Given the growing interest in the digital transformation of trade, the team at DBS examines the ways in which digitalisation is redefining supply chains and how the industry can forge ahead through collaboration with governments and industry bodies.


While trade digitalisation has been an ongoing trend, the pandemic has seen accelerated activity from corporates, as they recognise that digitalisation is not only an enabler of operational efficiency, but also a requirement for the transformation of their business models and a solution to complex business priorities.

The benefits of digitalisation are clear, but the realisation of such benefits is much more complex. There is a heavy dependency on cross-border standardisation of regulations, legal frameworks and their interoperability, and the need for extensive collaboration amongst all participants. Without this, there is a risk of multiple isolated digital islands emerging and the full network benefits of digitalisation being overlooked. As a result, corporates are looking to trusted banking partners with demonstrated thought leadership and deep expertise to support them on their digitalisation journeys.


Digitalisation: Drivers and enablers

Various important changes have started to force the pace of trade digitalisation. One significant driver is the focus on supply chain resiliency, a key priority for corporates as they look to build more robust supply chains for business continuity.

Supply chains are becoming increasingly complex, which increases the number of potential failure points and makes tracking more demanding. Corporates are trying to manage these supply chain challenges against the backdrop of the “now economy”, where customers are demanding far shorter lead times and therefore even greater scrutiny of all aspects of a supply chain. Public and private companies have responded to these challenges with concerted efforts to digitise physical trade flows.

Recent technological advances have enabled a faster transition to digitalisation. For instance, Application Programming Interface connectivity and data-driven operating models are setting the scene for the creation of innovative solutions. They enable banks to embed themselves into customer journeys to deliver seamless trade services. Rapid deployment of Internet of Things technology has helped corporates to connect the physical and digital worlds, giving them real-time access to data.

While the transition to digitalisation is fundamental to dematerialise trade documents, having a common data infrastructure is a critical component in facilitating digitalisation and maximising its benefits. A good example of how this works in practice is SGTraDex, which was initiated by the group Alliance for Action (AfA) on Supply Chain Digitalisation, a collaboration between the public and private sector that facilitates trusted and secure data sharing between participants to deliver efficiency, productivity and resilience across physical, information and financial flows.

“We are among the pioneers in the AfA for Supply Chain Digitalisation workgroup that led the conceptualisation of SGTraDex,” says Daniel Lit, Group Head of Documentary Trade Products, DBS. “We co-lead the technology workstream, where the common data infrastructure prototype was developed and tested through defined use cases and trialled through a series of business simulations with participants across the trade ecosystem.”

Subsequent live transactions between DBS and industry players on SGTraDex mark a critical step towards revolutionising trade, where digital data at source can be leveraged for real-time and trusted data exchange to facilitate faster decision making and enhance working capital.

An example of the practical benefits of this can be found in the solution to digitise the bunker trade supply in Singapore, the world’s leading bunker port. The solution addresses various disadvantages of the paper bunker delivery note (BDN), which is costly and inefficient. DBS has become the first financial institution to lead the co-creation of this industry-first solution, partnering with the Maritime and Port Authority of Singapore (MPA) and other likeminded industry players.

Apart from inefficiency, physical BDNs also carry a significant fraud risk, where the manual reading and input of the mass flow meter showing fuel quantity delivered is open to collusion between the supplier and receiving vessel captain.

To combat this, an electronic BDN is generated from the output of an electronic data logger attached to a regulated mass flow meter. This data can be further validated with electronic geolocation data provided by bodies such as MPA. Therefore, e-BDNs reduce the potential fraud risk in the bunkering process, in doing so making financing of fuel loads more reliable and secure.


Digitalisation: Driving sustainable outcomes

Investors are taking an increasingly firm line on environmental, social and governance (ESG) standards. This is reflected in the emergence of sector-specific industry standards, such as the Roundtable on Sustainable Palm Oil certification, which put pressure on corporates to comply. Meanwhile, multinationals are managing ESG

issues among their suppliers to minimise reputational and business continuity risk. Governments, too, are working to collaborate to raise regulatory and compliance sustainability standards, with the Association of Banks in Singapore’s Green Finance Industry Taskforce being a case in point.

Corporates are showing greater interest in engaging their banking partners on solutions that help achieve sustainability agendas. Digitalisation is a natural fit with sustainability as it makes it easier and cheaper to monitor supply chains in a highly granular fashion to ensure compliance, while also ensuring that the exploration of sustainable alternatives is commercially viable. It has the additional benefit of streamlining the trickle-down benefit of trade finance reaching beyond the individual corporate to its suppliers further down the supply chain. These entities can benefit from access to working capital if they meet sustainability compliance standards.

DBS collaboration with Inditex (one of the world’s largest fashion retailers), a market first, sees the bank delivering a sustainable cotton procurement supply chain financing programme to Inditex’s farmer producer organisations. The programme enables these organisations to procure organic cotton from individual farmers in a timely fashion through a fully traceable and transparent digital supply chain finance solution. These farmers have greater visibility of their cash flow and access to working capital, which in turn enables them to better plan their business needs and grow their sustainable farming operations.

HeveaConnect, a digital marketplace for the trading of sustainably processed natural rubber and a co-creation between Halycon Agri and DBS, is another example.


Digitalisation: Forging ahead through industry standardisation

While the benefits of trade digitalisation are undisputed, there is still a need for industry standardisation, in terms of legal frameworks, data and connectivity.

This is especially true for documentary trade as it typically requires the original title document, such as bills of lading, to be transmitted across multiple parties involved in the transaction. Although workable digital platforms have been in existence for decades, these platforms are generally closed loop networks and reliant on bilateral contractual agreements to manage the title ownership transfer.

This has inadvertently made it challenging to scale these solutions.

With the increased adoption of the UNCITRAL Model Law on Electronic Transferable Records (MLETR) into national legislation – with Singapore among the first to amend its Electronic Transactions Act for it to be applied to transferable documents such as bills of lading – there is greater potential for e-bills of lading (eBL) to be transmitted over open networks.

“DBS has been at the forefront to promote the use of TradeTrust developed by Infocomm Media Development Authority (IMDA), an open-source solution to enable eBL subjected to MLETR,” says Lit. “We partnered with IMDA to promote cross-border collaboration on eBL adoption with

trade corridors such as Shenzhen, Abu Dhabi and Australia, and have successfully completed a pilot trial on TradeTrust with these locations. Such efforts support the dissemination of beneficial digital innovation.”

Nevertheless, it remains a priority for governments to collaborate to develop consistent taxonomies and regulations that extend across multiple jurisdictions. Singapore’s work on Digital Economy Agreements with other nations is an example of how this is achievable, as is its adoption of the UN’s MLETR and IMDA’s TradeTrust. While these efforts are in their early stages, they show considerable promise, particularly in resolving the interoperability issues of closed loop platforms.


Conclusion: The road ahead

The combination of an acceleration in digital trade efforts, advances in technology and the pandemic have made it clear that digitalisation is a requirement for business success and survival.

Companies in APAC view banks as the preferred partner for digital support to drive transformation. Therefore, any bank worthy of this mission critical role should be able to demonstrate not only exemplary digital capabilities, but also a strong record of practical engagement in driving digitalisation through collaboration with governments and industry bodies.