CGI’s Patrick DeVilbiss, head of product, trade & supply chain solutions, and Colin Zeglen, product manager, trade & supply chain solutions, discuss how trade banks can navigate rapid technological changes by embracing fintech partnerships, SaaS solutions and operational optimisations to remain competitive in a dynamic market.

 

Banks today operate in a market environment marked by rapid and constant change, particularly in the realm of trade, which has accelerated significantly in recent years. Simultaneously, the financial sector is witnessing a surge in collaboration with fintech companies and the initiation of major projects, such as those related to the ISO 20022 standard – a development that places considerable strain on resources.

This creates a challenging dichotomy where trade banks must navigate a landscape of continuous transformation while managing limited resources. The increasing pace of change, driven by rapid adoption of new technology and the proliferation of fintech solutions, forces banks to innovate constantly. In addition, banks are constrained by regulatory and compliance requirements that utilise critical resources limiting investments in new products and cost-saving initiatives. The question then becomes: how can trade banks successfully drive their business forward in this complex and demanding environment?

To succeed, trade bankers must challenge the status quo, leaning into new collaborative partnership models, adopting Software-as-a-Service (SaaS) solutions, optimising internal operations, and providing a blend of trade and supply chain finance products to meet changing customer needs.

 

Establish partnerships with SaaS vendors

Partnering with fintech companies and leveraging SaaS offerings have increasingly become strategic imperatives. Fintech partnerships enable banks to innovate and enhance their service offerings without bearing the full burden of development and implementation costs. These collaborations allow banks to access cutting-edge technologies and specialised expertise in areas like receivables and payables finance, asset distribution and artificial intelligence.

By integrating fintech solutions, banks can improve customer experience, access new origination opportunities and remain competitive in a fast-evolving market. For example, some of the largest banks have partnered with fintech companies to launch supply chain finance solutions leveraging a marketplace of onboarded corporates to generate new revenue streams.

SaaS offerings provide another critical avenue for banks to manage their technology infrastructure more efficiently. As banks become increasingly dependent on technology to run their operations, the need for scalable, flexible and cost-effective solutions has grown. SaaS models allow banks to shift from traditional, on-premise software to hosted solutions that can be accessed and updated with ease.

This shift not only reduces the upfront costs and complexities associated with maintaining physical IT infrastructure but also offers a shared approach where banks can benefit from the continuous improvements and best practices embedded in these hosted solutions. For instance, the adoption of SaaS has allowed banks to modernise their core banking systems while reducing IT costs and enabling rapid scalability across different regions.

By utilising SaaS, banks can offload much of the responsibility for infrastructure maintenance, software upgrades, security updates and compliance management to their service providers. This frees up internal resources to focus on more strategic initiatives, such as enhancing customer engagement and developing new financial products. What’s more, SaaS solutions offer a level of agility that traditional IT setups often lack, enabling banks to quickly adapt to changing market conditions and regulatory requirements. SaaS models, combined with a strong core trade product ensure that banks maintain both a lower total cost of ownership while also evolving on a regular basis to meet the needs of their customer base.

 

Optimise internal operations

In addition to embracing fintech partnerships, banks are increasingly analysing their internal operations to identify efficiency gains through automation and data integration. The ultimate goal is to transition to a truly digital world of trade, characterised by end-to-end digital processes. However, the reality is that most banks as well as the industry, are not yet fully prepared for this transition.

While significant strides have been made in digitising various internal processes, the transition between different channels and institutions often still relies on physical documentation for trade transactions. This creates inefficiencies and bottlenecks that hinder the seamless flow of information throughout any given trade transaction. To overcome these challenges, banks must focus on optimising their operations by adopting intelligent process automation, which can intelligently extract data from physical documents while providing streamlined workflows to process trade transactions using rulesets defined by ICC rules or the bank’s own requirements. This enforces a standardised process across the organisation, institutionalising within software applications intelligence and knowledge that otherwise resides only in the minds of trade subject matter experts. These solutions can then be integrated back into the workflow of a bank’s core trade application to create a seamless and efficient mechanism for processing trade transactions.

As competition intensifies and cost pressures mount, optimisation will be crucial for banks to remain competitive in the space. The market is likely to see a shakeout, with only those banks that successfully adapt and modernise their operations thriving in the long term.

On the other hand, banks that fail to optimise their processes and modernise their internal systems risk being left behind as more agile and efficient competitors capture market share.

 

Drive a proactive product mix strategy

Looking forward, banks must be highly proactive in shaping their product strategies over the next five to 10 years. As traditional trade products like commercial letters of credit experience sluggish growth, other areas such as standbys, guarantees, receivables and payables are seeing significant expansion.

To remain competitive and capitalise on these growing segments, banks need to reassess their product mix and develop a comprehensive strategy that leverages the full spectrum of trade finance offerings. This involves not just focusing on the growth areas but also integrating them into a cohesive, end-to-end solution that addresses the needs of their clients across various aspects of trade and finance.

A successful strategy will require banks to review trade finance from a broad, holistic perspective and deploy capabilities that can cater to each of these target products. This might involve investing in technology that supports seamless usage of trade finance products, enhancing data analytics capabilities to better understand customer needs particularly for cross-selling opportunities, and automating processes to improve efficiency and reduce costs.

By adopting a more agile and responsive approach, banks can ensure that they are not only meeting current market demands but also anticipating future trends and positioning themselves to lead in a competitive landscape. The ability to offer a comprehensive suite of products that are tailored to evolving market conditions will be key to capturing market share and driving growth.

 

Emerge stronger and more competitive

Over the next decade, we will likely see a consolidation in the market, with a smaller number of banks emerging as leaders in the trade finance space. Those who succeed will be the ones who have effectively leaned into technology and adapted their strategies, embraced innovation and maintained a laser focus on the areas of growth.

Business growth in this environment will depend heavily on choosing the right partner that can provide long-term stability and innovation. As the financial industry undergoes consolidation, with fintechs and banks increasingly merging or forming strategic alliances, selecting a partner – who has a proven track record backed by robust solutions and a commitment to the long haul – will be an important decision.

With the right partnership and a strategic focus on technology-driven growth, some banks will not only survive but thrive in the coming years – as the future of trade finance belongs to those who can evolve, innovate and strategically position themselves to capitalise on the changing dynamics of the market.