Corporates and Paperback Processes – TFR Blog
Everyone is talking about the digitisation of trade, but what do corporates really want? An interoperable trade ecosystem that actually works, and where paper is a thing of the past .
At the heart of it, corporates want global trade solutions that facilitate the delivery of goods and services between their clients and the ecosystem in the easiest, most cost effective, and least risky way possible.
However, with the trade solutions and processes in place today they have to deal with traditional trade finance and commercial contract settlement arrangements. These processes are often complex, paper intensive, and require capturing data on a myriad of systems that are not connected or interoperable. These sub-optimal processes result in high cost, error rates that impact client service and the need for manual reconciliation. In turn, there is a negative impact on working capital and high operational risk – to the detriment of the efficiency and effectiveness of the entire trade ecosystem.
Regardless of size, industry or geography, corporates’ trade finance needs can be classified in three broad buckets:
- Strategic needs. These range from financing, risk and balance sheet management, to brand, product, and supplier, client and service provider management.
- Working capital needs – cash/cash flow and debt management, receivables and client management, payables and supplier management, inventory management and equipment financing and payment execution.
- Operational needs – physical goods handling and operational efficiency, along with contract settlement, document and trade instrument handling, operational processes and technology.
Integrated and automated
Indeed, even at the most basic, operational level, technology and digitisation have the potential to improve the corporate trade finance experience. Imagine a world where there is seamless connectivity and systems integration throughout the trade cycle, for all participants across the ecosystem – from buyers and sellers, to payment and logistics providers, banks and funders – to make the commercial contract and settlement process more controlled, efficient and secure. New and emerging technologies like blockchain offer this potential of a fully integrated, automated trade cycle with simplified processes that automatically and securely respond to trigger events, while offering enhanced visibility, tracking and reporting for compliance and management purposes.
New technology that enables digitisation of trade finance can help address many of the challenges plaguing the industry, such as a lack of interoperability among disparate systems across multiple networks and jurisdictions. A technology-enabled trade finance process can eliminate sub-optimal processes and remove operational friction. In today’s operating environment, technology is also playing a significant part in allowing participants to adapt to new regulatory requirements, enhance cyber security, and more proactively manage fraud within the ecosystem.
Whatever platform or technology toolkit is used, whether it be blockchain or another technology, what is important is that the development of the solution starts and ends with the trade ecosystems’ core current challenges across all participants. To create real value, any solution of relevance must be a corporate-centric solution with end-to-end scope, functionality and partnerships that provide clear benefits to the buyer and seller. At minimum, it will need to help improve working capital management for buyers and sellers, better manage risk and lower origination and funding costs for banks, funders and payment providers.
Article at TFR – http://www.tfreview.com/blog/paperback-processes