requirements, and technology can enable that.

WHY IS AIG UTILISING BLOCKCHAIN TECHNOLOGIES AND HOW IS THIS MAKING A DIFFERENCE TO OTHERS? AIG has a strong innovative and exploratory approach aimed at bettering our service and product offerings to our clients and being relevant in respect of trends that will impact our clients. DLT is one of these trends. We are part of a variety of different consortiums and pilots across the company and have a joined up approach in using lessons learned on each project, one of which we drove out of the trade finance team. The key is that we are using blockchain with our clients at the center so if blockchain can solve something better than another solution, then we look to engage in that if it makes sense. For our trade finance application, which was based on a receivables orchestration, we found that the data transparency was the key attribute that we did not see with other systems – so in practice that is being able to see the end to end invoice data at any stage in the transaction. This is particularly important when you consider expanding beyond the pilot to multiple different ecosystem participants such as more funders, obligors, brokers, insurers and even more widely including logistics, customs etc. As the first insurer to do a mainstream pilot with receivables and insurance, we are engaging heavily with the industry and also even with our competitors to think about how we can expand this. We hope to influence the base of how trade finance and industry intersect. 40

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WHAT ARE THE TOP 4 BLOCKCHAIN TRENDS OVER THE NEXT 3 YEARS, IN YOUR OPINION? 1. Convergence Different industries will come together more easily by being able to use blockchain and similar technologies to make data sharing easier – in our case we had insurance, banking and corporates coming together. This has not necessarily been the norm in these sectors previously. APIs will be key to this convergence to offer a “quick” solution to data exchange at least in the short term. APIs were key to the cost effectiveness of our first structure. 2. Machine learning –Using the data effectively to better assess trends will be key to expanding to more difficult risks and SME world. Blockchain and DLT will hopefully provide the platform of data convergence that will make this machine learning and algorithm use more widespread. We do this already by using payment history and underwriting experience to write limits including where financials on an obligor are not available, but much much more can be done with higher availability of data.

3. Interoperability In order for the ecosystem to work, interoperability between blockchain/ DLT networks and platforms is absolutely key. We cannot have more data silos. There are numerous projects going on in this area now. 4. Crypto currency I think this may become less of a trend if that is an option for an answer. The current issues with volatility, regulation, energy use, hacking etc…have taken the spotlight away from some of the non-crytpo currency uses of blockchain so I hope regulators, lawyers and industry leaders will be able to keep the issues separate. WHAT ARE THE MEDIUM TO LONG TERM OBJECTIVES THAT YOU’RE FOCUSING ON AT AIG IN RESPECT TO TRADE FINANCE AND HOW WILL YOU ACHIEVE THIS? Medium to long term objectives in this space are to be able to better use technology and data to drive more effective insurance and more profitable growth in the trade finance arena. We believe this is only possible by working with our clients, brokers and across the industry on their various technology applications and connecting those projects where appropriate. This will not be a short term endeavour and there are and will be more hurdles to overcome, but the medium to long term potential is there.

MARILYN BLATTNER-HOYLE Global head of trade finance, AIG

Marilyn is the global head of trade finance for AIG and in that role also leads the global trade finance Centre of Excellence developing new products/ processes including the trade finance-related blockchain/

technology

applications.

Marilyn

joined AIG in 2015 to focus on implementing AIG’s funded and unfunded supply chain finance products and to support AIG’s trade finance receivables

and

securitisation

transactions.

Marilyn previously worked as a lawyer in the international banking and finance practice for global law firm Hogan Lovells in London and New York where she serviced numerous bank clients as well as corporates. Marilyn was recently awarded the ‘Innovator of the Year 2018’ by Credit 500. She has spoken at key industry conferences including CES, ITFA, BCR and others, and on the Insureblocks podcast presenting on topics such as Blockchain technology for Trade Finance and the importance of Trade Credit insurance and capital risk mitigation to the Trade Finance Industry.

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COMMERZBANK: IS THE BPO A GATEWAY FOR FURTHER TRADE FINANCE TECHNOLOGIES? Bank Payment Obligation can act as a gateway for further trade finance technologies, says new Commerzbank whitepaper

• The whitepaper, “Leading the path of digital evolution” explains how increased market adoption of the BPO may spur the digitisation of trade: • Commerzbank notes an increased customer interest for the BPO due to growing demand for faster and digitised processing of trade transactions • The paper also highlights the hurdles to the tool’s wider use, such as raising customer and bank awareness of its advantages

In the face of slow market adoption for the Bank Payment Obligation (BPO), which serves as a legally binding undertaking to execute payment for goods or services, Commerzbank has launched a new whitepaper, “Leading the path of digital evolution”, which explores how to boost BPO adoption among banks and – crucially – their corporate customers.

stage. More corporates have used the instrument, and the number of “BPO- active” and “BPO-ready” banks is now about 40, situated primarily in Asia and Europe. Such BPO-active banks are citing growing BPO business and reporting that – slowly, but steadily – more corporates are being onboarded for the purpose of completing new BPO transactions.

2010 was a milestone for the BPO: it was then that it moved beyond the “proof of concept” stage and reached its “pilot”, as Standard Chartered Bank’s internal branch network facilitated a transaction between BP and Octal. The first cross-border transaction, between Bank of China and Bank of Montreal, took place the same year.

Market adoption is crucial to the success of any given product; the BPO itself continues to be adopted because it both fills existing gaps in the market and satisfies the demand for value-added, client-centric digitisation. Yet market adoption of the BPO has been relatively slow.

The BPO has since matured to its “commercialisation”

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“The BPO’s future potential – both as a transformation in its own right and as a gateway for other trade finance technologies – could set the industry on course for greater transaction optimisation and efficiency. It can also provide banks with the opportunity to better meet the growing demands of trading corporates, for faster, more transparent and digital process flows.”

ANGELA KOLL

Specialist Product Management Trade, Supply Chain Finance & Innovation at Commerzbank “What’s more, BPO offers yet greater potential in the Supply

work, as well as preserving the liquidity and credit facilities of

Chain Finance space, where it can serve as an enabling

the supplier.” added Koll.

framework by electronic matching of data of the physical supply chain to provide solutions along the financial supply

The paper suggests that adoption of the BPO has been

chain in a digital environment. Not only does it secure the

slow, so far, because: trade is traditional, yet complex; there

payment itself, but it can also provide security for financing

remains a scarcity of banks available to transact with the

against the payment by the recipient bank or the obligor

BPO; corporates and banks still need to be made aware of

bank, and allow a deferment of payment terms and maturity

the instrument’s appeal; and the URBPO still largely position

date. This is crucial for giving the buyer more autonomy over

the BPO as a tool for banks, rather than for corporates as well.

their working capital cycle and the supply chain in which they

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How does a Bank Payment Obligation Work? A BPO transaction flow consists of 2 data-matching processes:

1. MATCHING OF BASELINE DATA (ESTABLISHMENT OF BASELINE)

The buyer and seller agree on the purchase order data as the basis for triggering the payment obligation after shipment. This data protocol is called the “established baseline”. Now the seller already has the assurance to receive payment at maturity if shipment is effected according to the agreed terms and the data presented in compliance with the baseline. The data flow is channelled through the involved banks and processed on the SWIFT TSU.

2. MATCHING OF TRADE DATA (BPO BECOMING DUE)

After shipment, the seller provides the invoice and shipment data for matching against the baseline on the SWIFT TSU and sends the trade documents directly to the buyer. Upon successful matching of the data, the BPO becomes due and the obligor bank is automatically obliged to pay the BPO amount at maturity.

Koll adds: “While the trade finance community will pursue DLT advancements in the coming years, the BPO is available now – and has also already been demonstrated to be both commercially viable and valuable. To reach the tipping point, we need BPO-active banks to take a strategic approach to promoting the BPO as a product, both to their corporate customers and – critically – to other banks.” 44

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SUMMARY OF THE BENEFITS OF THE BPO

FOR ALL PARTIES: •

Enhanced trading relationship

•

Enhanced trade opportunities and processing and use of the four-corner model

FOR BOTH BANKS: •

Less effort and lower cost of onboarding clients (thanks to there being no additional KYC demands)

•

Enhanced bank-to-bank international relations

•

Fast, automated and seamless transaction processing

•

Risk mitigation – and therefore lower costs – involved with trade finance

•

Standardisation with other banks through the URBPO and ISO 20022TSMT Improved speed of handling mismatches on behalf of the client

•

Improved visibility and transparency on the trade transaction

•

The ability to “mine” the data that support transactions for future business development

BENEFITS FOR THE SELLER •

Guarantee of payment in full on a specific due date

•

Ability to raise finance on a BPO with deferred payment terms

•

Lower implied cost of funding than would have been incurred under other financing structures

BENEFITS FOR THE BUYER •

Guarantee of goods received as expected

•

Flexible financing options at several stages of the supply chain

•

Controlled input into the specifics of the payment conditions, as facilitated by data-matching on TMA/ SWIFT TSU

•

Early receipt of documents to avoid storage charges at the port of discharge

BENEFITS FOR BOTH CORPORATES •

Fast, automated and seamless transaction settlement processing

•

Improvement to the efficiency of the working capital cycle

•

Risk mitigation and financing for open account transactions

•

Reduction of complexity involved with paper-based processes

Commerzbank successfully implemented its BPO front end in November 2018, thereby completing its digital BPO processing offering. The front end allows corporates to enjoy digital end-to-end communication with the data matching engine of SWIFT (SWIFT TSU). The BPO front end supports fast, automated and seamless transaction settlement processing of the BPO and improved efficiency to their working capital cycle. Around 40 banks are offering BPO handling for trade business at the current time.

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INSIDE THE MINDS OF THE TRADEIX LEADERSHIP TEAM TFG spoke to the leadership team at TradeIX, about DLT, Trade Platforms and SAP / treasury, following their recent announcement and reorganisation of their team. Find out what keeps the minds of the largest trade finance network up at night.

WILL THERE BE A CONVERGENCE OF DLT TECHNOLOGY GIVEN THAT THERE ARE MULTIPLE PLATFORMS, AND IS THERE A NEED FOR A SINGLE PLATFORM?

DAVID SUTTER Chief Strategy Officer TradeIX

I think you will see convergence and interoperability between DLT protocols but exactly when that will happens and how it occurs remains to be seen. Within trade specifically, there are now so many different consortiums, networks, platforms, and applications all building on a number of different distributed ledger technology protocols that it’s hard to imagine that we won’t eventually see some level of interoperability and convergence between them. There are, however, still some significant technical challenges to achieving true cross-protocol interoperability, especially when considering the pace of change and diversity of requirements presented by different uses cases and different industries. The good news is that it’s something everyone in the industry is looking at and there are major initiatives already underway focused on overcoming these challenges and projects providing early proof points that show interoperability or at least connectivity are definitely possible and valuable. As a company, we’ve made a decision to build on Corda because it is indisputably the best protocol for us, our clients, and the use cases we’re focused on and we don’t see that changing but we cannot rule out the need to connect to other networks running on different protocols in the future.

WHAT IS THE IMPACT OF DLT TECHNOLOGY ON TRADE AND RECEIVABLES FINANCE IN THE LAST 5 YEARS, AND HOW WILL TRADEIX SHAPE THE NEXT 5 YEARS?

GEOFF RYAN Chief Financial Officer TradeIX

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DLT has had a powerful impact on trade finance in recent years. Today, both financial institutions and their corporate clients, realise the question no longer simply concerns the next application, or working capital finance solution, but about doing more with less. The market is now looking at new models, focusing on collaboration, increased efficiency, enhanced security and reduced costs in delivering solutions to customers with lower risk. Given that “cash is king”, and how much room there is for improvement in the market today, we feel our solutions will be for both CFO’s and Treasurers, seeking to maximise cash resources, and fund growth. It will be interesting to see which organisations are among the first to take advantage of DLT technology and join the growing network of funders, credit insurers, B2B networks, technology and data providers reaping the benefits of this streamlined approach, and who will be left behind with their legacy applications.

SAP AND TREASURY ARE SO IMPORTANT TO ANY TRADING BUSINESS. FOR TRADING BUSINESSES LOOKING TO OPTIMISE WORKING CAPITAL, HOW DOES TRADEIX HELP CORPORATE TREASURY MANAGERS WITH WORKING CAPITAL SOLUTIONS?

TAWFIQUE HAMID Chief Revenue Officer TradeIX

I agree, SAP, as well as other ERP systems such as Oracle and Microsoft Dynamics, are key in the trade finance process and one of the main sources of trade-related data. So far, corporates had to integrate with centralized platforms from third-party providers. Based on the growing number of implemented financing programs such as Supply Chain Finance and Receivable Finance, corporates had to connect to multiple, in some cases over ten different systems with multiple standards and communication protocols. We are introducing the world’s first distributed ledger trade finance that offers flexible options for corporates and banks to connect with each other – options that range from ERP-embedded trade finance applications to web-based portals. The ERP-embedded applications will offer end-to-end trade finance functionality from within the ERP environment.

FROM A CUSTOMER AND PRODUCT PERSPECTIVE, HOW ARE BANKS AND OTHER STAKEHOLDERS INVOLVED IN DLT ADOPTING THESE PLATFORMS AND TECHNOLOGIES, AND WHAT ARE THE KEY BARRIERS? WHAT IS TRADEIX DOING TO IMPROVE THE CUSTOMER JOURNEY FOR BANKS?

SHANE O’FLYNN Head of Product & Engineering TradeIX

Financial institutions and their corporate clients are very keen in adopting DLT for their trade finance business. They realize that the financial and IT systems that support global trade are aging, siloed, and have many manual steps injecting cost, risk and inefficiencies into trade processes for all parties involved. By joining the Marco Polo Network, members can gain access to the next generation of trade finance infrastructure leveraging the Corda blockchain technology without having to build it themselves. One of the key barriers corporate’s face is still knowledge and expertise around blockchain technology and how it might apply to trade finance. However, with the Marco Polo Network, banks and corporate’s are collaborating and sharing best practices, expertise and their experience with blockchain technology, which makes the adoption in trade finance much faster.

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Following a year of geopolitical uncertainty, technological disruption and competition, the 2019 International Trade Finance Awards by Trade Finance Global recognise and award those who have succeeded and provided an outstanding contribution to international trade.

Trade

Finance

Global

Excellence

Awards are totally independent and judged by an expert panel of trade specialists.

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BEST FINANCIERS

Commerzbank AG

Stenn International

Bibby Financial Services

BEST TRADE FINANCIER

BEST RECEIVABLES FINANCIER

BEST INVOICE FINANCIER

GapCap

UKEF

Abu Dhabi Islamic Bank

BEST ALTERNATIVE FINANCIER

BEST EXPORT CREDIT AGENCY

BEST ISLAMIC FINANCIER

Demica BEST SUPPLY CHAIN FINANCIER

BEST FINANCE PROVIDERS BY GEOGRAPHY

Citi

African Development Bank

J.P. Morgan

BEST BUSINESS FINANCE PROVIDER IN EUROPE

BEST BUSINESS FINANCE PROVIDER IN AFRICA

BEST BUSINESS FINANCE PROVIDER IN NORTH AMERICA

Bank of America BEST BUSINESS FINANCE PROVIDER IN SOUTH AMERICA

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BEST TRADE SERVICES

Ebury

Euler Hermes

Johnson Associates

BEST FOREIGN EXCHANGE PROVIDER

BEST TRADE CREDIT INSURANCE PROVIDER

BEST TRADE FINANCE RECRUITMENT COMPANY

Allen & Overy

Sullivan & Worcester

TRADE FINANCE DEAL OF THE YEAR

BEST TRADE FINANCE LAW FIRM

TECHNOLOGY & INNOVATION

ICC Banking Commission

A. P. Moller â&#x20AC;&#x201C; Maersk

Kyriba

INNOVATOR IN GLOBAL TRADE

BEST SHIPPING COMPANY

BEST TREASURY MANAGEMENT PLATFORM

HPD LendScape

Export Enterprises

BEST TRADE FINANCE SOFTWARE PROVIDER

BEST TRADE TECHNOLOGY COMPANY

BEST TRADE CONTENT

Institute of Export & International Trade

TXF

Shannon Manders (GTR)

BEST TRADE FINANCE EDUCATION PROVIDER

BEST TRADE FINANCE PUBLISHER

BEST TRADE EDITOR

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ABOUT TRADE FINANCE GLOBAL THE VOICE OF TRADE With the shifting geopolitical and economic climate, as well as uncertainty on the future of global trade, businesses need strategic guidance on growth and trading overseas. TFG produces a wealth of educational videos and guides for businesses on topics around trade, and shares industry knowledge through its role as strategic media partners for trade conference providers around the world. Attracting around 100k monthly readers, our online publications (the Trade Portal) have a global audience in 185 countries. Our newly launched specialist content hubs provide free guides, thought leadership articles and features on almost every aspect of trade. Our most recent venture, â&#x20AC;&#x2DC;Brexit Businessâ&#x20AC;&#x2122; is a guide for UK enterprises navigating the complexity around Brexit. As advocates on trade and shipping education, TFG also hosts and funds the Accelerate Scholarship, a grant to help students realise their full potential in a career in trade.

BEST FINANCE BROKER, UK

AT THE FOREFRONT OF GLOBAL TRADE Trade Finance Global (TFG) assists companies with raising debt finance. While we can access many traditional forms of finance, we specialise in alternative finance and complex funding solutions related to international trade. TFG focuses on raising finance lines to assist a companies growth, by allowing them to purchase and sell more stock/inventory. This is achieved through structuring Trade Finance & Stock Finance, Receivables Finance & Invoice Finance, as well as Business Loans.

STRATEGIC PARTNERS

MEMBER ASSOCIATIONS

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2018 Trade Finance Highlights