Thursday,13 June 2024

Standard Chartered Bank’s Mathew: “This is the perfect time to find more efficiencies”

5 min read

Interviewed By Foo Boon Ping

Samuel John Mathew, global head of documentary trade and products at Standard Chartered Bank, explains how technologies, such as optical character recognition, natural language processing and artificial intelligence aid in digitising internal processes.

  • Standard Chartered Bank partnered with Traydstream to digitise the documentary trade matching processes
  • Trade finance is being embedded in consortiums and platforms
  • Efficiencies are there for both the clients and banks

Foo Boon Ping (FBP): We’re talking to Samuel John Matthew, global head of documentary trade and products. Standard Chartered Bank has been working on quite a number of trade digitisation initiatives. Share with us some of the initiatives that you’re working on.

Samuel John Mathew (SJM): A lot are happening in the trade space. We’re trying to understand how we can use technology to drive efficiencies internally. We’re also looking at how our clients’ ecosystems and their buying behaviour are changing.

Paper is here to stay for the foreseeable future. How do we drive efficiencies from the paper without having too much of manual touching and handling of the paper? This is why we are looking at technologies, such as optical character recognition (OCR), natural language processing (NLP) and artificial intelligence (AI) to extract the data automatically. We have partnered with Traydstream to help digitise that process.

On the external front, we know our clients’ buying behaviour is changing. With industry 4.0, the supply chains are changing. How trade finance is bought as a service is changing, and it's going to be more embedded in consortiums and platforms. When you book an airline ticket today and click on the insurance button, the insurance is not provided by the airline. We similarly see trade finance being embedded into marketplaces. And that's where we are working with third parties, platforms and consortiums. We want to be part of that journey.

BP: There was also a time when fintechs were disrupting trade finance. How has it changed over the last two, three years?

SMJ: It's an interesting question. If you look at the last two, three years, the initial rhetoric was “banks are doing nothing and fintechs are going to eat our lunch”. The narrative has changed a little bit. There's cognisance of the fact that banks do bring a lot of knowledge, history and understanding of the underlying risks in the business. Fintechs come with the technology and what works best is a partnership.

If you look at just the presence of fintechs and banks here, the narrative has changed and became more of a conversation about specific use cases and problem areas where we can come together. Banks bring the expertise, for example in trade finance, while fintechs bring in the technology. If you think about it, banks are big on “fin”, and they're also the biggest spenders on “tech”. In a way, we are one of the largest fintechs. We are not as nimble as we would like to be. But the partnership has become more of a team as opposed to competition.

FBP: The key, obviously, is adoption. Talk to us more in terms of this technology and how you are applying it in terms of onboarding clients.

SJM: The first two examples I gave you are using pieces of technology to try and digitise internal processes. Adoption is not really an issue because it's about a bank converting the documents to data. That is scalable. Let's put it that way. It doesn't need to be adopted by multiple people. Everyone can have a different piece of technology. When it comes to industry level initiatives like Voltron, for example, then it's about how we build scale.

We’re looking at multiple avenues and channels to do that propagation to scale up. How do we get more banks to come on board? How do we get more corporates to come on board? How do we partner with existing third-party channels to get into a commercial arrangement that those platforms can be Voltron-ready? Just like things were very Intel Inside a few years ago, can we be Voltron-ready when you look at third-party platforms? Those are the two or three of the channels we're looking at in terms of propagation and scaling up.

There are various consortiums that we're looking at. There’s Voltron on the documentary side, which will look at letters of credit and guarantees. There's Trade Information Network (TIN), which will look more on open account and supply chain. We also recently announced our partnership with SAP Ariba, again on the supply chain finance side, because we'll be looking at how we can source more purchase orders and invoices into our ecosystem and finance those flows.

FBP: In terms of looking at all these pieces strategically, we are stuck with paper and we’re currently digitising the process. The effort to digitise documents is not new. How do you see it progressing over the next few years?

SJM: The technology improved since the last few years. If you look at what OCR, NLP and AI can do, it's a lot more advanced than it was even just two, three years ago. Paper is going to be here, at least for the midterm, so how do we digitise the paper as efficiently as we can? That’s one. Second is actually doing away completely with the paper, which is where our initiative like Voltron comes in.

In terms of the cost of technology and the development of standards and legal systems, which are two important things, progress has been made. The International Chamber of Commerce (ICC) is working on the Uniform Rules for Digital Trade. If you look at either a standard construct for a purchase order (PO) or a standard construct for a bill of lading (BL), it is coming through now.

Once these standards come through and the user trial model law for electronic data transfer gets adopted by more markets – Singapore is going to adopt that as part of the Networked Trade Platform – the electronic acceptance and electronic data transfers should replace it over a period of time. For these new standards and regulations to evolve and come through would be a key requirement.

FBP: More of the players or counterparties need to be on the same platform, or what we call the proliferation of different initiatives.

SJM: I like to call them digital islands. The digital islands need to talk to each other. They need to become interoperable. They don’t need to be on the same platform and on the same technology, but they need to talk to each other. Coming back to my first point, the key ingredient is the standard. If I were to standard construct for a digital BL, in the SWIFT world, you’ll have a standard construct for an empty one or three. Every bank understands it. What is the equivalent today in the new paradigm, so that the digital BL, digital PO or a digital invoice can be exchanged between two platforms that are completely different digital ecosystems? That will require standards to evolve and adoption to happen.

You could have multiple platforms that just talk to each other because the language has been agreed. Today, that language is missing. You could have a platform talking to Ethereum, but they don’t know exactly how to handshake. Today, the handshake is not agreed. Those digital constructs and standards are not there. The rules and laws are not there yet, but it will evolve over the next few years.

FBP: SWIFT tried to do this with BPO. It didn’t work. But now, what will make it work?

SJM: There's only one critical factor. Is it really bringing efficiency and making it simpler, faster, better and cheaper for the client and banks? Without that changing processes – asking the client to do something very different, just for the sake of doing it – it’s not going to fly.

At the end of the day, you got to find efficiencies in doing so. Those efficiencies are there to be fought for both the clients and banks, then the industry will move.

FBP: With one of these initiatives - Voltron, TIN – are you achieving that?

SJM: If it has been scaled, obviously we will achieve it. We didn’t achieve it with the handful of pilot transactions, but we do believe it will scale, and that's the reason we are making a few bets. As a large trade bank, you need to make a few bets. And this is one of the few other bets we are making in terms of our belief that is kind of risky.

FBP: Talk a little bit about the timing. Is this the right time for trade digitisation, with the current slowdown in trade amid all the trade tensions?

SJM: On the contrary, I believe this is the perfect time. You need to find more efficiencies because the sheer trade pie may be shrinking. No one would hope that the shrink is temporary and that eventually most wars come to an end.

There are enough issues in trade over the years. There have been disputes, but they do get resolved eventually. And, in pragmatism and commercial sense, I'm hoping that it will come to a resolution. And there have been some early signs that US agreed to delay it, some of the tariffs at least, and China's reciprocated, so hopefully it will come to a close soon.

This is a time that we need to actually find more efficiencies. Technology is an enabler to expedite that process. If your wallet is not growing, you really need to find more efficiencies.

FBP: Thank you so much.

SJM: Thank you for having me.

Keywords: Sibos 2019, Trade Digitisation, Optimal Character Recognition, Industry 4.0, Collaboration, Voltron, Trade Information Network (tin), Interoperability, SWIFT
Institutions: Standard Chartered Bank
Country: Singapore
Region: Asia Pacific
People : Samuel John Mathew
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