Standard Chartered and Huawei are developing an internet of things (IoT) solution to help the bank make better financing decisions.
The application will enable Standard Chartered to track the movement of goods on a real-time basis, and can trigger automatic financing or payment instructions.
In short, IoT technology refers to devices and sensors connected to one another that automatically collect and exchange data. IoT is what powers fitness trackers and smartwatches that monitor physical performance. It’s what car insurers use to offer cheaper insurance by installing a device in vehicles that tracks mileage and driving habits (for more information, check out our latest feature, Trade finance fintech for dummies).
In trade finance, such devises, attached to cargo for example, could enable financiers to easily obtain real-time information on the physical flows that they are financing and use it to better assess working capital funding risks.
Standard Chartered and Huawei note in a statement that their new solution could “revolutionise the way corporates communicate with banks for financing or payments”.
The aim is to reduce operational risks while providing reliable data that can be used in financing decisions. Instead of corporates having to manually initiate transactions through paper-based or emailed instructions, this data could be automatically fed to their banks.
With the announcement, Standard Chartered and Huawei join a range of other players exploring the use of IoT in trade. In a first-of-its kind trade transaction in 2016, Commonwealth Bank of Australia, Wells Fargo and Brighann Cotton combined smart contracts, blockchain and the internet of things to track a shipment from Texas in the US to Qingdao in China. When the goods arrived, the smart contract automatically triggered the release of funds.
Switzerland-based tech firm Arviem, meanwhile, helps firms installs smart IoT sensors on containers and cargo to track anything from the location of the goods to vibration and container openings, as well as conditions such as humidity and temperature to help them analyse and optimise their physical supply chains.
But Standard Chartered and Huawei are taking the technology a step further by exploring how the bank can offer smart financing based directly on the information provided through the sensors.
Standard Chartered envisions it could “open up possibilities for a broader range of financing solutions for manufacturers and their distributors” and significantly reduce turn-around times.
According to Michael Gorriz, group CIO of Standard Chartered, the technology could “change the fundamental way we do banking”.
“We found in Huawei a strong partner who shares our passion to transform the way we would like to support our clients and make banking seamless and effortless for them through the application of internet of things technology. We look forward to piloting the solution with clients and working with Huawei and other technology partners to explore new use cases,” he adds.
The solution will use Huawei’s OceanConnect, an open platform based on IoT, cloud computing and big data technologies.
Standard Chartered is also running other pilots in this space, working with large auto manufacturers in Asia to pilot IoT-enabled smart distributor financing. Through IoT sensors, the stakeholders can track exactly when a car is moved from one warehouse to another, or sold to the end customer.
“Given the financing is done on real-time and not historical information, we will be able to extend appropriate tenors and limits to the distributor. The process will be paperless, which enhances efficiency and reduces associated costs,” Ashutosh Kumar, the bank’s regional head for Asean and South Asia, wrote in a recent op-ed in GTR.
Standard Chartered will also be well-placed to identify ‘early warnings’ of potential issues that could affect the ecosystem.