As the digitisation revolution gathers pace, ecosystems that collaborate to deliver more value are redefining trade, and banks have a vital role to play in bringing them together to meet the evolving needs of corporates in the post-Covid reality.


Covid-19 has demonstrated beyond any doubt the value of trade digitisation – not only as a means to keep trade moving when physical documents cannot be transported, but also as a means to track provenance, shore up supply chains and identify new partners.

This is driving an evolution in the way the industry is approaching digitisation: where once the landscape was competitive, it has now become collaborative, and banks are setting aside traditional models to co-innovate along the value chain.

“Clients’ commercial ecosystems are permanently evolving and the core of our strategy is based on ensuring that our solutions are always adapted to meet their needs,” says Angel Bustos, global head of supply chain finance at Santander CIB. “We are not mere vendors of trade finance solutions or IT features; we are strategic partners to our clients, so we accompany them when executing transformational plans, going digital, going global or even when a crisis comes, as we have seen recently.”


A crowded landscape

The results from the latest Santander Trade Barometer show that 27% of businesses globally now see digital transformation and the increased use of digital tools as a significant opportunity over the next year, with many thinking hard about how to use the Covid-led drive towards digitisation to their advantage.

But as businesses look towards the future, cutting through the noise represents a real challenge.

“Corporates now have a clear objective to digitise processes as much as possible, but the problem is the mass fragmentation of offerings from players and platforms. Moreover, we’re increasingly hearing from clients that, far from making things easier, digitisation brings in more complication, as they need to bring together their suppliers, buyers and logistics partners and get them all to digitise as well,” says Mencia Bobo, global head of trade and working capital solutions at Santander CIB. “Corporates need a holistic, customised solution for their trade financing, and for banks, this presents a clear opportunity and responsibility to drive the process towards a more standardised and harmonised digital offering.”

From blockchain to the internet of things (IoT), artificial intelligence and optical character recognition, technological improvements to paper-based processes come from both fintech start-ups – which bring in sector specific knowledge to often ignored market segments – as well as banks, which have invested heavily into digital transformation.

“The narrative of banks as digital laggards in trade is a thing of the past,” says Bobo. “We are leveraging the knowledge and technology that we have developed across different areas to create a virtuous cycle whereby there is a constant cross-pollination of digitalisation initiatives into trade, for the benefit of clients.”

““We undertake permanent product evolution, where we are constantly innovating in both traditional trade products and supply chain finance,” says Bustos.


Closing the gap

To ensure an equitable future for trade, it’s crucial that technology is leveraged to realise efficiencies for all. Addressing the US$1.5bn trade finance gap, which is thought to have widened even further in the wake of the pandemic, means rethinking how supply chains are financed. And by putting to work the wealth of data gained across departments, banks can better assess risks and provide trade financing earlier in the supply chain.

“We have 1,500 supply chain finance programmes and around 300,000 suppliers worldwide on our books. The amount of information that we have is huge, and we can harness this across geographies and supply chains to connect even the smallest global trader to finance,” says Bustos.

Working together with solution providers worldwide, banks can help develop and manage all of the necessary technological capabilities for the end-to-end digitisation of trade, making financing easier, faster and more available for corporates.

“We believe that this is where we can bring real value to the table,” says Bustos. “We can leverage the power of the whole ecosystem by bringing in third-party providers to complement our offering.”

By assessing their own value chains, banks can determine where partnering makes more sense rather than building or buying, and can then prioritise the solutions that provide the greatest service to clients.

“The role of banks right now needs to be both advisory – identifying the digitisation needs of corporates – as well as a convening role, whereby banks surround their funding and structuring offer with third-party processes, and then put this together as one package for the corporate,” says Bobo. “By doing this, banks accompany the client right from the beginning all the way through the trade process, while ensuring that they get access to the digital tools they need to reduce friction and trade more easily.”


Banks as conduits

One of the biggest barriers to the full digitalisation of trade is around scalability and the digital island effect. At the moment, a number of individual companies and consortia are working on trade digitisation initiatives, which are happening in pockets of innovation around the globe. As a result, an exporter in Singapore, for example, likely has access to a greater number of digital services for trade than one in Santiago de Chile.

While it is hoped that one day all of these systems and services will be universally available and interoperable, we are not there yet, which means some companies run the risk of being left behind. Thanks to their global footprint, banks can act as conduits of digitisation, taking best practice from one market and scaling it in another.

“Because we are a global bank with our trade teams on the ground in several countries, whatever we do in, say, the UK, we can replicate it in Mexico, for example,” says Bobo. “Everything is interconnected, so we are capable of escalating digitisation across geographies very quickly.”

Through investing into existing routes to deliver liquidity into the trade ecosystem as well as partnering with fintechs to deliver it via new routes, banks can continue to ensure the fluidity and security needed to allow for the movement of goods and services, while corporates get the best of both worlds: benefitting from new technology while being counterparty to one of the world’s most important financial institutions.

“Where banks really come into their own is through the ability to tie down liquidity and commit funds to other counterparties in the ecosystem. Banks have the assets, the footprint and the balance sheet which means that they can act as a strategic partner, even during the recent crisis,” says Bustos.


Connecting the dots

After a year of unprecedented challenges, businesses are now preparing for recovery. While almost two-fifths (39%) of respondents to the Santander Trade Barometer survey say their performance has deteriorated over the past 12 months – the worst figures on record – almost two-thirds (65%) are confident of growth over the next three years.

To support this growth, banks have a unique opportunity to use their position at the centre of the ecosystem to bring together solutions to ensure that every exporter, everywhere, can harness the power of digitisation – no matter what stage of the trade journey they are on.

The time for digital transformation of trade is now, and with banks at the centre, trade digitisation won’t be a benefit for the few. Instead, it will be an evolution for the entire sector.