The ongoing slowdown in global trade, exacerbated by the US-China trade tension, has reduced transaction volume, increased competition and eroded margins in the trade finance business. This situation may have inadvertently accelerated banks’ quest to reduce costs and improve profitability. Moreover, corporates’ growing demand for shorter processing time, greater visibility and automation of processes, coupled with the need to mitigate the growing risk from trade-based fraud and anti-money laundering (AML) and sanction violations have driven trade finance providers to explore and implement agile digital trade solutions. This year’s Asian Banker annual survey of trade finance trends highlights swathe of challenges such geopolitical uncertainty impacting
trade relationships, associated shifts in supply chain patterns, tighter know your customer (KYC) legislation, emerging technology and lack of wider adoption of industry standards, all making trade digitalisation a rather tough climb. Commercial banks are recognising these challenges, and rolling out customised/structured trade finance solutions to cater to specific client need. Banks are also accelerating innovation of electronic/paperless trade processes, and upgrading online product/channel facilities to reinforce core bank-enterprise relationship. The best practices identified in the survey include conversion of manual procedures to reduce processing time across wider ecosystem, strengthening KYC processes for earlier risk detection and streamlining due diligence processes.

Digitalisation stays firm at the top of trade transformation agenda Regional banks’ digitalisation efforts are increasing in momentum;from cross-border instant e-payments using QR codes,which cater to changing patterns of intra-Asian demand, to collaborating on blockchain consortiums. Banks are also developing consensus solutions such as invoice financing on blockchain, applying Robotics Process Automation (RPA) or Artificial Intelligence (AI) to increase productivity. Notably there is an increasing desire to automate market operations and make digitalisation scalable. China’s rebalancing of growth from exports and investment to consumption is fueling import demand for high-tech consumption goods such as that of electronics. Banks in Hong Kong are leveraging closer proximity to Mainland and lower funding costs from stronger USD liquidity to expand cross-border trade finance facilities. Both, Bank of China (Hong Kong) and Hang Seng Bank commenced processing of transactions with customers to submit trade documents and apply for trade finance application on eTradeConnect, a cross-bank trade finance blockchain platform. Wider adoption is expected to drive standardisation and reduce the processing time of transactions and costs from traditional paper documentation. There is a push from the Reserve Bank of India (RBI) to reduce overreliance on domestic instrument by local banks, underscoring the need to shift toward globally accepted trade finance instruments. To drive new synergies and value creation, Kotak Mahindra Bank observes that fintechs are becoming an integral part of trade ecosystem. It recently partnered with a fintech for extending financing and currently leverages its expertise in doing underlying documentary checks. Yes Bank deployed predictive
analytics and data management tools to monitor fraud detection at various levels and draws inferences to make information flows seamless. There is a declining demand for plain vanilla trade products for example, corporates in Indonesia look for more sophisticated, and capital optimising solutions compared to traditional products. This has led Bank Mandiri to launch a front-end web-based system which integrates relevant APIs with customers to facilitate their complex transactions. Meanwhile, in Southeast Asia, United Overseas Bank (UOB) offered solutions to help clients manage their physical and financial supply chain. This development is against the backdrop of rising diversification in production and sourcing patterns resulting from trade frictions and the subsequent investments and trade expansion into the region. Others such as Metrobank and RHB Bank Group are focusing attention to ease clients pain points at the back of changing macro-economic dynamics and its structural impact on specific industries. Banks are betting high stakes on the promise of blockchain technology to increase automation, transparency and manage risks from trade and
Re-location of parts of production and supply chain processes by global manufacturing firms to markets like Vietnam and Thailand, have accelerated the pace of trade-related investment in the region.
supply chain financing. For instance, Sri Lanka’s Hatton National Bank partnered with a fintech to enable blockchain-based domestic and cross-border trade finance network. Currently, at pilot stage, it includes the bank’s correspondent partners and their corporates clients. Notably, Thailand’s Bangkok Bank invested in R3, a consortium of leading global banks trialling blockchain, for crossborder interbank transactions. Re-location of parts of production and supply chain processes by global manufacturing firms to the Vietnamese market, has accelerated the pace of trade-related investment. To remain competitive, domestic banks such as Vietcombank invested in new trade finance software to deal with the surging transaction volumes and mitigate operational risks. VietinBank proactively collaborated with international banks to promote large business flows while tapping into the knowledge of new potential markets. Deutsche Bank noted on the emergence of blockchain networks, such as VoltronX, Marco Polo and we.trade, and regulator-driven trade platforms, particularly in Hong Kong, Singapore and UAE, as critical drivers offuture connectedness of cross-border trade ecosystems. The bank is one of the founding members of Trade Information Network (TIN), a new multibank initiative that seeks to connect corporates to financing opportunities in their supply chains.
The increasing burden of AML checks and ‘false positives’ add significantly to the cost of compliance While some banks may have reduced or even terminated correspondent banking and client relationships to bring down operational costs and preserve profitability, compliance is one area where banks and financial institutions (FIs) cannot easily cut back on expenses.