Global trade is undergoing fundamental change, for instance trade within Africa is on the rise – reaching 18% of the region’s total exports in 2014, compared with only 10% in 1995¹. The complexity of managing trade, especially global trade, presents an opportunity for banks to add value to their commercial customers beyond simply finance and payment services. Order and delivery cycle times can take as long as 20 days for domestic trade and 40 days for global trade, and the number of parties involved in processing a shipment increases to anywhere from five to 20².

Consequently, banks’ corporate customers are demanding more sophisticated trade finance services, to be integrated with their supply chains to provide greater visibility, and control over, their working capital flows^3,4. One such shift is a move from documentary credit to open account trade finance services.

While competitors offer open account and working capital facilities and innovative trade platforms, due to the absence of functionality, the bank was limited regards product scope. Sales efforts were geared towards overdraft as a working capital platform. Hence, the client asked BSG to assist them in moving from a procedural and opaque trade finance solution (such as overdraft facilities), to open account trade finance solutions – which are more transparent with regard to the use of funds. This also implies cheaper funding from the bank’s treasury, to cover banking customers’ trade financing and risk management needs.  By utilising China Systems’ Trade Finance platform and a more sophisticated approach to credit, the bank can streamline processes and provide an innovative and integrated platform for customers to transact on.

An integrated front-end would:

• Enable the bank to be more competitive as customers would have an interface to manage transactions and have visibility of their loans throughout the lifecycle
• Facilitate large volume supplier programmers to upload and select invoices for financing
• Enable the bank’s customers to strengthen key supply chain relationships, by helping counter parties in the supply chain gain more favourable pricing, versus trying to do so on their own

By integrating back-end processing, the bank can enable trade-based interest and discount calculations to be managed and booked to core banking, irrespective of which core banking platform is used.

An integral element of this project was the creation of a base in South Africa to drive expansion into Africa by ensuring the reusability of enablement artefacts.

Interest in and demand for open account supply chain financing is growing globally, including Africa – as trade finance products adapt from being more manual and administrative to becoming more flexible and risk conscious.  The new capabilities introduced in the client environment will enable the bank to manage risk management, reduce capital costs and improve client service – while ensuring the bank can competitively position themselves as a provider of working capital solutions in Africa.

1. International Trade Statistics 2015, World Trade Organization
2. Market Guide for Global Trade Management Software, 30 September 2015, William McNeill, Gartner
3. Corporate Demand Will Make Advanced Payment Services a Key Competitive Differentiator for Banks, 22 February 2016, Fabio Chesini, Gartner
4. Transaction Banking Needs Open Collaboration for a Frictionless World, 3 November 2014, Fabio Chesini, Gartner