How Covid-19 is changing the face of Trade Finance

08/10/2020

During the Covid-19 crisis, resiliency, robust IT infrastructure and adoption of digital tools have become the foremost priorities for organisations. For the Trade Finance industry, it has definitely been an inflection point as the adoption of digital across the chain has been quite low.

Historically, Trade Finance has been a paper-heavy business, and a significant percentage of it continues to be this way. With multiple parties involved - from shipping companies, insurance companies to government agencies and banks, paper is still the legally accepted document, with submission, verification, re-submissions being the norm.

Change behaviour and digitisation have not had much of an effect in this area. This, despite the accelerating trend of digitalisation in the banking industry and emerging technologies such as Blockchain that have been around for quite some time. 

However, within two to three months from the onset of the Covid-19 crisis, many of these digital aspects came to the forefront, enabling clients and banks to keep operations running despite not being physically present in office. Quick adoption of digital tools became the need of the hour, with the first signs of digitalisation and its benefits seen during the crisis.

The other aspect that has assumed importance is the increasing emphasis on risk and resilience. Clients now evaluate and choose banks by looking at risk and resiliency of banks in terms of handling their deals and how they have a robust resiliency setup. Some of the critical questions raised revolve around access to necessarydocuments, managing client information and data in the present away-from-office scenario, and the availability of digital tools and IT infrastructure.


Learnings from the crisis for Trade Finance


Three key learnings have emerged from the crisis for banks and well as specifically for Trade Finance:

  • The importance of risk and resilience for banking operations

  • The spread of trade finance expertise across different regions

  • The digital tools and strong IT support required during the pandemic 

From the clients and peers’ perspective, these three have assumed greater importance during the crisis, and will continue to remain so even post the crisis. This trend and change behaviour in clients and banking operations staff is clearly noticeable. Clients now expect banks to anticipate requirements of the future, build this into their resiliency plans and strengthen their digital infrastructure. We can safely say that many of these behavioural changes will tend to stay even once the crisis passes, and that these expectations will change the future relationship between the clients and banks
 

Societe Generale – quick to adapt and embrace the digital curve


Within Societe Generale, with our experience gained from Asia when the pandemic first broke out, we were able to quickly adapt and apply best practices in resiliency, IT tools, and other client-critical and business-critical areas across our offices in Europe and locations worldwide.

Our clients have clearly acknowledged Societe Generale’s response to the crisis, for being able to support their requirements competently and seamlessly during this period.
 

Change on the horizon


The International Chamber of Commerce has been a frontrunner in the digitisation attempt by coming up with the e-UCP rules more than a decade ago. It is also encouraging governments to adopt the Model Law on Electronic Transferable Records (MLETR) promoted by United Nations Commission on International Trade Law (UNCITRAL). This would enable banks and governments to accept electronic signatures and records as much as physical ones. This will, hopefully, accelerate adoption with many more players hopping onto the digital bandwagon, and bring in a much-needed sea-change in the way Trade Finance is conducted. 
 

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More Sibos 2020 expert views

Christian Cazenove Head of Trade Finance Operations Societe Generale
Sreeram Krishnamurthy Head of Transaction Banking Operations Societe Generale's Global Solution Centre
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