Each year, Sibos brings together the global financial community to discuss, debate, challenge and drive the changes it needs to continue to evolve. At this year’s event, held in Toronto on September 18-21, GTR spoke to key players and experts from across the trade spectrum to get their take on the standout Sibos themes for the industry.
The lines continue to blur between trade and payments
Perhaps fittingly for a conference held around the theme of ‘collaborative finance in a fragmented world’, a common narrative thread running through conversations at Sibos was the growing interconnectedness of the traditionally siloed domains of trade and payments.
Speaking to GTR, Valeria Sica, global trade data, partnerships and innovation head at Citi, said: “Trade and payments used to be seen as two separate tracks, but finally the industry is recognising that every trade transaction has a payment at the end and that we have to work together.”
Driven by factors such as the shift away from documentary trade to open account, the growth of e-commerce and the need to reduce bottlenecks and friction in an always-on digital global trade environment, the direction of travel increasingly appears to be towards a more unified model that inserts trade finance into the payments journey.
“As a consequence of the various supply chain dislocations and disruptions that have taken place over the last few years, clients’ business models are fundamentally changing,” Vinay Mendonca, chief growth officer for global trade and receivables finance at HSBC, told GTR.
“Consequently we’ve seen rapid growth in the B2B e-commerce space as businesses rethink the way they buy and sell. The discussions we are having are now around how we enable embedded finance into that, whether that’s the use of data to allow us to take decisions on credit or the APIs to move that data back and forth. Over the past year, we have made very good progress at scale on digital data decisioning models, and this will remain a key focus.”
Meanwhile, payments giant Mastercard, which has for many years been moving into the trade space with initiatives such as Mastercard Track and its partnership with Demica to deliver finance to suppliers on its network, says it continues to see opportunities to leverage its payment rails within global trade.
Brooke DiNatale, who has held the newly created role of head of product for global treasury solutions at the company since March, told GTR that Mastercard is “actively pursuing” further partnerships and integrations with procurement and enterprise resource planning (ERP) systems.
With its cloud-based Global Treasury Intelligence platform, launched last year, the company is also taking aim at enabling the better flow of data to inform supply chain decisions.
“With Mastercard Global Treasury Intelligence, we’re solving for the fragmented data flows that many treasurers face,” said DiNatale. “Our treasury analytics platform allows companies to send data from their ERPs, so corporate treasurers have a holistic view of procurement, treasury and finance insights within a consolidated dashboard. This integrated experience provides increased visibility into how and where businesses spend their money, as well as with which suppliers, to empower treasurers to uncover operational savings, optimise payment methods, analyse supplier ESG ratings and manage risks more effectively.”
The industry is moving from talk to action on co-operation
In a similar vein, there was a distinct sense that stakeholders across trade are now making tangible efforts to work together on the standardisation needed to make progress on digitisation a reality.
“Where this Sibos has been slightly different from others is it has been more about collaboration than I have seen before,” James Binns, global head of trade and working capital at Barclays, told GTR. “For example, over half the meetings I’ve had have been with technology companies and fintechs, and I’m really seeing genuine collaboration now rather than competition. I think that’s a real turning point.”
He attributed this shift to a realisation among industry players that “there are multiple platforms out there, and there will only be more platforms for the future”.
“We’re never going to get to a point where we have one or a few platforms,” he said. “What we need is standardisation of data, APIs, legal entity identifiers, and so on, to allow interoperability between platforms. I really feel as though this is now starting to get to the top of a lot of people’s agendas.”
The recent release by the International Chamber of Commerce (ICC) and Swift of API standards for guarantees – the first of their kind in the trade domain – was a recurrent topic of conversation in Toronto.
Jean-François Denis, global head of trade solutions and network management at BNP Paribas, told GTR: “These discussions actually started about a year and a half ago, when banks came together to work out the pragmatic prioritisation of a number of things with regard to Swift’s trade activities. The corporate-to-bank API is one of those priorities, and now we’re in the process of putting that into practice.”
At a panel session on corporate-to-bank APIs, Sam Mathew, ICC Banking Commission steering group vice-chair and global head of documentary trade at Standard Chartered, explained the importance of developing standards for trade: “The whole reason why we embarked on the corporate to bank APIs initiative is that the industry needs to speak a common language, because that then makes it much easier for us to talk to each other.”
But standards governing guarantees aren’t the only ones gaining traction. Earlier this month, the Future International Trade (FIT) Alliance launched the electronic bill of lading (eBL) declaration to advocate for industry-wide standardisation – which garnered immediate support from bank signatories including Commerzbank, CTBC Bank, DBS Bank, ING Bank, HSBC and Rabobank as well as numerous technology, shipping and logistics companies, metals giant Tata Steel and chemicals producer Ineos Styrolution.
Speaking to GTR at Sibos, Chris Sunderman, programme lead for the banking sector at FIT Alliance member the Digital Container Shipping Association (DCSA), said: “I’m very happy with the receptiveness from all the parties we have been speaking to. They all understand what is being done and what they need to do to collaborate in this quest towards digitisation and standardisation. The financial industry is putting digitisation back on the agenda again, but this time, standardisation is part of the journey.”
“Over the last two years, we have talked to a handful of banks, and while they all gave their support to our initiative, at the same time, freight forwarders and beneficial cargo owners were telling us that they wanted to change but that the banks did not want to,” added Niels Nuyens, the DCSA’s head of digital trade. “During Sibos, having met 15 or so banks, they are all now saying, ‘we want to help, tell us what to do, whatever it takes’, which is very encouraging.”
Despite all of the optimism, talks also revolved around barriers hindering the adoption of standards – and the perennial problem of a lack of awareness was a recurring theme.
“There’s a common misconception in the market, among both corporates and fintechs, that these APIs [for guarantees] can only be used with the Swift network, and that is not the case,” said Juliette Kennel, head of standards at Swift. “We need to get that word out, because as long as there is that perception, it’s going to make the job that much harder.”
“It’s much more difficult to reach all the corporates,” added DCSA’s Nuyens. “There needs to be a greater focus on getting the message out to individual corporates to ensure they understand the benefits and the progress being made.”
Legal reform is a shot in the arm for trade digitisation
The Sibos event also coincided with a major milestone for the global trade finance industry: the entry into force on September 20 of the UK’s Electronic Trade Documents Act (ETDA), which allows for the legal recognition of trade documents such as bills of lading in digital form.
“I am thrilled that it has been enacted into law,” said HSBC’s Mendonca. “This is a huge step, because so many contracts in international trade are governed by English law.” While he expressed disappointment that adoption of the electronic bill of lading (eBL) remains low despite industry efforts over recent years, he added that he expected to see this “pick up considerably” as a result of the completed and planned legal reforms in the UK and elsewhere – a view echoed by the DCSA’s Sunderman.
“Previously there’s been a bit of a wait and see approach to digitisation from many parties in the industry, because of a lack of comfort around legal frameworks,” he told GTR. “The ETDB is a big step forward towards further adoption and greater awareness.”
Barclays’ Binns was equally enthusiastic, although highlighted that more work lies ahead when it comes to capitalising on the potential benefits of the legislative change.
“There’s a lot of talk now about how the banks commercialise and apply this,” he told GTR. “The other interesting element is, yes, it’s now been passed into law in the UK, but what does that mean more globally? Given that so many contracts and maritime rules are governed by English law, this is an aspect that we all need to better understand.”
For DCSA’s Nuyens, this point is an important one for the industry as a whole to address. “Obviously, a lot of people do have concerns regarding the legal elements of [the ETDA] in terms of enforceability, which are not necessarily a barrier particularly given the bylaws of the platforms for example. It also serves to motivate other countries to make similar changes – we are already seeing progress in France and Germany,” he told GTR.
Technology will continue to change the face of trade – as well as the finance that supports it
Several panels at Sibos explored how the relentless evolution of technology continues to redefine the landscape of global commerce, and pinpointing what the future of trade will look like in a constantly changing world has become a priority for financial institutions and fintechs alike.
“In addition to these transformations of ‘how’ and ‘where’ trade is taking place, ‘what’ is being traded is also changing: we expect to see a secular rise in demand for sectors like tech services, and cloud,” HSBC’s Mendonca told GTR. “And what has changed for our industry, in trade finance, is that at HSBC we are now financing these services. Trade finance is no longer only about financing a container on the high seas, but we now finance cloud contracts and data as well.”
Each of the trade heads that GTR met with said that the digital transformation of their trade finance business was high on the agenda, with many outlining plans to partner with other players to drive further progress. As the industry looks ahead to next year’s Sibos in Beijing, all indications are that this topic will remain top of mind.
“We are not looking to create a proprietary Bank of America system,” Geoff Brady, Bank of America’s head of global trade and supply chain finance, told GTR. “If we can start by pulling out paper and reducing resources, this allows us to show operational savings and efficiency gains, which will encourage the wider ecosystem to come along on the journey with us.”
“I’m very focused at the moment on continuing to re-platform our business,” said Barclays’ Binns. “Looking forward, the emphasis will also be on areas such as our API strategy and the type of solutions we want to be connecting to in the digital trade market, be those know-your-customer and anti-money laundering solutions or OCR, automated document checking and multibank portals. That is going to be a real focus on the next two to three years.”
Image credit: Swift