Turning Data into Working Capital through Digital Trade Financing to Fuel a Sustainable Finance Ecosystem
While small-and-medium-enterprises (SMEs) show signs of growth as local consumption bounces back, their cash flow remains tight because of the extended payment terms for clients. To improve liquidity, some owners take money out of their own pockets or acquire high-interest loans. Having to handle hundreds of invoices and receipts every month, SMEs, especially in the fast-moving consumer goods (FMCG) and food & beverage (F&B) sectors, often cannot afford to spare manpower to apply for trade financing from banks – a process which is usually time-consuming and tedious.
For this reason, DBS Hong Kong identified GS1 HK as a strategic ecosystem partner to collaborate on an on-demand digital trade finance solution. By making use of financial technology innovations, this solution redefines the trade financing journey for SMEs with DBS availing financing through a streamlined credit assessment process. SMEs no longer need to submit extensive documentation to banks, and can access working capital with just one click via the bank’s corporate electronic banking platform, DBS IDEAL, and enjoy same-day disbursal.
Clearing obstacles for SMEs’ financing
Aimed to facilitate SMEs’ loan journeys, the partnership is built on DBS’ digital infrastructure including its predictive analytics capabilities, which is integrated with GS1 HK’s B2B e-commerce platform ezTRADE. The ezTRADE SME users can authorise DBS to make use of the trusted historical data on the platform to make credit assessment. Once the trade finance line is approved, using ezTRADE’s dynamic trade data, DBS will be able to calculate the SME’s current outstanding invoice amount and determine the amount available for financing, which is refreshed daily. SMEs no longer need to submit hundreds of invoices per month to the bank based on their daily business operations; this digital trade financing solution delivers a hassle-free and paperless solution by relieving SMEs from repetitive documents submission. What’s more, this trade financing solution offers flexibility to SMEs by allowing them to only draw on the financing amount that they need, thereby reducing the need to bear unnecessary interest unlike a longer term loan.
Usually, it is not common for FMCG / F&B SMEs to seek invoice financing because both the banks and SMEs would find it time-consuming to handle the tons of invoices involved. Alex Cheung, Managing Director and Head of Institutional Banking Group of DBS Bank (Hong Kong) Limited, said, “With the help of financial technology, we can streamline the processes, understand the scale and growth potential of clients and offer them with a suitable trade finance solution. More importantly, SMEs can access working capital for daily operations simply by using trade data, which greatly reduces costs.”
A few companies requested for the service when it was launched.
"The digital trade finance service helps SMEs open up new funding sources and ensure ongoing cash flow for business. This is built on the predictive analytics approach by DBS with the use of the trade data on GS1 HK’s platform, enabling DBS Bank to evaluate individual company’s financial health and offer the most suitable trade financing option, which in turn minimises our risk of bad debt."
Digital as Usual Drives Business Innovations
The global pandemic has accelerated the need for SME’s digital transformation. This was echoed in the latest DBS Digital Readiness Survey which revealed SMEs’ top three priorities for digital investment are sales and distribution channels, trade and supply chain finance and procurement.
Having been named the “World's Best Bank” and “World's Best Digital Bank” by Euromoney in 2021, DBS Bank is committed to providing a broad range of digital financial services for SMEs. This includes online business account opening as fast as three working days, real-time tracking of cross-border collections and seamless integration of DBS’ banking services into companies’ ERP systems.
"With constrained resources, SMEs usually require support from numerous experts to facilitate their digital transformation and growth journey. Our DBS team aims to be a one-stop shop for SMEs’ digitalisation journeys – offering a multitude of ‘mobile-first’ solutions while delivering a convenient and seamless banking experience. This enables our customers to focus on their core businesses."
Boris Chan, Managing Director and Head of Global Transaction Services, Institutional Banking Group, DBS Bank (Hong Kong) Limited
Business Hub for Insights & Inspirations
Since 2016, DBS BusinessClass – the bank’s regional community for startups and SMEs – has helped businesses acquire market intelligence, business knowledge and industry trends to create new opportunities and stay competitive.
Mr. Cheung commented that the programme has connected over 56,000 members in Hong Kong and 250,000 members across DBS’ key markets. “DBS BusinessClass has collaborated with different associations in Hong Kong to accelerate the digitalisation of SMEs’ day-to-day operations. As Asia’s Best Bank  equipped with strong regional market experience, DBS is proud to have been the jumping board for HongKong’s SMEs to expand into the South East Asian markets and tap into regional opportunities”.
Ecosystem Partners Root for SMEs
Recognising the benefits of ecosystem collaboration, DBS has formed an ecosystem partnership team that identifies quality collaborators to co-create diverse products like trade finance solutions, as well as organise business matching & exhibition events to create opportunities for SMEs’ growth. GS1 HK is acknowledged as one of the strategic partners.
"This digital solution was borne out of DBS’ ongoing commitment to meeting our SME customers’ needs in new and innovative ways. By leveraging digital ecosystems, we are pleased to be able to enhance the SME customer journey further by providing trade financing via a digital ‘one click’ transaction experience. Through our collaboration with GS1 Hong Kong, we have the ability to use alternative platform data to give us visibility on an SME’s health and support their working capital needs."
Sandy Tan, Executive Director and Ecosystems Head of Institutional Banking Group of DBS Bank (Hong Kong) Limited
Steering Towards Sustainability
Harnessing innovations and sustainable solutions to support companies, DBS has taken a leading role in green development across the banking industry. The bank has raised its sustainable finance target to SGD50 billion (~HKD280 billion) by 2024, of which DBS Hong Kong has contributed HKD24 billion towards in 2021.
In 2022, DBS was awarded the top spot of Debtwire Asia Pacific’s (excluding Japan) loans league table for green and sustainability-linked mandated lead arranger. The bank has doubled down on its commitment to providing sustainable financing or green loans to companies of all kinds – whether in Hong Kong or internationally. By co-creating this digital trade financing solution with GS1 HK, DBS will take paperless to the next level, empowering SMEs with greater competitiveness through a digital and sustainable model.
As shared by Mr. Cheung, Hong Kong’s SMEs have long been renowned for their agility and ingenuity. He therefore encouraged the SME community to keep a close eye on market changes, as well as an open mind towards new ideas, and remain focused on their path to pursuing digitalisation and sustainability, which in turn shall sustain their competitiveness and growth.
 DBS Group was recognised as “Asia’s Best Bank 2020” by Euromoney.