HSBC has released a new application programming interface (API) that enables its partner banks to issue local guarantees in markets where they do not have a presence.
The banking guarantee API allows HSBC partner banks to build applications for their customers, enabling them to have visibility of the status of their guarantees on their own banking platform, even though the guarantees are delivered by HSBC.
A bank guarantee assures a supplier that if the buyer doesn’t pay what it owes, the bank will step in on their behalf to make the payment. If a partner bank doesn’t have a presence in the supplier’s country and HSBC does, HSBC can reissue their guarantee to the supplier.
The news comes as the open banking movement is picking up pace globally, seeing a growing number of financial institutions releasing open APIs through which third parties can access financial data to build innovative products for the banks’ customers, allowing systems to interact and securely exchange data.
Open banking has up until now favoured the retail banking space, but the interest for using APIs for trade finance purposes is growing.
For HSBC, the banking guarantee API is the bank’s first extension of open banking into trade finance.
Speaking to GTR at Sibos on Tuesday, Surath Sengupta, global head of financial institutions, portfolio management and distribution, global trade and receivables finance at HSBC explained how the solution works: “For example, an Italian-based customer who needs to do a project in the Middle East has to issue local guarantees in the Middle East, but it can’t open accounts with another bank in the region just for that purpose, as it is extremely costly and cumbersome.
“Through our mechanism, HSBC can issue the guarantee which they [the customer] can see. But they still have the relationship with their local bank, which also has a tie up with HSBC. So, they don’t have to navigate different banks for every project,” he says.
ING Bank and Standard Bank are the first two banks to have completed transactions using the technology.
Sengupta says that HSBC is in “very active discussions” with a few other partner banks who are interested in using the banking guarantee API, as it is a “win-win” situation, where all parties benefit.
He adds that APIs are “fundamental” to the future of trade finance, and through their introduction the bank is improving cross-border trade by providing clients with access to the products and services they need from their platform of choice.
“This is a good step toward collaboration and opening the banking system for each other, with customers ultimately benefitting from a much wider and collaborative banking network.”
HSBC handles half a million bank guarantees a year; the bank guarantee API is the first of several trade-related APIs the bank is developing.