Banks must offer wider product suite to maximize digitalisation’s benefits: expert
Following is an interview with international trade finance expert Gary Collyer.
The International Chamber of Commerce Sri Lanka (ICCSL) will be hosting an international trade finance seminar on ‘Past Challenges and Future Opportunities in Trade Finance’. The one-day workshop will be held at Hotel Kingsbury on November 22, 2017. The workshop will be conducted by international trade finance professional Gary Collyer. Here’s an interview with Collyer addressing some of the key issues facing international trade today and some lessons learnt for countries such as ours.
Can you give us some background into your career?
I have spent around 40 years in the trade finance area. During this time I have worked for three leading trade finance banks – HSBC, Citibank and ABN Amro. For 15 years, I was the Senior Technical Adviser to the International Chamber of Commerce (ICC), Paris. I am still actively involved with the ICC in other roles.
Digitalization of trade finance has led to some confusion in the market as to the products that will be available, i.e. how such transactions will be completed and who will offer these services? What are your thoughts on the above?
For 100s of years, trade finance products have been predominantly delivered and serviced by banks. However, digitalisation has now opened up the market with so-called fintech companies as well as logistics companies offering a range of services in this area. In the seminar I will discuss where I see the business developing in the short to medium term.
The development of the ICC rules such as eUCP and URBPO, which were both identified as being necessary in 2002 and 2013, respectively, have not had any great impact in changing the trade finance mindset of moving from paper to electronic documents or data. Will the current initiatives that are being talked about have any material and immediate impact?
These new initiatives will need rules to support them. The eUCP is currently under revision to anticipate what may be needed, recognising that the rules are drafted to be platform or solution neutral. Certainly, the URBPO can be used as part of initiatives such as blockchain in managing underlying credit risk.
What is necessary to move from paper to electronic documents or data? What inhibits that transition?
In simple terms, a new mindset. Trade finance practitioners, whether from a bank or corporate background, appear to have greater comfort in examining a paper document than examining the exact same document but on a screen. Plus, the movement from paper to electronic is not a simple act of saying on a Friday evening “we are now finished with paper” and to start work on Monday morning in a digital environment. There is a lot of work involved in assessing what is needed to move a single transaction to an electronic platform, given the number of entities that can be involved with a single trade finance transaction.
Can you list some of the best practices that should be adopted by banks and corporates in trade finance?
That would be giving away some of the tips and ideas that will form the basis of the seminar! Let’s just say that today’s processes can be better and we will look at how that can be achieved.
What are the developments you see in trade finance in the short term?
Clearly, digitalisation as it is appearing in every trade magazine and article that you read today. We are seeing it happening in the commodity area where speed of payment is of paramount importance given the value of such transactions.
However, it will be a slower integration for the smaller value transactions or where the interest is not so great. However, in the background, there is the question of whether banks are offering the full suite of products that are available today. Trade finance is one bank product where one size does not fit all situations.
Any thought of opportunities that may come in the long term?
It would be foolish to think that digitalisation will become the global norm in the short or medium term. Paper transactions will still exist for some time. The key is for banks to manage such products while minimizing costs to themselves and their clients. As mentioned in the previous answer, are banks offering a full range of products to enable their clients to grow from an import or export perspective?
To maximize the benefits of digitalisation, banks must have a wide suite of
products on offer.