The gradual process of trade digitisation over recent years has acquired a new urgency as a result of Covid-19, and as a result, the future state of end-to-end paperless trade is now closer than ever. Nonetheless, the journey to digital won’t happen overnight, and to ensure everyone can benefit, incremental changes are needed to digitise trade from the inside out.


As the dust begins to settle on the disruption of the past 18 months, one thing has become clear: digital transformation is at a tipping point of historic proportions. Throughout Covid-19, barriers to paperless operations have been challenged and overturned, with the pandemic accelerating years’ worth of digital progress in a matter of weeks.

While the economic, social and health costs of the pandemic will be felt for years to come, one silver lining is the chance to experiment with technologies and co-operative approaches that could lead to a more sustainable, resilient and inclusive future for global trade.

“Covid has massively increased the propensity and preference for digital, and businesses and individuals all over the world are experiencing seismic change,” says Nick Hampton, regional head of services, global trade and receivables finance Europe at HSBC. “What is happening is the convergence of new technologies, such as artificial intelligence, supercomputing, 3D printing, and the Internet of Things (IoT). It’s here, it’s now, it’s happening, and it is transforming customer needs.”

As courier services carrying important trade finance documents saw their operations delayed, and the employees responsible for inspecting those documents found themselves working remotely, the paper-heavy world of trade and trade finance had to find workarounds. “We already knew that we had to get from A to B in the digital journey, but this is just supercharging that desire,” says Hampton.

Fortunately, the capacity and framework of those technologies were in place, albeit not fully perfected, and having experienced a taste of the digital future, few corporates want to return to paper.

“There is absolutely a change of behaviour and mindset among clients,” says Sibel Sirmagul, regional head of product and propositions, global trade and receivables Europe at HSBC. “Take the digital signature, for example. It is a small change, but it has been a great experience for clients, and they want it to continue.”

The potential efficiency gains from automating trade finance processes are enormous in terms of labour, cost and speed, and one of the most promising developments in this respect is the implementation of blockchain technology. Blockchain-based platforms such as Contour and that bring together the world’s banks, corporates and ecosystem partners on a common, digital, and trusted network are already transforming global trade: recent transactions carried out by HSBC on Contour have reduced processing times from 10 days to under 24 hours, unlocking working capital and enabling more trade to be done between countries.


Meeting clients where they are

Despite the benefits, not every entity involved in a trade transaction – shippers, insurers, importers – is currently able to adopt distributed ledger technology, while smaller firms in particular simply may not have the resources to launch blockchain projects yet, despite potentially being the most significant beneficiaries.

“Not everybody is ready to use blockchain,” says Sirmagul. “What clients want is least change management. When you go to a treasurer and the back-office system, moving from paper to blockchain is a huge leap.”

She adds that an incremental approach can make digitisation more accessible. “Our role is to look at what can we offer it as an intermediate step, to eliminate paper and increase connectivity, rather than going straight to the blockchain conversation.”

“Listening to customers and understanding their needs is a key part,” says Hampton. “Rather than putting solutions out there, banks need to make sure that we address those needs.” He adds that HSBC has carried out numerous client engagement activities to discover what functionality would be most useful to corporates who are at the beginning of the digitisation journey.

“What we hear often is that corporates want first of all to be able to see where their trade transactions are, and they want to be able to do this using their mobile phone, especially in today’s work-from-home environment,” he says. “When we think about the future of work and the future of skills, these aren’t just strap lines.

For many companies, the days of having the export/import department or treasury team in one place are in the past.”

In response to this, the bank is continuing to invest in HSBCnet, a banking as a service application which is available via desktop and mobile.

With an interactive trade dashboard, users can get a consolidated real-time status of all their trade transactions, and can receive notifications when a trade counterparty receives and accepts documents. Not only do applications such as this remove some manual processes from trade transactions, but they also enable banks to better understand how to help clients digitise further.

“If a customer is using HSBCnet, we can intervene and ask for feedback at the moment of the transaction, and this is providing some great insight,” says Hampton. “We can then develop new functionality based on real-time feedback.”

Another way of helping corporates to digitise trade processes is by meeting them where they are, explains Sirmagul. “What clients expect from us now is a fully digital experience from onboarding to KYC and servicing. If we can get that from the initial touch point to the end, that is a great achievement,” she says. “We can do this by putting banking solutions when and where clients trade in the digital environment. If a client is involved in e-commerce, we can come there and help them with that journey. It is no longer about them coming to us; it’s about us coming to them.”

One global example of this is HSBC’s recent partnership with HKTVmall, a Hong Kong-based online shopping and entertainment platform, to provide a new digital trade finance solution to e-commerce sellers.

The collaboration enables HKTVmall’s vendors, which include electronic appliance sellers, fashion retailers, and consumer goods providers, to access finance without having to present paper documents. Instead, the bank uses merchant data from HKTVmall, including turnover and refund records of different types of goods, to analyse and forecast vendors’ credit performance.


A changing landscape

Another reason that not every counterparty is able to fully digitise their trade processes is that, in some cases, paper is still needed, be that to meet regulatory requirements or transfer titles and clear goods through customs.

“There are a couple of key macro issues holding this back,” says Hampton. “The first is that there is a lack of digital standards for data, and that impacts the development and adoption of things like APIs. The second is around legal consistency. We are not yet at the stage where there is full recognition of electronic negotiable instruments across the whole global landscape.”

This, however, looks set to change. Last year, the International Chamber of Commerce (ICC) launched the Digital Standards Initiative (DSI), which is tasked with developing open trade standards to facilitate interoperability among the variety of technology platforms that have entered the trade space over the past few years.

Meanwhile, on the legislation front, encouraging moves by economies such as Singapore in adopting the UNCITRAL Model Law on Electronic Transferable Records (MLETR) into domestic legislation, and the G7 economies in committing to adopt electronic trade documents, indicate that the international legal framework for global trade is likely to shift quickly.


Using the tools available

To ensure they’re ready to meet this changing landscape head-on, corporates need to look at what can change their business today by leveraging the digital solutions that are available to them – and banks must co-create with them to ensure that they can take advantage of what’s on offer.

“Trade digitisation is like any other form of technology adoption,” says Sirmagul. “You will always have the early adopters, but the importance of trade is such that we must close the gap between the digital haves and the have-nots.” She adds that the benefit of trade finance is that experimenting with some of the available technologies does not require large amounts of investment: “These are short-term instruments. You do a transaction, the deal is done and paid. You are not stuck to a process that you can’t get out of. That is the beauty of this. You can come and play, and plug in and out, and that’s what we are seeing with a lot of our platforms.”

The acceleration of digitisation brought about by the pandemic has been so wide-reaching that there’s no going back. Those companies that have already successfully implemented digital solutions in trade have found themselves at an advantage, but incremental solutions provide a base upon which every corporate can build as they work towards the end-to-end full digitisation of trade.

“The combination of customer experience from corporates and specialist experience from banks means we can create unique solutions,” says Hampton. “The tech is there now, today, and we cannot afford to wait.”