Jean-Francois Denis is BNP Paribas’ Global Head of Trade Solutions and Network Management, a position he has held since October 2018. In this interview, the former engineer turned payments and cash management specialist, and now a driving force behind one of the world’s most pioneering trade finance institutions, gives his take on the business, and outlines why he believes that incremental innovation is key to its transformation.


Q: The trade finance industry is in a state of flux: what are your thoughts on the way that the market is developing?

Denis: I would say we’re seeing four things happening in the trade finance market. Firstly, if you look at all the different types of trade finance products and services, there is slight growth. So, while we know that we have these diverging trends, such as the slowdown of growth of international commerce in general, and an increase in the need to mitigate risks for our clients, be they country or counterparty risks, the two factors combined contribute, more or less, to a slight growth in the market.

Secondly, the market is very fragmented: there are a lot of players, be they banks, non-banks, financial technology companies and so forth, and very little consolidation. Thirdly, amongst all these very diverse players, there is a common search for efficiency, which is leading to a number of market initiatives aimed at increasing productivity and profitability. Then, finally, there are the regulatory aspects, primarily round the evolutions of the Basel framework.


Q: Are banks as relevant today as they used to be? How do you see their role developing?

Denis: What’s interesting about this business, is that, in a way, the various products create a patchwork of situations: domestic guarantees are very different from international documentary instruments, for instance. But one of the things which is common across the business and products, and where banks are more relevant than ever, is the deep expertise that is required in terms of risk analysis – of corporates, banks, countries and so on – which is core to this business, and for our clients.

It requires a very deep and long history of expertise to truly understand the situation. Sometimes technology can help, but honestly, with the situation in the world around us as it is, in the coming years our clients and other stakeholders will continue to seek good support on risk management. International banks with a good network are very well placed in that regard. And then, of course, you have the financing element – which is also a core business for banks – and those with appetite will be more relevant.

Looking to the future, the other key to remain relevant is digitalisation, automation and process improvement in general. This is where a number of stakeholders – and we are one of them – are really trying to make progress.


Q: What is BNP Paribas itself doing to maintain its competitive edge, and what’s its strategy when it comes to tackling transformation in the trade finance space?

Denis: We are working towards overall process efficiency as a whole – ultimately for the benefit of our clients. We have three streams: the first is what we can do by ourselves – without the need for others. We have done a number of projects and still have more in front of us because we have just confirmed a strategic plan for the next three years. Some of these projects of ours are around digital applications, such as our trade finance front-end Connexis Trade or Inquiro, which provides additional data and visibility on the LC export flows.

The second stream, around which there is very little publicity, is what I would call incremental innovation. Take SWIFT’s concept of gpi for trade. For a while the industry has been talking about how painful it is to track and trace trade transactions. The idea of using an existing framework to build something specifically to address trade’s pain points, for a relatively moderate investment, does not attract that much attention. It’s not massively revolutionary, but it can bring real added value. This second stream we clearly cannot do by ourselves, but we already have all stakeholders around the table so it’s much easier from that perspective.

The third stream is aimed at slightly more disruptive innovation, and where we work solely with others, usually in a consortium and often around an initiative that starts from scratch. We are involved in several of these initiatives globally, such as Marco Polo, Trade Information Network and Letter of Credit Network, and regionally, such as Singapore’s NTP and Hong Kong’s eTradeConnect.

Specifically, in terms of trade finance, the bank has a trade finance innovation forum, which gathers a number of people globally, and evaluates all of our own initiatives as well as others in the industry. It’s also worth noting that, more broadly speaking, the Group is committed to trade finance and cash management, as businesses. It sounds obvious, but it’s a key point because it makes the difference between a strategy that drives steady continuous investments and growth, and one that is more sporadic.

If you look at the annual Greenwich survey over the years – which measures penetration rates – we’re consistently ranked highly in both cash and trade. We’re at the top of the 2019 list of leaders in European large corporate trade finance, and across all of our domestic markets – as well as the UK – and we are also number one for overall quality for trade finance in Asia, and number two in market penetration in the region. This reflects the bank’s very steady and continuous approach.


Q: With all of these various initiatives taking place digitally – on different platforms and with a variety of players – are we in danger of replacing trade’s current siloed applications with just a more modern version of siloed applications?

Denis: I think it’s interesting to compare cash management and trade when it comes to conversations around siloes, islands and interoperability. I personally feel that concerns around interoperability are overplayed in trade finance.

Take a look at the cards business in the retail space as a comparison. How did cards become interoperable? The branding on the cards – Mastercard, Visa, etc – suggests that they are interoperable, but the systems themselves all work on various networks and it’s the terminal which allows the interoperability behind the scenes.

I’m not saying it’s not interesting to think about interoperability – it is. I’m just saying that it’s more important to kick off with initiatives in the first instance, and then treat the interoperability. Obviously, if things reach critical mass at some point, then there will be a driver to solve it.


Q: BNP Paribas has been recognised as being at the forefront of sustainability efforts in the trade finance industry: what’s been driving this focus, and what’s the next step in the bank’s journey?

Denis: We need to take a step back to Group level, where sustainability is really a top priority. As you know, BNP Paribas’ tagline is ‘the bank for a changing world’, and there is a true belief that we cannot be successful in a world that is not successful, and that we have a role to play in society. Equally important though, is that we need to keep the business profitable – because it’s not sustainable for us to work on sustainability initiatives if it’s not financially worthwhile. That can be a challenge as we sometimes embed in our solutions some form of financial incentive for the clients who deliver on their sustainability performance targets, but we are ultimately convinced that supporting our clients in this journey is above all a major business opportunity.

Clients are demanding further progress on the sustainability front, and we have been involved in a number of key trade finance deals, which were tailored to specific clients or situations. As you know, we were involved in the pioneering deal with Puma to provide financial incentives to suppliers to improve their environmental, health and safety and social standards. More recently, we have been involved in Trado, which is a new model for blockchain-enabled sustainable supply chain finance, led by international banks, corporates and technology startups.

The next step is to move from tailored solutions to achieving some sort of scale, which is what we’re facing now – and which I think is normal.


Q: What does the future of trade finance look like, and who will be the dominant players?

Denis: Nobody has a crystal ball and it’s obviously very difficult to predict. If we take the product view, the move to open accounts – although not stopping – is slowing down because of increased risks. So I believe we will have more and more incremental innovation that builds up around the pure open account type of business.

Documentary trade too – although it is declining in Europe, we should never forget that it is thriving in Asia, and will continue to do so – it is not dead. In terms of the industry players, it’s imperative that they have a deep understanding of all the risks, and this is something that comes more naturally to big players with a global network. It has taken a lot of time for banks like BNP Paribas to build up these networks, and, as such, changes in the industry will most probably be very gradual.