Digitisation in trade finance is enhancing efficiency and the client experience

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Any successful digital strategy must start with an understanding of the client experience and the industry context and what can be improved. The trade finance business challenge is to turn a relatively old, manual, paper-based activity into an agile, more transparent and instantaneous digital process for banks and their clients.

In truth, it is a challenge that the trade finance ecosystem has been trying to address for many years, with some degree of progress. However, the pandemic and its impact on the business reconfirmed the strong need to intensify investments in the trade finance digitisation efforts. Leveraging on technology, process and innovation will contribute to this common industry objective.

This is why BNP Paribas is intensifying its transformation together with its clients and other key major actors of the trade finance ecosystem.

Front-end digital capability  

This is the context in which greater efforts to digitize processes are underway.

For BNP Paribas, a key starting point was increasing the bank’s digital offering by developing and providing front-end solutions that best match the needs of its clients across industries. As such, the bank invested substantially in new digital channels and platforms, such as Connexis Guarantees and Connexis LC Export, which have since been rapidly adopted by the bank’s corporate client base.

Connexis Guarantees enhances the issuance and reporting capabilities of business guarantees, while Connexis LC Export offers a full digital overview of the lifecycle status of export letter of credits, a capability which improves the traceability of the agreement between the bank and its clients, in turn saving time for both parties.

Industrialising processes

Industrialisation of the end-to-end process is an additional key building block of digitisation, enabling cost reduction and greater speed in the processing time.

The trade finance business challenge is to turn a relatively old, manual, paper-based activity into an agile, more transparent and instantaneous digital process for banks and their clients.

Gautier Mouzelard, head of transformation and compliance at BNP Paribas Trade Finance

Among the industrialisation levers that can be pulled, investment in process automation and scalable and robust technologies is powerful.

As part of this, some administrative tasks can be off/near-shored, which can free-up time for the onshore team to advise and better serve clients. Furthermore, by pooling tasks to off/near-shored centres, this allows specific investments in specialized automation technologies (e.g. Optical Character Recognition) that are not profitable with a decentralized model.

In addition, there has been a strong focus in recent years on complying with the most advanced compliance market standards at the same time as fully integrating them into the customer journey.

At this time, clients of financial institutions may not yet recognise that compliance controls can be a “service” provided to them. After all, banks protect themselves and their clients from specific abuses related to their counterparties.

For us, we see our approach in this area as a real differentiating factor and competitive advantage.

Methodology as a key lever

Another important factor and lever in digitisation, is the methodology underpinning the approach to a faster and more qualitative outcome.

In the main, adopting a more agile way of working with clients, IT and the respective operational teams, can significantly reduce the time to market for new products and fulfilment of client enhancement requests. As such, all our projects leverage this agile methodology, which is showing tangible results.

What’s more, the co-creation aspect is now systematic for all new initiatives and results in a win-win situation (including product quality, adoption rate, delivery time etc.) for the client and the bank. This is because this capability better captures the exact client requirements all along the development lifecycle, taking into account evolving client needs and industry context.

Harnessing innovation

Innovative technologies are not a goal as such, they are an enabler to improve the customer journey and digitisation objectives. We therefore only invest in technologies we believe in.

Good examples of investments we have made include in OCR combined with machine learning and natural language processing technologies, which are now playing a key role in digitising paper documents and automatic data extraction.

This reduces cost, operational and compliance risks as well as delivering better client service. This also offers some opportunities to automate complex parts of trade finance such as document checking.

In addition, BNP Paribas is also involved in programmes that leverage distributed ledger technologies, such as Contour. Dematerialized transactions can be securely shared on the Contour blockchain network by the different stakeholders involved in the process. It’s a promising starting point for a full dematerialization of letters of credit with enhanced traceability and enabler for better environmental aspects.

We also see a great potential in contextual analysis in the fight against money laundering (AML), gathering data from inside and outside the bank and playing with strong analytics that allow us to better detect suspicious transactions. This is a key weapon in the battle against money laundering, which is why we have made a considerable investment in contextualisation systems. This commitment is putting BNP Paribas in the vanguard of the drive to fight money laundering in trade finance.

Other promising technologies we, and others in the ecosystem, are looking at include smart contracts and APIs.

Without doubt digitisation has the potential to help improve processing times, and efficiencies by reducing frictions and increasing transparency in global trade finance. Investing via the right balance of evolutionary initiatives (e.g. front-ends) that offer short term results together with more disruptive projects (e.g. Contour) that could be an industry game changer over the long term, ensures digitization happens at speed and delivers optimal results.