Digitalisation, strategic partnerships and diversified offerings empower banks to become trusted advisors and support clients throughout their international business endeavours. Louis Du Plessis, head of trade finance at RMB, outlines how financial institutions can go beyond traditional roles to add value in the complex world of global trade.


While banks have long played a role in trade when it comes to finance and payment solutions, the reality is that there is a lot more value that financial institutions can add beyond the traditional working capital, letters of credit and guarantee facilities.

Trade is a complicated business: an intricate web of logistics and interactions driven by global supply chains, diverse regulations, technological challenges and the constantly evolving economic landscape. While digitalisation could be seen to potentially add yet another layer of complexity, particularly in an industry that remains heavily paper-based to this day, if effectively implemented it can actually simplify many areas, and it also has the potential to deliver a host of additional benefits.


Risks and the rules

One of the common challenges across the trade ecosystem is the risks that are associated with the physical documents that form the basis of global trade. In addition, the industry is highly rules based, and understanding these rules and the implication for which party in the transaction bears the risk can be a barrier to entry for less sophisticated clients. Since trade instruments are still very much guided by International Chamber of Commerce rules, the execution of these instruments can become documentation, administrative and rules-heavy.

Without an adequate understanding of all three elements, along with timely execution, the result can be significant delays and potential financial loss. Moving into the digital realm can help to simplify some of the complexity, creating a simplified way to address many of the elements and risks for all stakeholders in the value chain. Aside from reducing the risk of paper-based transactions, there are several benefits associated with digitalisation across the value chain, from provider to buyer to seller. These include reduced cost, enhanced efficiency, timeous execution and improved risk management.

In a connected world, banks have the power to create an ecosystem driven by digital technology, where clients can leverage off each other for support, enhanced efficiency, beneficial pricing structures and more.


Trade instruments and the landed cost of goods

There is no doubt that the global economy has faced unprecedented challenges in recent years, with worldwide supply chain issues receiving significant attention and a cost-of-living crisis that is affecting every country, particularly developing economies. These challenges have forced international trade players to look for innovative ways to reduce the landed cost of their goods, creating a win-win situation for both importer and exporter. Markets are driven by various levers, including risk mitigation, finance, logistics and insurance, and the ability to enhance competitiveness depends on several factors, including track record, cost of funding, availability of liquidity and so on.

To illustrate this concept by way of an example, say an exporter requires payment for goods without delay, while the importer prefers extended terms to pay for goods. The country with the most competitive funding basis is better positioned to acquire the finance for the transaction more efficiently and include it in the landed costs, thereby effectively reducing the landed cost of goods. With various trade finance techniques, a similar practice can be applied to logistics and insurance when transacting globally.


Creating the connections

As trade and globalisation continue to expand, trade complexities are likely to persist and may even increase in the future, especially in light of unexpected events like the Covid-19 pandemic and escalating geopolitical developments. At RMB, we believe that the key is to go beyond banking, moving further down the value chain and supporting our clients at the beginning stages – before they even need working capital or trade credit facilities.

From a digital perspective, we can help to facilitate this value add with First Trade 360 (FT360), an end-to-end management and tracking solution that helps our clients manage the entire shipment process from start to delivery, via a single integrated platform with real-time updates on transaction status. FT360 is a fully integrated system with a completely customisable dashboard for reporting and tracking of everything from estimates, orders placed and orders in production, to shipments in transit, with live automated alerts, and full pre- and post-costing, as well as risk mitigation and vetting of freight and local vendors.

By offering services from a logistics perspective, we can create a seamless process when it comes to financing, as and when this is required. But more than that, we can help our clients by harnessing the power of our digital solution as well as our relationships to create an ecosystem where clients can connect and leverage off each other. For example, we can connect importers and exporters with freight forwarders and shippers, warehousing, distribution, insurance and more and use our relationships to improve efficiency and cost effectiveness for all parties involved.

Leveraging our client relationships within the group, we can harness valuable connections and bring together diverse stakeholders and resources to create ecosystems from which our clients benefit. Banks that are able to successfully achieve this can add significant value for clients.


Meeting our clients where they are

We believe that trade finance should not just be about the money, but about investing in, assisting and supporting our clients and partners. However, finance still plays a critical role, and digitalisation can also help to streamline these processes. The challenge is that the trade ecosystem is so vast and technology stacks are developing so rapidly that there are constantly new software solutions available, and it can be difficult for banks in particular to keep up, given that their legacy processes are heavily entrenched and often not agile enough to keep pace with these changes. In the past, banks were designed to last, but going forward we will need to position for constant change when it comes to client requirements and technology.

Our strategy, alongside building out our own capabilities, is to partner with key players to simplify and facilitate client requirements. One of our partnerships is with one of the largest multi-bank trade finance platforms, which enables us to meet our customers where they are, rather than trying to reinvent and build a bank-borne solution. The partnership helps RMB to streamline trade finance, improve know your customer processes, keep track of documents and more, while our clients can use the same system to perform the same tasks.


Think differently to make a difference

By diversifying our offerings and extending beyond traditional financial services, RMB is positioning itself to become a strategic partner for our clients engaged in international trade.

As digitalisation becomes the way of the world, we cannot simply keep doing things the way we always have, because agility has become a point of critical competitive differentiation. Our aim is to support our clients more effectively and add value to the entire trade ecosystem, cementing our position as a trusted advisor and supporting our clients at every stage of their global business endeavours.