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Treasury & Capital Markets
What does it take to become a top trade finance provider?
The Treasury Review Leaderboard 2022, CSI Value, this week features providers of working capital. This is the final published instalment of the voice of the client, part of The Asset Awards 2022
The Asset 17 May 2022

Operating amid the rapidly growing manufacturing hubs of Asia, banks looking to lead in trade finance need to be well-versed in understanding the practices of customers striving for efficiency despite often encountering manual and out-of-date processes.

In this diverse region, where the adoption of digitalization processes is varied, a number of institutions have stood out against tough competition, not only for their efforts in improving their internal processes but also in shaping change in the wider trade finance ecosystem.

The top trade finance banks – heavily paper-based for a number of decades – are looking to enable change, whether it be by increasing the use of OCR (optical character recognition) technology to instantly digitalize trade documents, or leveraging on blockchain networks, such as Contour, to validate information between parties.

In either case, the key theme for the market-leading banks is thinking outside the box and having a wider view of how traditional processes can be reshaped. Apart from standard trade documentation, open account trade is also increasing for the large corporates in the region.

A number of institutions that The Asset spoke with as part of the Triple A Treasury, Trade, Sustainable Supply Chain and Risk Management Awards 2022 shared that this change in business approach by clients meant that they have had to be agile and invest in growing their supply-chain finance business over the course of 2021.

While traditional trade finance banks indeed have the ability to structure such supply-chain finance programmes, others still have some ways to go to make clients feel comfortable.  For example, CFOs and treasurers that spoke with The Asset shared that the banks that stood out were those able to onboard their selected suppliers with pace and ease.

This meant, for instance, allowing a supplier to be onboarded to a large programme without having to open a new bank account. In terms of timeframe, while other banks took several weeks to onboard one supplier, some banks were able to do the same process within a day or two.  

In addition, to help a firm achieve their working capital goals, several trade finance banks are now actively looking to assist companies in meeting their sustainability commitments via the development of sustainability-linked supply-chain financing. Following COP26 late last year in Scotland, there has been a drive by companies to improve their sustainable practices. This means looking at the suppliers they work with, determining whether they are environmental, social and governance (ESG)-compliant and providing them with financial incentives.

As the old adage goes, it takes two hands to clap. Thus, banks looking to be leaders in this space need to not only look at themselves, but also work alongside their peers through consortiums and with government agencies to establish a digital trade finance standard to improve visibility and prevent trade fraud.     

This is the final week for the publication of The Asset Treasury Review 2022 Leaderboard. The Treasury Review survey, however, which forms the basis for the weekly Leaderboard, will run through May 2022.

The Asset Treasury Review 2022 is a component in the annual selection process for The Asset Awards for Treasury, Trade, Sustainable Supply Chain and Risk Management. In promoting industry best practices, the views of CFOs, treasurers and treasury management professionals are important. Those wishing to participate in The Asset’s Treasury Review 2022 can share their views by clicking here.

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Mervyn Tang
Mervyn Tang
head of sustainability strategy, APAC
Schroders
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Stephanie Choi
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