Mobile banking solutions have the potential to bring a raft of new efficiencies to trade finance, but there is still a long road to travel before they are fully realised. Ben Poole reports.
In the corporate sector, mobile banking solutions are still in the development stage. As a sector, it is lagging behind the consumer segment, where individuals are more comfortable doing a variety of activities on their phones, and have the solutions readily available to do so. For corporates, there is rightly a lot more concern around security and protecting confidential information, such as account or counterparty information.
In the trade finance space in particular, mobile banking tools are really just starting. Many banks are trying to take a subset of what they have available on their client portals, and make these available to corporates on mobile devices. Typically, these will allow the user to view statuses or transactions that have already taken place through some other means.
One element that immediately places a constraint on the functionality of a trade finance mobile tool is the large quantity of data usually involved in a trade transaction. Take an application submitted by a corporate to a bank for a letter of credit (LC), for example. The quantity of data that has to be input to do that means that the process is quite prohibitive to do on a mobile device.
Where mobile tools can play a part in enhancing efficiency in the trade process is by allowing people to approve data that has already been entered by somebody by a desktop computer. Typically the person approving these types of transactions will be of senior level within the organisation, and it is that level of individual that may be out of the office quite regularly. It is possible to display what has been previously been entered on a desktop in a mobile solution, and have the manager click ‘approve’ or send back corrections by using a mobile device.
Desktop vs mobile
With access to trade data possible from beyond the confines of the office, the information that corporates can access from their desktops and mobile devices needs to be seamlessly synchronised. “Any trade information that you wish to access, from whichever type of device you are in front of at the time, has to come from the same source. This is the guiding principle behind our Straight 2 Bank suite of products,” explains Gautam Jain, managing director and global head of client access, transaction banking at Standard Chartered. The concept is that a client can be looking at information on their iPad on the commute into the office, and be assured that they can start working where they left off once they arrive at the office and switch on their desktop computer.
A trade finance transaction can of course involve more than just a bank and a corporate, and the new mobile banking tools that are just starting to come online also have potential for counterparties and clients of the corporate. Fran Martell, global trade capabilities product manager at Citi, describes how this can be simply achieved: “Citi Trade Advisor lets not only our clients, but also their counterparties, run a quick query about a transaction. They need two pieces of information to view data related to the transaction – a reference number (a bank or customer reference) and the value of the transaction.” A solution that operates within these parameters lends itself to a mobile capability, as the user is only required to enter two data elements to receive a status update. Solutions need to be informative and still protect the client’s data, something that can be tricky in the trade finance space.
While mobile technologies such as smartphones and tablets have the potential to offer greater visibility and efficiencies, the market is still in its relative infancy, and this is causing some headaches for trade finance solution providers as they try to understand how to develop the solutions that are of most use to their customers. “While banks can develop solutions that easily run on most desktop computers, the same is not true in the tablet space and mobile banking. This is due to the proliferation of different manufacturers and the array of software that their smartphones and tablets run on,” says Tan Kah Chye, global head of trade and working capital at Barclays Corporate. “The standardisation of technology does not exist in this space, and therefore this is something that banks need to address when developing solutions.”
One issue that banks are addressing as they bring a solution to market is how to access the solution. One option is to provide a mobile internet solution that customers can access through their mobile browser. The alternative is to package the solution in an app that is then downloaded onto the mobile device. Both options have their advantages. “Trade Advisor is a mobile internet solution rather than an app,” explains Citi’s Martell. “In development, when we looked at the corporate space, we saw people using very different types of phones, for example Blackberry seemed to be very prominent. Mobile internet is a way of reaching every device with one solution.”
However, apps do have their advantages too. They are more likely to be optimised to the screen size of the smart phone or tablet, and some can provide the capability of doing a limited amount of work while the device is offline. Whether or not a bank has the inclination to develop a number of apps for the same solution across the variety of mobile operating systems that exist is open to question.
Current tools and future concepts
As has been mentioned, the facility to initiate a trade transaction via a mobile device is rather impractical. This is simply because it is difficult to initiate a documentary trade transaction on an electronic device.
However, open account and, more recently, the bank payment obligation (BPO), lend themselves much more to electronic initiation, and some banks will be trying to understand if it is in any way possible to integrate something along these lines into their mobile trade offerings.
“A significant difference in open trade from traditional trade is that the users of open trade are both large corporates as well as small and medium-sized firms across the entire supplier eco-system,” says Raj Subramaniam, product strategy and marketing, Global CASHplus, Fundtech. “The smaller corporates are much more inclined to quickly embrace opportunities for additional efficiency, with a focus on faster decision making and quick and simple operational processes. Making available trade-related data on mobile, and facilitating invoice and payment processing is a great benefit for such nimbler corporates.”
Today, authorisation and monitoring are the two areas that are already within the reach of the banks. Standard Chartered’s Jain provides an example of the types of services readily available via mobile: “In terms of monitoring the status of trade transactions, we offer LC summaries, bills and collections reporting, and trade authorisations for corporates and SMEs. With the most recent update, we have introduced trade limits and utilisation reporting as well.”
While this provides useful additional functionality, it is still the tip of the iceberg of what could be achieved in the mobile banking space for trade finance. To offer more, mobile solutions need to follow the path trodden by their desktop cousins – namely standardisation, automation and combined channels.
The goal is to provide a mobile trade solution that is multi-bank from a client’s perspective – one channel using one set of standards, rather than corporates having to tweak how they deal with different banks. In the trade space, banks need to sit down with corporates and technology providers to establish common goals and how this standardisation can progress.
The ISO XML standards are a part of this. Not only is XML being used in the single euro payments area (SEPA), but it can also be used in trade. The future is heading towards more connected functionalities and services, with corporates being able to access different banks and data through the same technology and file formats.
“The beauty of the XML file format is that it is a standard that will be used for many products and not just payments,” says Adnan Ghani, head of transaction services origination, UK (international), network and trade at RBS. “Swift has adopted this and so have banks, and not just in the payments space. The RBS trade portal MaxTrad is XML-ready, for example. This will help us standardise our offering, which in turn will help our clients to be able to deal with multiple banks using the same standard.”
It is also important to take a holistic view of trade finance in the mobile age; to view it as more than about having a single point of contact between the bank and the corporate. Some of the more challenging aspects of trade finance are found before and after that contact.
“I think that, over the next five years, we will see more vertical integration of the trade finance activities that happen before and after the bank/customer contact,” says Barclays’ Tan. “A good example of this would be the credit approval process – I can see this type of approval process being available on mobile banking solutions.”
There is clearly a lot of work to be done, but the potential for mobile banking in trade finance is huge.