Banking on an Ecosystem of Digitalisation, Partnership and Data

The global COVID-19 pandemic has pushed business to increase their pace of technology adoption with a renewed sense of urgency. The shift to digital operations is being made across all industries, bringing about a permanent shift and increased efficiency. The banking industry is no exception. 

Biswajyoti Upadhyay (BJ), Managing Director, Regional Head of Transaction Banking Sales in Hong Kong, Taiwan & Japan and Corporate, Commercial and Institutional Banking of Standard Chartered Bank (Hong Kong) Limited (Standard Chartered), pointed out that the UK-based bank has expedited its digital strategy to offer clients along the global trade and supply chain the most innovative banking solutions that meet their needs.

 “I believe many of the digital infrastructure has been built ahead of time, the COVID crisis just accelerated the adoption of it. The new norm is, businesses are moving away from traditional transaction into electronic transaction, and the trade finance sector is ready for it.”
 

The Digital Push & Trade Finance

Standard Chartered has invested in technology to enhance its full suite of international trade and supply chain financing services. Many standard products such as the Letter of Credit (LC) issuances and invoice financing are already done through its internet banking platform. To take the digital trade financing platform to the next level, the bank is mapping massive trade documents with its OCR (optical character recognition) programs to enable big data analysis in order to better support its clients.

Standard Chartered has partnered with GS1 Hong Kong on its ezTRADE platform as the bank’s latest initiatives on data analytics. The proprietary platform is one of the largest B2B trade platforms in Hong Kong , processing more than 20 million electronic transactions each year and maintaining digital records of thousands of buyers and sellers across Hong Kong and the Greater Bay Area.

This partnership provides the bank with the necessary access to the wealth of secured information and business transaction data of a particular client stored on the ezTRADE platform. “Instead of relying on the static financial information that comes in three or six months from client’s financials, and potentially nine to twelve months for an audited financial statement of SMEs, this platform gives us transparency to a client’s business and cash flows in real-time for better evaluation of their credit worthiness as well as understanding of their financing needs.”

“We believe it is a critical moment to change the way we evaluate the healthiness of SMEs. The latest financial statements are going to reflect the challenging business environment of COVID over the last year. At the same time, as businesses gradually return to normal, SMEs are going to need more liquidity for their sales activities and operations. Unless we move from a traditional evaluation using financial statement to an evaluation based on the latest sales and procurement activities, we would not be able to support these SMEs and their cash flow is going to be impacted.”

“It also saves both the client and us a lot of time and manpower to salvage paper documents in the loan applications, which used to take days or even weeks to process, but are now completed and accessed seamlessly on one single platform. This has significantly improved our operational efficiency.”

Cross-border Blockchain Pilot

Apart from partnering with industry associations like GS1 Hong Kong, Standard Chartered has also actively contributed to government-led digital trade projects. Back in 2018, the bank was one of the founding members of Hong Kong’s eTradeConnect pilot, the city’s first blockchain-based trade finance platform facilitated by the Hong Kong Monetary Authority. The platform allows buyers and sellers to create, exchange and confirm purchase orders and invoices in real-time, share information on a “need-to-know” basis as well as submit applications for financing on one single interface.

More recently in November 2020, Standard Chartered successfully completed a cross-border blockchain transaction by connecting eTradeConnect with the blockchain platform run by the People’s Bank of China. It was one of the Phase 2 pilot cases to help establish linkage between the two blockchain systems and was critical for getting the cross-border service prepared for launch to more banks.

“Drawing on our early experience in digitalizing transactions for local businesses in 2018, we are now focusing on bridging the two public platforms in Hong Kong and Mainland China to support importers and exporters. This is part of our continuous effort to promote global trade and prosperity.”

Unleashing the Power of Partnership and Data

The emergence of digital trade platforms like ezTRADE has brought buyers, suppliers, logistics providers together into supply chain networks, and Standard Chartered is determined to leverage on these platforms for growth. The bank is embracing an open banking strategy to ensure that it can support cross-sectoral businesses no matter which platform or network they are using. It is joining forces with various platforms to provide their respective users easier access to the financial supply chain solutions across the footprint – going beyond physical and digital borders.

“Partnership is a big part of our success. We have been collaborating with administrations and fintech companies in different regions to tap into opportunities that are beneficial not just to our clients, but also the business sectors as a whole. It helps to foster trust among the trade participants, with a view to driving digitalization progress, improving efficiency, reducing risks and facilitating trade finance.”

Besides going digital, BJ believes what fuels the business growth is the ability to collect and analyse data. “Data is going to be incredibly valuable asset to everyone. The ability to generate insights from the harvested data is deemed the most critical opportunity going forward.”

In a more globalized world where more companies are collaborating and competing with each other, their success becomes increasingly dependent on how well they orchestrate different business activities and manage different partners along the supply chain.

Here for Good: 1 Billion COVID-Financing Fund

Although some local SMEs are already showing signs of recovery, the Q2 2021 Standard Chartered SME Leading Business Index remained below the “bull-bear line” pointing to a stagnant market outlook. “98% of businesses in Hong Kong are SMEs employing 45% of the workforce. So apart from trade finance, we are also supporting them with a range of offerings from short-term loan, mortgage, 100% SME Financing Guarantee Scheme, etc.”

To combat the crisis, Standard Chartered has committed US$1 billion of not-for-profit financing to support companies helping in the global fight against COVID-19. Vinda Household Paper (China) Limited, for example, has received a US$23 million facility from the bank, making it the first company in Asia to benefit from the project. The company has used the funds to support the new face mask production lines at its existing manufacturing facilities in Zhejiang and Guangdong, enabling production of up to 7 million masks every month.

Sustainability Financing

To help create a more sustainable world, the bank has recently launched the Sustainable Trade Finance Proposition with a suite of products and services that will help companies implement more sustainable practices and build more resilient supply chains. Under the new proposition, the bank will offer better support and financing terms to the manufacturers that meet the sustainability standards, or for the retailers who carry out green sourcing along their value chain. Digital trade platform like ezTRADE, for example, can significantly replace paper consumption with electronic information exchange, thus helping to minimize impact on the environment and contribute to meeting companies’ own Environmental, Social and Governance (ESG) goals.

“Echoing our brand promise ‘Here for Good’, we are excited to help make global supply chain activities more sustainable, more inclusive and the world a fairer and better place to work and live.”