At the recent Sibos conference in Amsterdam, commercial banking leaders from around the world gathered to share their insights and enthusiasm about the latest trends and innovations. I had the great pleasure of leading a roundtable on trade finance, and I was happy to find so many banks already excited about the possibilities for the future of global trade and supply chain finance. This area has lagged behind many other banking services in terms of adoption of digitalization and AI to create a more efficient workflow.
But recent Accenture research reveals that the industry may be on the brink of a new era. It’s all laid out in our report, Find your competitive advantage in today’s trade finance sector.
I shared my key takeaways in an interview from the Sibos conference floor. Watch the highlights here, and read more in the post below.
If banks don’t lead the way, their competitors will
The door is open for commercial banks to take a leadership role in modernizing trade finance. Rather than competing against the fintechs, banks need to be more like fintechs—and still have a chance to be at the forefront of digitalizing their trade finance offerings before clients are lured away by faster-moving competitors.
The complexity of trade finance has made it a tough area to modernize, but putting it off is no longer an option. Accenture surveyed 675 clients around the globe—including importers, exporters, distributors, wholesalers and manufacturers—to find out what’s important to them when it comes to trade and supply chain financing. As Accenture expands new capabilities in this area, a deep understanding of client needs and industry expectations is crucial.
In the transaction banking domain, fintechs have always been on the lookout for underserved clients that are ready to try something new—and they have steadily increased their market share in this business (~5% in 2018 to almost 18% currently) by offering nimble yet relevant trade and supply chain financing services to corporate clients. Banks until now have been in a better position than fintechs to serve these longtime clients, but to sustain and grow their client relationships they will need to enhance their technology in order to offer new, more relevant and more efficient trade financing services. Speed and efficiency are more important than ever after the challenges in global trade and supply chains over the past couple of years. Banks that introduce digitalized and automated services—or that partner with bigtechs, fintechs or ERP software vendors to create interconnected solutions—will have a better chance to retain market share as competition intensifies.
Companies are seeking efficiency and faster turnaround times, more competitive pricing, easier access to credit facilities, and better access to international markets from their providers.
– Accenture research
Partnering with clients to meet their needs
The current high interest rate environment is challenging companies, both large and small, in trade finance. Banks that can move quickly to meet changing needs will be able to help keep customers afloat in the months and years ahead.
Although the majority of trade finance clients in our survey were relatively satisfied with their service providers, two-thirds of them were planning to change their roster of providers over the next 12 months. That means there are gaps in service from existing providers—including primarily trade financing —that need to be addressed as a priority if banks are to retain those clients.
There is an underserved and growing need for products such as higher pre-shipment finance and purchase order financing, particularly among small-to-medium companies.
– Accenture research
Over one-third of trade finance clients in our survey said that locating available working capital—combined with finding the right pricing and the right set of services and offerings—is their most important product consideration in 2022. As a result, they are looking for solutions that help them optimize working capital and enhance cash conversion by extending days payable outstanding, reducing days inventory outstanding and days sales outstanding, and driving strategic growth. So trade financing banks now have to satisfy higher client expectations. In fact, if they are to retain and grow the client business relationships that they’ve been able to nurture until now, they will need to exceed these expectations.
Companies are also anxious to reduce manual paperwork, which has been stubbornly persistent in global trade due to the requirements and common practices of port authorities, other industry players and—to a lesser extent—regulators. The opportunity to move away from paper and embrace embedded finance is very attractive to this sector, and commercial banks are in a good position to help expand the use of embedded finance in global trade.
Finally, sustainability is becoming a more prominent goal in global trade, and companies are looking for creative ways to reduce their carbon footprint. While banks may not be able to offer much help with reducing cargo ship emissions, offering sustainable financing solutions will help banking leaders stand out and attract the growing number of clients prioritizing green practices across their suppliers and partners.
Launching this eye-opening research at Sibos gave me a great opportunity to connect with my colleagues and clients from all over the world and discuss the implications with them. As I pointed out in an earlier blog post, Back to in-person events (for now) and loving it!, the conversations that naturally unfold during in-person conferences like Sibos have enormous value and provide insights and diverse points of view that might otherwise be lost.
In an upcoming post, I’ll be discussing another topic that was top of mind for Sibos attendees—treasury services. I’m teaming up with my colleague Margaret Weichert, who leads Accenture’s payments team in North America, to reveal the changing expectations of customers in this crucial service area, and what banks will need to do to keep them satisfied. Keep an eye out for that one because it’s a very hot topic right now. Read more Sibos takeaways from my banking colleagues here.