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Banks can help corporates to adapt to the changing world of trade

11/09/2019

As geopolitics and technology evolve, banks must support their clients. But to become truly valuable partners they will have to adopt a new mindset and learn to work together more effectively.

The headlines are full of news about trade wars between the US and China, increases in tariffs and the slowing pace of global trade growth. The reality is not quite so stark: overall trade continues to grow, albeit at a slower rate relative to economic growth than in the 1990s and 2000s. However, we are seeing an evolution in the nature of trade, and consequently trade patterns.

In the recent past, cost was the main determinant in most trade transactions. Now, other considerations – most obviously geopolitics – have become important. As a result, new trade corridors are emerging. Instead of trade between the US and China, there is a move to other Asian countries, for example.

These developments are occurring rapidly and are subject to sudden shifts.

Corporate treasurers need to stay abreast of changes and the erection of potential trade barriers. In many instances, companies need to ensure that the US market remains open to them and must therefore expand their political horizons and – from a treasury perspective – become more flexible.

 

An increased emphasis on self-service

Fortunately, technology has the potential to facilitate greater flexibility, as well as improve speed and efficiency. In the past, it took treasurers a long time to access information and implementing connectivity was cumbersome and costly. Now, treasurers increasingly want to do more themselves. Rather than relying on a phone call (and having to wait for a response), treasurers want immediate insights via a portal that gives them visibility and control across their global operations.

Indeed, innovations such as application programming interfaces (APIs) can enable treasurers to access information and make payments directly from their treasury management systems or enterprise resource planning systems – they do not even need to use their bank portal. New solutions such as SWIFT gpi can also provide full visibility of payment status and charges applied throughout the banking chain, so that calls to chase up payments become a thing of the past.

Banks need to invest in efficient real-time solutions that give treasurers the speed and agility to make quick, informed decisions. Most importantly, they need to ensure that the vast quantity of data they have on their customers is accessible and can be analysed to provide valuable insights to them. For instance, many treasurers may over time lose track of how many bank accounts they have worldwide or how many transactions are made from each: this creates risks and results in unnecessary costs. Banks have such information but need to make it easy for customers to access.

Banks also need to take account of changes in how corporate treasurers work; many travel frequently and need access to information and to be able to authorise and make transactions via their smartphones or tablets. Increasingly, treasurers also expect analytics capabilities to be accessible from their bank portal when they are on the move.

 

A new type of relationship between banks and corporates

The changing geopolitical environment and the growing importance of innovative technology to corporate treasury require banks not just to provide more information and invest in technology but to transform how they interact with customers.

Ultimately, banks need to move from being primarily service providers into a more advisory role, where their knowledge and experience are put to better use.

To do this effectively, banks will also need to change their culture and how they collaborate with third parties. Historically, most banks have mainly developed their own technology internally or in some instances failed to provide valuable services. Now, given rapid technological innovation, to retain their trusted relationships with clients, banks will increasingly open up their ecosystems to third parties such as FinTechs or partner with other banks to develop solutions. By working with partners, banks can accelerate time-to-market and enable customers to rapidly leverage the benefits of new products or technology such as artificial intelligence, machine learning and blockchain: the we.trade digital platform is a good example of this approach.

The world is undoubtedly becoming more complex. Many of the geopolitical certainties that have underpinned international relations and global trade for many decades are under pressure. To prosper in this new environment, corporate treasurers must help their companies become more agile and nimble. And the banks that support corporate treasuries around the world have an important role to play in helping them achieve these goals and deliver increased strategic value to their organisations.

 

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Deputy Head of Global Transaction & Payment Services Global Transaction Banking - Societe Generale