Transcript
Speaker: Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
Speaker: Make sure you're subscribed to stay up to date with new episodes.
Speaker: Thanks for listening.
Speaker: And now onto today's show.
Speaker: Welcome to TMI's Treasury Cast and HSBC's Cyboss Spotlight.
Speaker: I'm Eleanor Hill, editor of TMI, and I'm delighted to be working with HSBC to bring you an in-depth look at the events from this year's Cyboss.
Speaker: Throughout this series, we will explore the critical topics impacting the transaction banking landscape, specifically looking at sustainability, digitization, and innovation.
Speaker: We will examine the opportunities and the challenges disrupting the areas of payments, trade, custody and traditional business models.
Speaker: Well, another episode for you, and we've got another great pair of experts as well, namely Vinay Mendoza, who has just become Chief Growth Officer, Global Trade and Receivables Finance at HSBC, and Carl Wagner, who is CEO of Contour.
Speaker: So welcome both of you.
Speaker: It's great to have you here.
Speaker: And I'm sure our listeners have probably already guessed by now, by your mere presence, that we're going to be talking about the
Speaker: exciting and innovative world of digital trade finance.
Speaker: So we've got an awful lot to pack into this podcast and looking forward to hearing your insights.
Speaker: But it'd be great if we could kick off with maybe a bigger picture look at what's been going on over the last 12 months.
Speaker: So Carl, what have you seen going on in the world of digital trade finance?
Speaker: Has there been a big change that's really caught your eye?
Speaker: Has there been a particular milestone that you've considered to be really impressive?
Speaker: What's
Speaker: what's going on out there that our listeners should know about.
Speaker: Thanks for the opportunity to be here.
Speaker: Obviously, the last 12 months or the last 24 months, obviously, COVID has emphasized the fact that having the resilience of digitalization is one way to keep your business going.
Speaker: Yeah.
Speaker: And obviously, everyone has seen that.
Speaker: I'm hoping that the, and I don't see it, but I'm hoping that momentum doesn't slow down
Speaker: Now that people can actually travel and paper can be mailed again.
Speaker: But I think people have realized that that's a decision they have to make on digitalization.
Speaker: I think one of the milestones is we're seeing smaller, not only the global banks who have been getting together and thinking about this for a long time, we're also seeing smaller regional banks or even smaller domestic banks also seeing digitalization as a choice they have to make and choosing providers to work with.
Speaker: Yeah, absolutely.
Speaker: And yeah, so right on that.
Speaker: Hoping that we don't turn back on all of this digital progress that we've made and fingers crossed it will all press forward.
Speaker: Vinay, anything that you'd add?
Speaker: Any particular milestones that you've noticed?
Speaker: Absolutely.
Speaker: So for us, undoubtedly, it's been the rapid uptake of digital channels and tools by our clients.
Speaker: 88% of our transactions, Eleanor, are now initiated digitally by our customers.
Speaker: This was less than around about 50% a few years ago.
Speaker: The 88% milestone is something we're really delighted and proud about.
Speaker: But it's also we're really happy that clients are using the full range of the digital toolkit, right from things like net-based UI, UX solutions, host-to-host connectivity, Swift,
Speaker: And I'm sure we'll talk about blockchain and contour as well.
Speaker: Another milestone just worth considering since you mentioned 12 months was, you know, major trading nations in the UK, as you know, have now pushed for legislative change around embracing digital documents and digital title transfer.
Speaker: That's something that we've been supporting and we're really happy that.
Speaker: there is the legislative support that will lead to a wider uptake of this usage.
Speaker: Just a couple of points more is, I'd say that the pandemic no doubt accelerated this digital uptake.
Speaker: But to your point, we don't believe that clients will ever revert back to the manual modes prior to what it was.
Speaker: So we believe this will be the solution they take forward.
Speaker: And I think the reason for that is,
Speaker: While digital definitely helps with quicker and more efficient outcomes, but a big driver in the current environment is the increased supply chain resiliency that digital solutions can afford through the visibility, through the transparency, and the quicker kind of solutions they deliver, right?
Speaker: And for that reason, we believe that this is here to stay.
Speaker: And we've seen this also bear out through better client satisfaction levels as well.
Speaker: Great to hear.
Speaker: Yeah, I think people are realizing that there's so many benefits once you even scratch the surface.
Speaker: But that 88% VINAY, I wasn't even expecting it to be that high, to be honest.
Speaker: So it's fabulous to hear that.
Speaker: One of the other themes that's really been noticeable in the digital trade finance space over the last sort of 12, 24 months is
Speaker: has been that there's been so much more collaboration and also co-creation.
Speaker: So, Carl, tell us a little bit about why it's so important.
Speaker: Where do you think it's working well?
Speaker: What still needs to improve from a collaborative point of view?
Speaker: And also, where does Contour fit into this kind of collaborative co-creative picture?
Speaker: Yeah, that's a great question.
Speaker: Again, Contour was started with this collaboration concept in mind.
Speaker: Eight banks came together to do the first POCs and then decided to make it into invest and make it a commercial company.
Speaker: So we started that whole idea of collaboration.
Speaker: A consortium as a service is really how we started.
Speaker: But as we look to the future, we're focused on the trade finance process.
Speaker: aspects and working with banks and corporates, but global trade is a lot more than just trade finance.
Speaker: There's shipping, there's bunker monitoring, there's ESG, there's green financing, there's sanction checking.
Speaker: There's a lot of other areas of expertise, domains of expertise out there that we're never going to be able to manage.
Speaker: And there's no way we would like to try that.
Speaker: So collaboration with other partners is key to giving an overall
Speaker: much more robust experience for banks and corporates.
Speaker: And that collaboration, we used to talk about data inheritance about 20 years ago.
Speaker: Don't key in the data twice.
Speaker: People have been talking since blockchain started and enterprise blockchain started 2016 about does everything have to be on the same blockchain system?
Speaker: It actually doesn't have to be.
Speaker: It doesn't have to be all blockchain.
Speaker: It can be any system that can connect through APIs.
Speaker: It's an opportunity to exchange information
Speaker: and delight the customer where there's data fields that overlap and you want data updated.
Speaker: And that's really where we see the opportunity to collaborate and continue to build this global trade ecosystem, not just trade finance, but global trade ecosystem to be more transparent and efficient.
Speaker: Absolutely, that sort of interoperability point is so key, but I liked what you said about the fact that, you know, when you're collaborating, you don't have to be great at everything, you can do the piece that you're best at, and then that delivers the kind of best solution for the end customer.
Speaker: So Finney, anything you wanted to add to that one?
Speaker: Yeah, sure.
Speaker: I think, you know, with trade, it's clear that not just the banks and customers need to co-create, but also the customs, ports, regulatory authorities that come together.
Speaker: No single entity or industry can solve this problem or challenge independently.
Speaker: Right.
Speaker: So I think it's fantastic that we've seen the collaboration coming together.
Speaker: I'll also just take, you know, a second to just talk about co-creating with clients specifically.
Speaker: When it comes to trade, it's quite important to understand the different user personas in our clients' offices and their different needs, because we span right across procurement teams that manage suppliers.
Speaker: to the sales teams that manage customers of our clients.
Speaker: And therefore each of them takes away something different from the solutions that we deliver.
Speaker: And I thought maybe I'd talk to two examples of where we've benefited by co-creating with some of our customers today.
Speaker: So one was where we worked with one of the largest British multinational retailers and also with a leading French home improvement MNC to develop the LC, letter of credit application screens.
Speaker: As you can imagine, these are fairly complex instruments and trying to create a set of screens that are very easy to use is quite challenging, actually.
Speaker: So we started out by firstly mapping the user personas in these offices.
Speaker: So we realized that the shipping clerks, the account payable clerks, the financial controllers were the ones with the most pain points.
Speaker: So we use tools like Sketch to prepare proof concepts and we visualize the client journey with wireframes.
Speaker: We then gave it to the users and we follow this approach called ethnography and design thinking, where we observe how easy it is for the client users to use these solutions and wireframes without having to be trained on it.
Speaker: So we actually observe them and rather than ask them and we see how easily they found the solutions, how intuitive it was naturally.
Speaker: And then we iterate those wireframes almost in real time.
Speaker: so that we get to the best solution possible.
Speaker: So it really helps us kind of deliver an end product that we know is usable and needs customers' needs.
Speaker: And we're really pleased that some of the, one of the reasons that e-penetration was that 88% was because we could deliver and digitize some pretty complex journeys like the letter of credit application screen.
Speaker: Yeah, and make it just so user-friendly that, you know, almost anyone can do it.
Speaker: Yeah.
Speaker: Absolutely.
Speaker: And then another example maybe I thought I'd talk through was also co-creating with partners in this space.
Speaker: Probably seen we do have an arrangement with NetSuite where we have embedded our HSBC apps into the ERP journey so that customers can access our trade finance solutions as part of their journey, right?
Speaker: So to make it real, if a customer wants to pay an invoice,
Speaker: on their accounting or an ERP solution, as they're coming to that journey where they're selecting to pay the invoice, they could get an option to actually access HSBC Trade Finance in order to make that invoice payment.
Speaker: So we almost embed ourselves
Speaker: into that journey.
Speaker: And again, some of these solutions are only possible because we co-create with partners or with customers to be able to deliver them.
Speaker: Excellent Vinay, thank you for that.
Speaker: Karl, there was a point that I wanted to come back to you.
Speaker: Earlier you mentioned APIs and how they're essentially revolutionizing trade finance and the way it's delivered to corporate clients.
Speaker: So I'm just wondering, can you spell out for us in clear terms what's actually possible today with APIs within the trade finance world?
Speaker: And what are the practical benefits of these real-time capabilities, especially for treasury teams, for example?
Speaker: Absolutely.
Speaker: I mean, using APIs is a way for different systems, different ecosystems to transfer information, live time decisions made in one system and it's transferred to the other system, updating.
Speaker: It's allowing treasurers to, for instance, in Contour, an LC usually takes five to eight days to present.
Speaker: It usually can be done in an afternoon now.
Speaker: Now, all of a sudden, the treasurers have to think differently about how they plan for money.
Speaker: Before they had to plan, you know, it's plus or minus four days.
Speaker: I'll borrow the money now to pay.
Speaker: Now it's so very often, you know, with with data, with APIs, with connectivity.
Speaker: it's not necessarily paying earlier or later, it's the certainty of payment.
Speaker: What day do you have to plan for?
Speaker: And so it's not a zero-sum game that with technology, the buyer loses, the seller wins because they move faster.
Speaker: They can have more working capital efficiency.
Speaker: You can do more turns a year with that same credit line.
Speaker: You can plan better.
Speaker: So APIs and the ability to transfer information between systems and, you know, and that's an opportunity for different decisioning, being more efficient and working with your banks closer.
Speaker: And I think the last piece is what I've been looking forward.
Speaker: forward for the last 20 years I've been on this journey is the ability for banks to delight their customers with new products because you're going to have new milestones of data that can be verified.
Speaker: And you could look at risk in a different way.
Speaker: You could look at how to do payments in a different way.
Speaker: And that's a tremendous opportunity for banks to be able to do more, not just the traditional products, but to do more in the future when they have all these data sets.
Speaker: Absolutely.
Speaker: And on that note, Vinay, I believe HSBC has been sort of co-creating with Oracle.
Speaker: Is that right?
Speaker: That is correct.
Speaker: We embedded our solutions in Oracle's NetSuite solution.
Speaker: So customers can now quite seamlessly access HSBC capabilities as part of their journey within the NetSuite solution that they have.
Speaker: But, you know, if you just take a step back, I think, Eleanor, in this space, trade is happening in new venues, whether that's in
Speaker: marketplaces, e-commerce platforms, ERP systems, logistics platforms.
Speaker: And customers need us to offer our capabilities and embed them in these venues.
Speaker: And the only way to achieve this in a scalable manner is through APIs.
Speaker: So we've developed an API developer portal that is live
Speaker: So clients and partners alike can access that developer portal.
Speaker: They can see the technical specifications to over 50 APIs that we published that cover a set of journeys across our entire product suite.
Speaker: And we've seen an exponential increase in the number of API calls that we're getting across different partners and customers that we're engaged with.
Speaker: We've got about over 40 programs that are currently under implementation with new platforms or with new clients.
Speaker: So clearly, you know, the benefits that treasury teams see.
Speaker: through the seamless journeys, the real-time visibility, a kind of dashboard cockpit view that you get, as well as monitoring the risks are something that, you know, we see that this area is only going to further accelerate itself.
Speaker: Yeah, absolutely.
Speaker: Certainly echo that from the conversations that we have with treasurers from the TMI side.
Speaker: APIs are always up there.
Speaker: But for those listeners, Carl, who maybe are still considering APIs, haven't made that leap.
Speaker: Are there any drawbacks that they should be aware of?
Speaker: Specific barriers to entry?
Speaker: Are APIs more suitable for a particular size of corporate or a sector of corporate?
Speaker: What would you say?
Speaker: Again, we work with the banks and the corporates.
Speaker: And obviously, that integration into the back office, whether it's to an SAP or called the ERP systems, or into the bank back office systems, that's a bigger decision.
Speaker: And that's an investment that really only makes sense for the multinationals, for a smaller SME.
Speaker: And I think what we've seen in Contour, and we've
Speaker: scaled our system now to be available to SMEs because in the past, a lot of these digitalization opportunities were only available to, for the last 20 years, to the large corporates.
Speaker: That's why, but trade is big and small.
Speaker: And we see the opportunity to, with an SME portal, with just being able to give, offer our services at very low cost to SMEs,
Speaker: Now we can manage a whole transaction from beginning to end.
Speaker: So people can see that transparency.
Speaker: And so SMEs can use the system or even small banks can start with the web browser.
Speaker: It's perfectly fine.
Speaker: And it's an opportunity to get access to that information that you never had before.
Speaker: Once you...
Speaker: Once you do enough transactions, once you may, it's more common than maybe you look at integration.
Speaker: I think the key thing is to start learning how you're going to change your mindset, your decisioning and the opportunities based on having digitalization squeeze down some of that time.
Speaker: Yeah, absolutely.
Speaker: Don't be afraid to take those first steps as daunting as it might be because it's actually it's much easier once you get underway and there's an awful lot that you can learn quickly and also eventually implement fairly rapidly with APIs as well, which is a huge benefit.
Speaker: Now, Carl mentioned a key word there Vinay, which is decisioning.
Speaker: So I wanted to ask you a little bit about a different application of technology in terms of leveraging it for database credit decisioning.
Speaker: So sort of giving more instantaneous feedback on that.
Speaker: Tell us a little bit about the progress that's being made there.
Speaker: Yeah, absolutely.
Speaker: So I think what API is and it's a perfect segue have enabled is this ability to access data.
Speaker: both historic data as well as real live data to make better quality decisions.
Speaker: So we've invested in credit models and scorecards, which now allow us to take in a wide range of information to take some of these decisions.
Speaker: So for example, things like the internal ratings that our clients may have of their suppliers and buyers, or in fact, external ratings that you can get through partners like Euler Amies or others, Alliance, Alliance Trade as they're called now,
Speaker: Or you could get history, like the performance history of suppliers and dilutions in their payments, aging, concentration levels.
Speaker: All this is a goldmine of information that's needed when we put it through our digital decision algorithms.
Speaker: So we consume this through the API infrastructure.
Speaker: And then we're able to turn around credit decisions almost instantaneously.
Speaker: Yeah.
Speaker: Wherein in the past, we were relying on historic financial statements that kind of took us forever to, you know, it took weeks, months to take a decision.
Speaker: We now can do that in a day and get a much, much better quality decision, right?
Speaker: Yeah.
Speaker: It reduces our cost and time to serve.
Speaker: But more importantly, using this, we can, you know, access a wider scale of customers that
Speaker: because it takes lower kind of effort at our end and it's much faster to consume this data so we can actually serve more customers using this.
Speaker: What we are now working on is to leverage non-traditional data feeds from IoT devices, like where we can get actual information on where the goods are, where the ships are and containers are, and we're already consuming some of this
Speaker: and making it available to our clients through mobile apps as well.
Speaker: So long story short, there's been a significant uptake in the use of these kind of credit models and scorecards.
Speaker: And our risk underwriters have been very happy to kind of support certain programs, you know, for clients in different industries.
Speaker: So we see this absolutely scaling up.
Speaker: Excellent.
Speaker: And like you say, that IoT piece, so interesting as well.
Speaker: I'm just wondering, Vinay, if there are any other sort of real life examples of the benefits to clients of this data based approach that maybe you could share with us?
Speaker: Absolutely.
Speaker: So I'd like to give a couple of examples of kind of real-time benefits or real-life benefits to customers through this database decisioning.
Speaker: So one of them is we've launched a solution called Digital Receivable Finance.
Speaker: We worked with a fintech partner called Trade Ledger to do this.
Speaker: In essence, what we do is an SME client can consent to share their sales ledger from their ERP system with us through a simple click of a button.
Speaker: that data comes through to us and we run it through a digital decision algorithm.
Speaker: So that algorithm really holds the years and years of expertise and IP that our risk underwriters have.
Speaker: We've been able to convert that into this algorithm.
Speaker: It takes the data and it spits out an approved, a decline or a manual intervention decision almost instantaneously.
Speaker: Just so you know, traditionally this process of approving a facility for receivable finance
Speaker: could take almost months, three to four months.
Speaker: There would be physical visits, paper would move up and down.
Speaker: We're now able to do that very, very instantaneously.
Speaker: And in less than a week, we can go from approaching a customer, getting them to consent to settle this information to actually making an offer to them.
Speaker: This is now live across all our key markets and we're actively commercializing it across a range of different ERP systems to use this data and offer receivable finance facilities.
Speaker: So that was one example.
Speaker: The other is an example that I wanted to share from our client, McCain Foods.
Speaker: So you probably know McCain Foods is a Canadian multinational in the frozen foods industry.
Speaker: It's a leader in this space.
Speaker: And the solution we've done is working with McCain is we've helped a potato farming company in China to get funding ahead of the growing season, right, when they need it.
Speaker: So the supplier typically needs this financing to buy seeds, lease land.
Speaker: tend crops in order to fulfill their contracts, right?
Speaker: So that's the kind of client need we are servicing.
Speaker: What we've done is using these digital decision process, what I just described, we're now getting access to the supplier's performance, their past history, as well as live information
Speaker: And we're able to actually kind of complete drawdown.
Speaker: So we accelerate the credit approval and we can kind of do a drawdown in a matter of just few days after they submitted its loan application.
Speaker: So in this particular case, for that potato farmer, we were able to get drawdown within three days of them submitting in the application and the documents.
Speaker: Normally that process would take three months, right?
Speaker: So this is the kind of agility that we're supporting and evolving needs
Speaker: for our clients' customers in the supply chain.
Speaker: And it really talks a lot to the resiliency of the supply chains that our customers are looking to build and kind of getting this level of data and being able to stern around those digital decisions is quite critical to be able to have for them to scale up.
Speaker: Absolutely.
Speaker: And that kind of agility at a time of, you know, such macroeconomic uncertainty and hardship for a lot of suppliers is going to make a huge difference for people.
Speaker: So fabulous examples, Ebene.
Speaker: Thank you so much for that.
Speaker: I'm conscious that we've covered an awful lot in this podcast already.
Speaker: Some great insights from you both, but I'm just wondering if we could leave our listeners with a few little action points.
Speaker: So
Speaker: Carl, what steps do you think corporate treasurers should be taking to make the most of this increasingly digital trade finance environment?
Speaker: What would be your suggestions to them?
Speaker: I think really just one thing, start.
Speaker: If you don't start, you won't learn.
Speaker: It's a learning process.
Speaker: Technology is always going to be iterations and getting better and better.
Speaker: That first app we had on our phone that checked bank balances, if everyone said, I'm not going to use this toy, I can transfer in 22 currencies and different effects...
Speaker: no one, it wouldn't have progressed, right?
Speaker: Technology is always a journey.
Speaker: So I think it's an opportunity for CFOs to think about where do I start?
Speaker: Where do I start with a certain corridor?
Speaker: Do I start with a certain buyer-seller pair where they're also interested in digitalization?
Speaker: And we can learn.
Speaker: That division can teach other divisions.
Speaker: So it's going to be a process.
Speaker: And I think the last thing is,
Speaker: Don't choose the hardest thing to solve first.
Speaker: Because very often they say, digitalization is great.
Speaker: I have this one customer, one transaction a year.
Speaker: Could you help me with that?
Speaker: And I'm thinking, well, that automation for one customer, that doesn't match.
Speaker: What are the other thousand transactions you do?
Speaker: Why don't you try working with something that has some volume where you see the actual benefits rather than automating a single transaction?
Speaker: So find a corridor, find a partner to work with.
Speaker: And I think all of us, you know, in from the banking side, from the fintech side, we're here to help them on the journey.
Speaker: Absolutely.
Speaker: Yeah.
Speaker: Just get started.
Speaker: Great stuff.
Speaker: And Vinay, your final thoughts?
Speaker: Sure.
Speaker: So I think from, you know, from what we're seeing is maybe a few years ago, if we had to do this, we would have said,
Speaker: initiate the digital kind of, you know, embracing digital, etc.
Speaker: But I think almost all the clients we speak to are already along that journey.
Speaker: And I think, like I said earlier, the imperatives around building resiliency in their supply chains, and adopting new business models, especially e commerce models to access bigger markets for growth is critical, right?
Speaker: I'd say the most successful ones, and these are the clients who kind of tell us where they think they've got it right, I think is whenever they're looking at digital solutions to come at it across the enterprise, right?
Speaker: So to take along the stakeholders within the company that could benefit from these digital adoptions.
Speaker: So for example, in supply chain finance, making sure the procurement team is fully engaged.
Speaker: As an example, the credit control teams typically are engaged in matters related to
Speaker: kind of on the sales growth side.
Speaker: So if we were doing a receivable finance solution and increasingly now on almost any solution we discuss bringing in their sustainability leads, their technology leads is something that, you know, we've seen happen right through.
Speaker: So I think thinking about digital solutions across the enterprise is quite important.
Speaker: I think the second thing to state is
Speaker: like firms like McCain, which we just referenced, is to think even beyond your enterprise.
Speaker: Think about your ecosystem.
Speaker: Think about what your supplier or what your buyer is going to need and what factors affect them.
Speaker: Because the success of your digital solutions are also predicated on how kind of your ecosystem subscribes to those same digital solutions.
Speaker: So I think, again, we see the most successful
Speaker: digital use cases are those where they think right across their entire ecosystem.
Speaker: And then absolutely think about solutions that help with visibility, your agility, so which help you change and diversify suppliers, et cetera.
Speaker: And, you know, customers are constantly, as we know, upgrading ERP systems.
Speaker: And I think it's important every time they do that, they think about, you know, how will that impact digital trade?
Speaker: But I tend to agree with Carl.
Speaker: absolutely start somewhere, think enterprise-wide and really come along on this journey.
Speaker: Brilliant stuff.
Speaker: And there's so many solutions out there now for clients as well.
Speaker: And it's very exciting.
Speaker: So thank you both ever so much for joining us and for sharing your insights, giving us a great update on the progress that's been made and the opportunities that are out there still to be had.
Speaker: It's much appreciated.
Speaker: This has been HSBC's Cyboss Spotlight, a podcast mini series produced especially by TMI for HSBC Global Viewpoint.
Speaker: To discover other episodes in this series, search for HSBC Global Viewpoint on Apple and Spotify, or head to gbm.hsbc.com forward slash cyboss, where you can also find out more about HSBC's transaction banking insights and presence at Cyboss.
Speaker: Thank you for listening.
Speaker: Thank you for joining us at HSBC Global Viewpoint.
Speaker: We hope you enjoyed the discussion.
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