Commodity Trade Finance in the digital age


Commodity Trade Finance in the digital age

19 Apr, 2018 09:12 am

How Big Data, Artificial Intelligence and Blockchain are driving change and reinventing the client experience?

Innovation and Digitalisation are significant pillars of development for Trade Finance banks. For instance at BNP Paribas group the 2020 vision is supported by 4 identified enablers: Conduct, Digital, Sustainability and People change. To accelerate the digital transformation and serve the evolving needs of clients, an ambitious plan, supported by €3bn investment, is being implemented. Similar plans are being developed by most trade finance industry players.
Commodity trade finance today is a traditional business where paper is everywhere. Bills of lading are physically circulated among many participants. Interactions are mostly through phone, fax and numerous emails and, given the large numbers of parties involved, rapidly time consuming. Information is shared sequentially by all parties, leading to very long processes. Data captures are redundant and reconciliations mostly performed manually, thus increasing operational risks. Tasks are often repetitive and labour-intensive thus making it difficult to promote employees engagement in their daily work.

Nowadays, people are expecting more transparency, more efficiency, more security, reduced costs and quicker turnaround. Digital transformation can help addressing these challenges and better serve commodity players.
"Digital transformation can help addressing these challenges and better serve commodity players."
Process digitalization is already happening in the banks with a paperless objective shared by most actors. Several projects have emerged are now being deployed. Supported by internal or external incubators, solutions can be implemented in only a few months thanks to innovative ways of working such as agile methodologies, design thinking and clients co-design. Those can apply to internal processes but the value still remains for customers benefiting from quicker processing times.
With Blockchain, trade finance banks are investing massively. Blockchain technologies have the potential to be disruptive all players. Quicker processing of transactions, increased security and transparency and paper/emails reduction are some of the identified gains from this innovation. 2016 has seen several proofs of concept being delivered. Trial payments executed successfully, consortiums put in place. In 2017, we've observed some further developments on these initiatives. For example, R3 has developed its own Corda platform and IBM has delivered Hyperledger Fabric framework. However, the standards have not fully emerged and legal uncertainties remain. Will 2018 provide some answers? On top of these long standing projects, practical solutions are being deployed, aiming to address specific pin points. MyCollat, a solution enabling real-time monitoring of goods used as collaterals by banks, is one example of such available products. It has been developed in a co-design with several clients, a bank and a warehouse network.
Using Big Data, banks also have the possibility to better understand their clients' ecosystem and develop further their expertise in the value chain. The concept is, notably, to evaluate links between clients and suppliers. The challenge of data confidentiality, however, needs to be addressed carefully in order to preserve the confidentiality of client information and complies with the most stringent regulations.
"Using Big Data, banks also have the possibility to better understand their clients' ecosystem and develop further their expertise in the value chain."
Another angle of innovation explored is with Artificial Intelligence (AI) and Robotics. Dedicated AI labs are being established by banks to foster innovation and provide pools of expertise available to their own network. For trade finance operations processing, we can already see some solutions being deployed to automate and accelerate compliance checks and bank controls. By automating some parts of the processes, the operating costs and processing times can be further reduced. Artificial Intelligence is a lever that is massively developed and other dedicated solutions for commodity players are being identified. Taking into consideration the usages already in place in the retail business, it has brought a lot of comfort and relevancy to clients. For instance, chatbots may bring answers to simple and recurring client's questions, 24/7. The stake is to feed the AI engines with relevant and valuable data for better results and trade finance banks are well positioned to achieve this.
"Artificial Intelligence is a lever that is massively developed and other dedicated solutions for commodity players are being identified.  "
These initiatives illustrate trade finance banks' ambitions to provide distinctive experiences for clients thanks to digital technologies. The banks are committed to transform customers' journey and meet their precise needs, with a clear focus on the global experience. In the digital age, the question is not "What to offer" to clients but "How to offer it". Offering a similar level of satisfaction that clients are already receiving in their private life from the likes on Google, Amazon, Facebook and Apple is a must. The journey continues!

This article was first published by AGEFI in the special edition Commodities.

Christophe Cantala
Head of Specialized Trade Clients, Marketing and Risks at BNP Paribas
Christophe Cantala is part of Specialized Trade Solution ExCo, Heading the Clients, Marketing and Risks departments. Christophe has a global and transversal 15 years experience across BNP Paribas. He started his career in Risk Modelling in a basel 2 roll out context, then spent 5 years within central Inspection Générale, first as Inspector, then as Head of Assignement. He took part and leaded missions in CIB, Domestic Markets and IRB, within the 3 continents. He moved to Switzerland, first as Head of Strategic Development, then as COO of E&C finance Europe, where he leaded within the management the remediation and transformation of the business which resulted into the STS business line. He has been for two years within STS in charge of clients, business development and strategic topics.
Philippe Penet
Head of Specialised Trade Solutions in Switzerland at BNP Paribas
Philippe Penet is currently heading Specialized Trade Solutions in Switzerland offering trade financing products across the commodity value chain with a focus on the Agribusiness sector. Philippe has over 25 years expercience in Finance, including eleven years in the City. Philippe started his career in credit followed by four years at Enron Europe in different finance functions (inc. corporate and asset finance). Moved then to banking in Project Finance at Credit Agricole Group and since 2005 occupied several managerial positions across sectors and product ranges in the Energy & Commodity Finance business of BNP Paribas Group.
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