Patrick DeVilbiss, Senior Offering Manager, and Colin Zeglen, Product Manager for Trade and Supply Chain Solutions at CGI, discuss the results of the CGI-Baft annual survey and webinar, at which a panel with representatives from National Bank of Canada, Scotiabank, CGI and Baft participated.

 

CGI and the Bankers Association for Finance and Trade (Baft) conducted their second annual trade technology survey at the end of 2021.

The survey focused on gathering insights about trade technology and the resulting impact on banks’ day-to-day operations. Bankers with a range of job functions from North America, Europe, Asia Pacific, Mena and Africa responded. This article covers the highlights from the survey.

The influx of new and innovative technologies has given rise to a variety of initiatives in banking and trade finance to support digital acceleration, collaboration, rising compliance requirements and improving processes to increase efficiencies. Banks are also contending with mounting environmental, social and governance (ESG) expectations as well as the continued challenges related to the Covid-19 pandemic.

Over the last few years, the pandemic has impacted every industry and forced them to adapt. For trade finance, the pandemic accelerated trends toward digitisation and modernisation, promoting solutions and technologies that enable banks to meet the demands of their clients. Trade finance is traditionally a very manual, paper-driven process. This was entirely disrupted by the need to deliver value virtually, reducing paper from the trade process and conducting business digitally versus through the mail.

There has also been an increase in credibility with clients as banks deliver a modern approach that meets their demands. Clients have been demanding streamlined processes and an improved user experience even before the push of the pandemic. Now, banks have adopted modern practices, including the digitisation of signatures, which enable them to give more attention to the business internally and satisfy business needs.

 

The future of trade finance

Similar to the 2020 survey, there was a significant shift from traditional trade business to supply chain finance (SCF).Over the next five years, banks expect only 50% of their revenue to come

from their traditional trade business. This shift requires banks to make new investments in technology in the next few years that will speed up modernisation programmes. What technology are banks most interested in implementing? The top five technology investments banks are prioritising include:

  • Trade back-office modernisation
  • Portal modernisation
  • Trade application programming interface (API) services
  • ESG solutions
  • Blockchain/distributed ledger technology (DLT)

While back-office and portal modernisation are critical foundational aspects that were expected to be at the top, API services and ESG solutions were the investments that stood out as the most impactful and trending right now. These trends are mirrored by CGI’s own investments in the CGI Trade360 application, which supports a modernised back office solution that is API-enabled out of the box.

In terms of fintech engagement, the survey indicated that banks have a middle satisfaction level, with no respondents stating that they were “very satisfied”. The top types of fintech engagements in demand from banks were SCF platforms, followed by digital document platforms and bank consortia.

SCF platforms help create a slick front-end for customers that aligns with the trends toward digitalisation and away from traditional trade business processes. Because of how tangible SCF platforms are, bankers see and can easily understand the value being delivered.

CGI views the future of trade as interconnected and leverages the CGI Trade360 application as the hub to provide connectivity to external fintech partners that are able to provide value-added services to the community of banks using the platform.

 

The impact of APIs

Trade API services like AI and machine learning are core technologies banks are looking to invest in. The recent panel discussion revealed just how impactful and crucial APIs are from both an internal and front-end perspective.

Internally, they allow banks to integrate legacy and new systems to share information between platforms and enable intelligent data capture. The benefits delivered are reduced manual data entry, risk, delays and errors, and more efficient reporting across geographies and requirement compliance. Automating internal processes eliminates operations waste, and automated testing helps banks release products to the market faster.

APIs can also create a seamless and controlled customer experience on the front-end by extracting data. Reliable and timely data is of the utmost importance to clients. By combining APIs and leveraging automation, banks can also achieve master data management and provide meaningful information to clients for forecasting and effective decision-making.

 

A growing focus on ESGs

ESG requirements and initiatives have been a focus not only in the trade finance space but also for corporates. In the survey, 85% of banks indicated that they had ESG initiatives already in place. ESG solutions were also one of the top five technology investments banks are looking to make, with a significant emphasis on environmental sustainability. This is a shift from the 2020 survey results, as ESG was not even mentioned. 42% of corporates also indicated to banks that they were “interested” or “very interested” in ESG initiatives, meaning that there is still a gap between where corporates want to be and what is being provided.

The panel discussion revealed that the level of ESG initiatives in place depends largely on geography, company size and industry, with Europe being ahead of other regions. Many banks have already made public ESG commitments, and corporations are approaching banks looking for solutions to drive their own results. One ESG solution that has been seen more and more in the market is sustainable SCF.

What incentives are there for having ESG initiatives? While banks don’t currently have standardised scoring in this area, green suppliers tend to have better margins than gray suppliers. There is also an increasing focus on the social aspect of ESGs, as talent acquisition and retention have become more tied to an organisation’s values and efforts when it comes to environmental and social issues.

 

Most significant challenges and barriers to innovation

While there are many opportunities for innovation in trade finance, there are still challenges that make it difficult. The top three challenges for banks in meeting expected revenue shifts are an insufficient investment in technology internally, compliance and the regulatory landscape.

Along the same lines, budgetary constraints, resource limitations and competing priorities were listed as the most significant barriers to embracing innovation. The challenges of compliance and regulatory compliance carried over from the 2020 survey but didn’t make the top of the list for 2021. The trend toward digitalisation has helped combat compliance and regulatory challenges by making it easier to gather and report data and adopt modern takes on traditional activities, such as the digitisation of signatures.

Banks, like any organisation, undoubtedly struggle to decide where to invest funding between all of their competing priorities. While trade faces external pressure to deliver and drive solutions, it also struggles to receive bank funding. The panelists all shared the experience that trade is often siloed from the rest of the bank’s operations and processes, causing insufficient investments. So, what can trade banks do to combat their internal investment challenges?

The answer is integrating and removing friction from the customer experience and other internal processes. By integrating with the overall payment ecosystem of the bank versus remaining siloed in a standalone project, trade can show the value it delivers to the bank as a whole.

Understanding the bank’s strategy can also allow greater effectiveness in aligning with its priorities and receiving investments.

 

The importance of the CGI-Baft annual survey

Since our 2020 survey, there have been interesting shifts in the market, some of which were expected and others more surprising. The shift towards SCF from traditional trade finance was expected, but the growing focus on ESG initiatives accelerated well beyond what was anticipated. Technology like APIs and ESG solutions were highlighted to help banks make this shift towards digitalisation.

The survey also helped identify gaps around topics, including ESG initiatives and fintech engagement, which can be lessened by better leveraging partnerships to help clients get where they want to go.

CGI uses this survey as well as industry and client input to guide the future vision of the CGI Trade360 platform, which continues to deliver a seamless digitised end-to-end processing and client experience for banks and their corporate customers.

For additional information on the topics discussed in this article and more insights into the trade finance industry, download the 2021 survey report at https://www.cgi.com/us/en-us/white-paper/corporate-and-transaction-banking/cgi-baft-survey