Thursday, 1 February 2018

CHAIRMAN'S MESSAGE - Sean Edwards, ITFA Chairman / Head of Legal at SMBC

Dear Members and Friends,

It is no secret that the world economy, and therefore trade, is gaining traction. Economic data points have been indicating that this has been the case over the past 12 months or so. And recent central bank activity by the US Federal Reserve is testament to this. The momentum in global activity has spilled over onto 2018 from what has been a year of transition. In the IMF’s recent World Economic Outlook Update, it therefore comes as no surprise that the forecast for the world economy’s growth in both 2018 and 2019 has been revised upwards to 3.9 percent. The Asian Development Bank has reported a fall in the trade gap down to “only” US$1.5 trillion. Whilst unsatisfied demand remains enormous, and new technologies are just starting to make a dent, the trend is on the right course.  

Emerging markets began the New Year as they started off, in a strong vein, but the weakness brought about from rising benchmark yields in the US crept in. Having said that, demand for emerging markets remained robust and is expected to stabilise, with premiums rising albeit slightly from current levels. As had been expected, following the strong show in emerging markets in the past 18 months, the sharp correction witnessed of last year was far from inevitable, and spreads could widen in a much smoother fashion. Further growth of interest rates in the US will inevitably translate into higher borrowing costs for EM issuers, and could also, in the long run result in a slowdown in activity but this does not necessarily have to be a sharp and panic-inducing process.

Registrations to the 45th ITFA Annual Conference have started to flow in. We encourage you to register and take advantage of the Super Early Bird Package which is available till mid-April. Cape Town awaits us - a coming-together of cultures, cuisines and landscapes. The members of the ITFA Board are extremely keen to welcome you to this fantastic coastal city in South Africa.

In this edition of the 2018 ITFA Newsletter you will find an article written by André Casterman, the very active chair of our Fintech Committee, entitled ''Collaborating with Fintechs does not mean taking risks, quite the contrary’’. James Collins has contributed ''The Updated Wolfsberg Principles 2017 – now called the ‘Wolfsberg Group, ICC and BAFT Trade Finance Principles''. We also publish a  notice concerning the establishment of an ITFA Insurance Related Think Tank (IRTT) to supplement the Insurance Committee’'. Our regular feature - Chart of the Month, contributed by Dr. Rebecca Harding of Coriolis Technologies Limited provides an interesting read titled ''Re-focus on UK services’’.

We look forward to hearing from you with any feedback you may want to share with us by sending an email to myself, any of the Board Members or to our general email, info@itfa.org.  

Best wishes,
Sean Edwards


COLLABORATING WITH FINTECHS DOESN'T MEAN TAKING RISKS, QUITE THE CONTRARY by André Casterman, Chair, ITFA FinTech Committee and Founder, Casterman Advisory

There are various ways for financial institutions to benefit from advanced technologies and business models provided by so-called FinTech's. For those still hesitating to make the step, one approach is to start collaborating with FinTech's that help them in a non-intrusive, incremental way thereby limiting business risks. For those who are more bullish, taking stakes in handpicked FinTech companies will be the way to go, albeit riskier. Whichever way, collaborating with Fintech’s will drive transformation and accelerate change.

The Bank - FinTech collaboration is the way to go

Whereas most of the early FinTech talks spurred fears of so-called imminent disruption, a change in mindset occurred in 2017 as most FinTech's realised that the shortest path to revenue generation is to partner with banks rather than compete against such established and trusted institutions. Over the last 2 years, multiple deals between banks and FinTech's have been announced demonstrating not only the viability but also the strategic importance of such collaboration. In the payments space, examples include Standard Chartered Bank’s and Santander’s investments in blockchain-based global payments network Ripple. In trade financing, examples include HSBC’s stakes in TradeShift and Kyriba as well as DZ Bank’s and DB’s stakes in TrustBills.

Whilst such "collaboration" comes as a change vs. the early days, it is actually not new at all. Financial institutions have been using third-party software solutions for the last 5 decades. What is really new with FinTech's is that incumbent institutions can now easily take advantage of very advanced ways to drastically improve or, when desired, to re-invent their businesses. The “FinTech – Bank” deals led by some banks aim at taking bold moves to deliver serious growth opportunities. Making it happen is however easier said than done. Let's focus on execution.

Options for banks to work with FinTech's

To keep it simple, let’s consider two collaboration options as per Figure 1:

·         Option 1 - Incremental. In this first prudent approach, banks take advantage of FinTech propositions to improve or extend their existing and proven business models. Benefits for banks include incremental product enhancements, increased operational efficiency, reduced costs and improved user satisfaction. In this case, FinTech propositions are usually software solutions introducing technologies that co-exist with legacy systems. Collaborating with such Fintech's is low risk given the absence of impact on existing business models and practices. Also, as some FinTech technologies integrate very smoothly in legacy environments using non-intrusive IT techniques, short time to market is to be expected on top of earlier listed benefits. This first option offers a path to major efficiency increases and product enhancements whilst minimising risks.

·         Option 2 - Radical. In this second approach, banks partner with FinTech's who have invented and own a new business model. Banks do this when they realise important changes in client expectations and behaviours are happening and that business practices are being disrupted by Fintech's. In order to embark on such FinTech adoption path, banks need to have a bullish ambition (1) to get into new markets such as additional geographies and/or underserved client segments and (2) to embark in new business models and practices (e.g., joining a market place). Such FinTech platforms usually aim at connecting all participants involved in complex business transactions, so as to enable specific features such as auctioning, multi-banking, escrow service, title registry, transaction tracking, ... Assuming the bank's risk appetite is as high as the RoI of the prospective opportunity, banks will consider taking a stake in their chosen FinTech partner. This helps them be part of the governance and benefit from growing valuation of the FinTech company itself. It sometimes offers dividend payments as well.

Figure 1 illustrates both "Incremental" and "Radical" options whilst Figure 2 provides more details on key differences between both approaches.


Figure 1. Path to Bank – FinTech collaboration

The majority of financial institutions being risk averse, they favour taking an incremental approach which is described above as the low-risk Option 1. Figure 2 outlines key differences between both options:


Figure 2. Key differences between both FinTech adoption options

 

Given the strategic importance of the matter, some banks started to industrialise the "Radical" approach. A recent example is Standard Chartered Bank's new business unit called SC Ventures which will lead digital innovation across the Bank, invest in FinTechs companies and promote rapid testing and implementation of new business models.

As Michael Gorriz Group Chief Information Officer of Standard Chartered Bank said: “As new technology continues to play an ever more important role in banking, there is a huge opportunity for us to promote more innovation, and at the same time develop and deliver digital solutions that work for our clients and for us.”

Whether favouring the Incremental or Radical approach, one business area where such Bank – FinTech collaboration delivers tangible and immediate benefits is related to Data Management. As Alec Ross, Futurist and Author puts it in his recent book: "Data is the raw material of the information age". Financial institutions that fail to take advantage of their client transaction data miss a huge opportunity to match emerging client needs. They ought to understand that data represents a new type of economic asset feeding top management decision making. As the nature of innovation is changing, data becomes a decisive factor in the success or failure of businesses.

 

The new ITFA FinTech will guide you through the FinTech landscape

At a Board Meeting which took place in September 2017, the ITFA Board identified the future impacts of FinTech innovations on the receivables space and decided to set up the ITFA FinTech committee.

The ITFA FinTech committee is starting its activities in Q1 2018 and will organise educational opportunities for ITFA members to discover the various options to take advantage of FinTech propositions. The potential FinTech impacts on payments and trade finance are expected to be huge, so information on new technology options, improvements in business processes and new business models are paramount for transaction bankers to face the wave of change.

Resourced with representatives from FinTech companies and banks, the ITFA FinTech committee will act as a neutral forum for the ITFA membership to keep abreast of FinTech innovations impacting the trade finance and risk distribution spaces. It will focus on four key market-level themes: Collaboration, Platforms, Infrastructure and Data.

We hope the ITFA FinTech will become a venue for the ITFA membership to debate common issues and grow their understanding of FinTech propositions impacting the trade receivables space. A FinTech panel as well as other educational opportunities will be available at the ITFA 45th Annual Conference that will take place in Cape Town between 4-6 September 2018.

Members of the ITFA FinTech committee

ITFA FinTech Committee Chair
·         André Casterman, Casterman Advisory

ITFA Board Members
·         Paul Coles, HSBC (ITFA Board Member)
·         Sean Edwards, SMBC (ITFA Chair)

Banks
·         Adeline de Metz, UniCredit
·         Daniel Rymer, Mizuho Bank
·         Farah Shaikh, Crown Agents Bank

Platform providers
·         Ka-Kit Man, CCRManager
·         Johanna Wissing, LiquidX
·         Markus Wohlgeschaffen, TrustBills



THE UPDATED WOLFSBERG PRINCIPLES 2017 - NOW CALLED 'THE WOLFSBERG GROUP, ICC AND BAFT TRADE FINANCE PRINCIPLES' by James Collins

A personal comparison and commentary by James Collins, currently working as Senior Manager, Trade Finance with Bank of Ireland and member of the ITFA Market Practice Committee.

A collaboration between the Wolfsberg Group, ICC and BAFT led to two years’ work aimed at making the 2011 Wolfsberg Trade Principles not only more up to date, but also more accepted and adopted by a broader audience than was previously the case. The revised Principles were published in January 2017.

My notes, originally prepared for my own benefit, comparing the new Wolfsberg Principles against the 2011 version can be found in the Members’ Section of the ITFA website.  However, I would encourage all Trade Financiers to take the time to read the full version of the new Principles if you can.

A possible perception of the old Wolfsberg Principles was that it applied only to the larger, global trade banks.  In considering an update, it was deemed that most Financial Institutions would be more likely to take up the guidance if the ICC was involved.  The input and involvement of BAFT would of course add greater geographical scope and relevance too.  The result should be seen as more universally applicable guidance than before.

In the Foreword to the 2017 Principles, the authors highlight that the core principles have not changed.  Neither have the responsibilities of the banks involved in international trade to meet all of their Know Your Customer requirements and have good knowledge of the business they are conducting.  Banks must still adhere to all relevant regulations on Money Laundering, Terrorist Financing, Bribery and Corruption, Sanctions etc.

What they have focused on is providing more detail concerning risk mitigation and the challenges and limitations faced by the banking community are also covered.  Recommendations are given to policy makers, law enforcement agencies and so on, regarding what actions need to be addressed to help FIs meet their obligations.

Having studied the new Principles, the changes are subtle more than dramatic, yet effective in their subtlety nonetheless. They are written to assist and guide FIs to manage the current obligations and interpretations made on Trade Finance business.  Pragmatically, the Principles accommodate the current compliance view of trade finance and its treatment as a high risk business.

The way the Principles are now set out and divided into the various sections and topics make them a lot easier to read too.

The Principles are split into two sections:  The Core and Appendices.
The Core itself is divided into four parts: introducing the Core; Control; Escalation; Glossary.

Under these headings, such topics as: Parties in Trade Transactions; Financial Crime Risks; National and Regional Sanctions, Embargoes and the Non-Proliferation of Weapons of Mass Destruction (NPWMD); Challenges; Recommendations; Customer Due Diligence; Name Screening; Activity Based Financial Sanctions; Export Controls; Limitations; Three Lines of Defense are covered.
The Appendices cover the application of the Principles in respect of: Documentary Credits; Bills for Collection; Guarantees and Standby LCs; Open Account.

We have all experienced first-hand the ‘world of compliance’ in the six or so years since the Wolfsberg Principles was first published. In summary, I think the new Principles are much more clearly set out and they give fuller and better guidance in key areas than previously.  Smaller banks can feel more included and that the Principles are equally applicable to them as they are to the larger banks.  I think the involvement of the ICC and BAFT has complemented the good work of the Wolfsberg Group and you can sense this collaboration in the more accessible style these Principles now have.  Previously, although I might have agreed with the sentiment of the 2011 Principles, I feel that the new update gives clearer guidance and is less subjective.   Practitioners now find more direction on how to navigate this ‘new world’.   Indeed, a key benefit the new principles have over the earlier version is time; by this I mean they are more considered and therefore arguably more appropriate for the trade finance industry today.

I understand the Group is also quite advanced with principles covering Open Account and FI Refinancing.  From the Work the group has done on the Trade Finance Principles, I anticipate that guidance on these further topics will be equally as applicable, clear and helpful.

James Collins, ITFA Market Practice Committee member. 


Disclaimer:  The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

NOTICE CONCERNING THE ESTABLISHMENT OF AN ITFA INSURANCE RELATED REGULATORY THINK TANK (IRTT) TO SUPPLEMENT THE INSURANCE COMMITTEE

We are pleased to announce that the Insurance Committee has established an Insurance Related Regulatory Think Tank.  The Think Tank’s objective is to clarify and build the right space for the credit insurance product as a proper Credit Risk Mitigant viz. the regulation applicable to Banks.

To achieve that objective the Think Tank will:
  • gather information with a view to compiling a library of information on regulatory topics to be available to ITFA members. This information will be made available on the ITFA website. As a starting point ITFA’s Guidelines on structure and content for CRR compliant non-payment insurance policies is available here
  • act as a resource point for exchange of information between members
  • act as a conduit for dealing with relevant member queries by keeping any queries anonymous and circulating to members for feedback.
The Think Tank would welcome the support of ITFA members and would welcome any contributions that members may have in particular:

1) by providing information (articles, useful websites etc...)  to be considered for inclusion in the ‘library’

2) identifying insurance regulatory topics or queries for consideration by ITFA

3) sharing with the Think Tank, which other organisation ITFA should reach out to, to work on credit insurance / regulatory topics.

Communication with the Think Tank can take place via emailIf preferred your communication will be forwarded in an anonymous way by the ITFA secretariat.

For any further questions, the members of the Regulatory Think Tank are:
  • Carol Searle from Texel Finance
  • Juliette Barre from XL Catlin
  • Huw Owen from Liberty Specialty Markets
  • Cengizhan Kaptan from Raiffeisen Bank International
  • Sebastien Heurteux from BNP Paribas

NEW ITFA MEMBERS

TradeIX Limited is a ''Network of Networks'' open platform for trade finance, focused on low-cost transaction execution in a highly-secure environment by connecting pre-approved parties through APIs and leveraging blockchain technology.

TradeIX has a strategic partnership with R3 and their leading blockchain protocol for the financial services industry, Corda. TradeIX is also a member of the Linux Foundation and work with the Hyperledger consortium.

Mr. Richard Tynan will be the main contact person for all ITFA related matters.

Aon Credit International is a leading insurance broker. Working with both corporations and financial institutions their specialist global team provides innovative credit solutions for non-payment and investment risks. 

For corporations, they focus on helping clients use insurance and guarantees to improve working capital across payables, receivables, guarantees and investments. 

For financial institutions, the team is passionate about leveraging credit, political risks and surety insurer capacity as alternative distribution methods. In an evolving and complex regulatory environment, whether the driver is managing credit risk, credit concentration or capital optimisation, their Structured & Capital Solutions team has experience - across multiple finance product lines - of creating solutions for both single transaction and portfolio coverage. 

Mr. Aaron Bailey will be the main contact person for all ITFA related matters.

International Bank Liberia Limited is a commercial bank licensed and operating under the laws of the republic of  Liberia and providing full fledge commercial banking services to the Liberia public. These activities include, but are not limited to providing commercial loans and overdrafts, international remittances and trade finance by the issuance of letters of credit and guarantees.

Mr. Henry Saamoi will be the main contact person for all ITFA related matters.

CHART OF THE MONTH by Dr Rebecca Harding, Coriolis Technologies Limited

Chart of the month - Re-focus on UK services

In February 2017 the UK’s Office of National Statistics issued a warning about the UK’s fabled trade surplus in services. The ONS stated that it had been looking at pullicly available data, most notably available from the United Nations, provided different data on trade in services to that calculated by the UK government. It argued that the data from other countries, suggested that the size of the UK’s surplus may be considerably smaller than has been assumed to this date.

The ONS has a point. If you look at publicly available international data, it does seem that the data is inconsistent. Germany, for example, says it exports twice the level of financial services to the UK than the UK says it imports from Germany.

The only way round this problem is to reverse the flows and take an average which, using AI techniques, is weighted in favour of the better reporting country historically. This still produces surpluses with the world in business and financial services (Figure 1). However, the UK has deficits in all other service sectors except pensions. At an individual country level, the UK has a deficit in financial services with Germany. 






Sunday, 7 January 2018

CHAIRMAN'S MESSAGE - Sean Edwards, ITFA Chairman / Head of Legal at SMBC

Dear Members and Friends,

On behalf of the ITFA Board, I would like to take this opportunity to wish you all a very Happy New Year and all the very best for 2018. May the year ahead bring good health and peace.

As I write this message, the ITFA team is compiling a list of scheduled events for 2018. The 2018 Events Calendar can be viewed on our ITFA website and will be updated on an ongoing basis. Click here to find out more information about the various events being organised during the course of the year.

How can I fail to mention our flagship annual event - the 45th ITFA International Trade and Forfaiting Conference which will be held in Cape Town, South Africa between 4-6 September 2018. The conference itself will then take place over two full days on Wednesday and Thursday. Our unmissable Gala Dinner will take place on Wednesday night. The programme is being worked on and will include sessions on focused, relevant market issues including developments in fintech, documentation, supply chain finance and insurance, from both a regional and global perspective. So take advantage of our Super Early Bird price available until 15th April and register here.

Emerging markets registered a positive year in 2017, driven by a small rebound in commodity prices, the stabilisation of fundamentals, ongoing global and EM economic recovery, as well as a geopolitical environment whereby the US, led by the infamous Trump, North Korea, China have been market-friendly. It has been a struggle to find an asset class, an economy which surprised to the downside, but there have been 2 economies which struggled in particular for very different idiosyncratic factors, and these are Turkey and Venezuela.

Research suggests that economic data surprises in EM are moderating, meaning that the growth that has been registered in 2017 may be mostly priced-in by now. Additionally, the disinflation we have seen in several EM countries in 2017 (Brazil, Russia, Colombia, etc.) is unlikely to extend into 2018 as the base effects fade away and the bulk of policy rate easing in EM is behind us. All in all, it is difficult to have repeat of 2017, but in the absence of any tail risks, such as US economic policy and the Fed, China, geopolitical risks and EM elections, EM could well register decent economic flows in a year of consolidation.

In the very first edition of the 2018 ITFA Newsletter one can read an interesting article written  by Shannon Manders, GTR, titled ''ITFA sets up a Young Professionals Panel, Aims to address Skills Gap’’. Johanna Wissing from LiquidX contributed an exciting article titled ''Paving the way for the future of Trade and Working Capital Finance’’. One also finds the regular feature: Chart of the Month contributed by Dr. Rebecca Harding of Equant Analytics – ''Trade in 2018: where politics and economics collide''.

May I take the opportunity to thank all associates, partners and sponsors for their support in 2017. Should any of our members wish to contribute to our website, and become website sponsors, please send an email to alexiavella@itfa.org. Your contribution is highly valued.

We look forward to hearing from you with any feedback you may want to share with us by sending an email to myself, any of the Board Members or to our general email, info@itfa.org.  

Best wishes

Sean Edwards

Thursday, 4 January 2018

ITFA SETS UP YOUNG PROFESSIONALS PANEL, AIMS TO ADDRESS SKILLS GAP by Shannon Manders, GTR

The International Trade and Forfaiting Association (ITFA) has expanded its Young Professionals network through the creation of an advisory panel, chaired by Johanna Wissing.
Wissing, together with Duarte Pedreira, who joined the ITFA board in September as head of its Young Professionals initiative, are now in the process of appointing the remaining members of the panel.
Wissing tells GTR that the panel will include a “good mix” of individuals from different institutions, bringing together people with a few years of experience in the trade finance industry and those who are newer to it.
The panel is an extension of the Young Professionals network, in that, as board member, Pedreira will drive the wider strategy for the initiative, but that the panel members will execute the finer details in relation to specific events, projects and programmes.
To begin with, the panel will focus on London-based educational and networking events – both of which will be aimed at career development.
The looming trade finance knowledge gap is at the heart of what ITFA – and the panel – are aspiring to address.
“The trade finance world is a mature sector, and therefore you deal with quite a lot of people that have been around for a long time. Eventually, at some point, they’re going to leave, and so we’re now edging towards there being a danger of a skills gap,” explains Wissing. “One of the reasons for that is because people in the trade finance sector have grown organically within it, because it’s a very enjoyable space to be in. There wasn’t really any room for new entrants for a while, because there were enough people with that specialist knowledge.”
Technological disruption within the trade finance industry is further necessitating the importance of driving more young people into the space. “I think it’s good to get fresh pairs of eyes who can work with the experienced people to see how change can be driven for the industry,” she says.
ITFA’s aim is to be at the forefront of championing this initiative for the industry. “We hope that the creation of the advisory panel will help to create sufficient critical mass and resources to really drive things forward,” says Wissing.
ITFA’s Young Professionals network has been a few years in the making, but the association’s commitment to the cause was cemented when it appointed a board member dedicated to the initiative at its 2016 annual conference in Dubai. Chris Hall, was initially drafted in to head the network, but became the head of regions in a recent board reshuffle, which saw Pedreira elected.
“It’s the kind of initiative that needs that level of involvement,” says Wissing, who herself had set the ball rolling the year before at the Barcelona conference.
“Having Duarte take it on combines his passion for the mentorship scheme [Pedreira helped set up the Martin Ashurst Trade Finance Mentorship Forum] and the fact that he is now a board member.”
Wissing explains that when the network was first launched, it was difficult to get ITFA’s membership institutions to devote enough thought to it. “It took a little bit of time for institutions to really look at it,” she says.
But, she believes that because ITFA has found its feet in the broader trade remit – beyond its original scope of a forfaiting and secondary market organisation, it is now the “right time” to revamp the initiative and “go further and wider and put some more pressure on members to nominate their youngsters”.
What these membership institutions stand to gain is development of their younger staff members, without excessive investment requirements. “It opens up training and networking opportunities for their staff: this leads to career development, which ultimately the institution will benefit from,” Wissing says, adding that individuals will in turn be greatly appreciative of their institutions for their support.

Wednesday, 3 January 2018

PAVING THE WAY FOR THE FUTURE OF TRADE AND WORKING CAPITAL FINANCE by Johanna Wissing, LiquidX

Today, much is being talked about the role of Fintech companies in the financial services sector and phrases such as “digital banking”, “technology disruption” and “Fintech revolution” are commonplace. New start-up businesses are emerging almost daily and the Fintech sector has by now become a major part to the overall size of the digital economy and is attracting significant investment from VC firms. Key drivers behind that development are the increasing adoption of smart-phone technology, changes in consumer preferences demanding the development of ever quicker and simpler ways to transact and an increasing need for alternative financing facilities. New digital developments such as cloud banking, the emergence of crypto currencies and of course blockchain technology (ultimately a component of the crypto currencies, but with the potential to be used for many other applications) are rapidly changing the industry.

The majority of the Fintech evolution so far has taken place in the payment, peer-to-peer lending and crowd-funding space with companies like Transferwise, iZettle and Funding Circle having acquired a significant customer base. The trade finance world on the flipside has been left largely untapped by technology companies, something which is changing right now and which will help to transform the way in which trade and working capital finance will be provided in future.

Having access to trade and working capital finance is key for companies worldwide whether they are trading globally or within their domestic home markets, yet the ICC 2016 Global Trade and Finance Survey concludes that next to slower growth of key emerging market economies, declining commodity prices and protectionist movements the shortage of supply of trade finance presents one of the biggest risks to global economic growth. Amongst other factors that shortage has to be attributed to a lack of bank financing with particularly the SME market suffering from the consequences of the same. But it would be too easy to simply blame the banks for that shortage, as the overall environment for banks active in trade is difficult to say the least: trade finance is generally regarded as a high-risk asset class by regulators despite its historic low default rates and therefore banks are holding significant balance sheet to support their trade book which becomes ever more difficult against the backdrop of tight market pricing. On top of the capital requirements many banks’ abilities to provide trade facilities – be it for risk mitigation purposes in, for example, the form of confirmed LCs, guarantees, indemnities etc. or for financing purposes such as supply-chain finance, receivables finance, trade loans etc. – is impacted by legacy operating systems which are out-dated thus significantly adding to the operational risks and costs of transactions.

But it is not all doom and gloom! Thanks to the emergence of Fintechs and the application of new technologies within the trade and working capital context there are numerous opportunities to improve on the current situation and help increase global trade volumes over the years to come. There are numerous ways in which Fintechs can add value by improving operational efficiencies through leaner and faster systems, minimising risk through more secure processing, providing access to additional sources of financing, enhancing corporates’ ability to forecast trade and working capital needs, enabling better regulatory reporting for banks by generally enhancing reporting capabilities and by offering systems capable of capturing the benefit of risk mitigation techniques such as credit insurance. Better reporting will also enable banks to finally capture and report historic low default rates of trade finance to regulators and could therefore eventually lead to a more preferential treatment of trade finance. All these advantages will lead to banks reducing costs and increasing profitability thus enhancing overall returns of their trade books.

Technology intermediaries are a lot better positioned than banks to drive change in the trade and working capital space. Due to their adaptability digital start-up companies are quick to innovate and even quicker to respond to customer demands. Ultimately, as with any technology solution Fintech innovation in the trade and working capital space should not be an art for art’s sake, but it must be relevant for corporates and financial institutions alike. Therefore, not surprisingly an increasing number of trade finance professionals are joining Fintechs coming from banks – including myself.

From a personal experience perspective I have had a great start into the Fintech world at LiquidX, which I joined two months ago after seven and a bit years in Corporate Banking. It is a very fast-paced, innovative and vibrant environment and there is something new to learn every day and no day is the same. But the one most amazing aspect of the role is being at the forefront of change in the industry and of being able to drive the creation of new and more efficient working capital and trade finance solutions. It is exciting to spot an opportunity that could massively support either a bank or other financial institution or a corporate and then actually being able to implement such new opportunity as well. People who know me closely enough would wonder when I became a technology expert and I am not, but a lot of the technology out there isn’t only made for rocket scientists, but can be adopted for multiple uses rather easily, although I would never be able to build the underlying technology myself. But then again I didn’t build my car and I am still able to drive it.

The long and short is that there is some amazing technology available, it just all comes down to putting it to best use. The most revolutionary of it all has to be the blockchain – a buzz word everyone would have heard by now and I bet some people might roll their eyes as soon as they hear it, but the matter of fact is that there are numerous potential uses for blockchain along the entire trade supply chain from sourcing raw materials and all the way to post-trade settlement. So, Fintechs do not only help banks of course, but also corporates by creating better treasury management systems and therefore allowing better forecasts of financing needs and faster processing of orders, invoices and payments.

The digital evolution of trade and working capital has just begun and there are some exciting tools out there, such as blockchain, to drive it. As such it is not surprising that ITFA has newly created a Fintech Committee that will engage closely with all ITFA members to educate and inform about the on-going digital evolution of the trade and working capital space and to work with ITFA members to bring technology to its best use and develop the solutions our members require. Much has been said about Fintech companies disrupting markets and taking business from traditional banks – I couldn’t disagree more with such statements. Fintechs aren’t here to “eat banks’ lunch” – in fact Fintechs help banks to run smoother, more secure and efficient operations and to originate additional business by being able to leverage off business generated by technology intermediaries. Particularly in the trade finance context digital change is all about collaboration for everyone’s benefit: the banks, the Fintechs, the corporates and therefore benefiting the growth of global trade volumes as a whole. There is much change ahead – watch this space, it will be very exciting!

Tuesday, 2 January 2018

UPCOMING EVENTS - SAVE THE DATE

May we take the opportunity to remind our readers that ITFA will once again partner with GTR at the GTR Mena Trade Finance Week 2018, which will be held between 19th and 20th February 2018 at the Jumeirah Emirates Towers, Dubai.
The GTR Mena Trade Finance Week 2018 will take stock of recent global developments, while focusing on key issues in regional hotspots and sectors. With unrivalled links to a huge number of movers and shakers in the industry, this event provides access to hundreds of companies engaged in international trade, acting as an ideal forum at which to learn about the latest trade, export and infrastructure financing tools and opportunities.

Another upcoming event is the ICC 2018 Annual Meeting which will be held between the 3rd-6th April 2018. The Banking Commission of the International Chamber of Commerce (ICC) is pleased to announce, in collaboration with the Florida International Bankers Association (FIBA), the 2018 Annual Meeting, to be held for the first time in Miami. Under the theme “Navigating Trade in a World of Disruption”, the Banking Commission’s flagship event will focus on thriving in an environment where the “new normal” is very much one of uncertainty.

The Annual Meeting will gather 500+ trade experts, banking professionals, business leaders, lawyers and government officials from over 65 countries, featuring a series of informative and interactive plenary and breakout sessions, as well as roundtable discussions addressing global challenges and financing trends.

Monday, 1 January 2018

NEW ITFA MEMBER

ITFA is pleased to announce one new member has joined ITFA during the month of January.

Zenith Bank UK Ltd is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member bank of the UK’s Financial Services Compensation Scheme.

Their corporate banking services include: offshore corporate and trade finance, international private banking, investment management and brokerage facilities. They help businesses transact efficiently, quickly and profitably throughout West Africa, Africa, The United Kingdom and the rest of the world.

Natalia Sokolova will be the main contact person for all ITFA related matters.


CHART OF THE MONTH by Dr Rebecca Harding, Equant Analytics

Trade in 2018: where politics and economics collide

The difficult environment for trade in value terms is likely to continue during 2018. Although oil prices are likely to rise, and inflationary pressures set to build in Europe and the UK, this will still be insufficient to create a strong increase in the value of world trade during the course of the coming year. We expect world trade value growth to be flat or negative and for many countries to follow this pattern. (Figure 1). The only exception is the UAE which may show substantially increased trade in 2018 on the back of the oil price recovery and a diversion of trade from riskier countries in the region.


Figure 1: World trade growth by country, 2017-18 (%) and CAGR, 2017-21 (%)
Source:   Coriolis Technologies 2018
NOTE:    Projections are based on long and short term momentum and do not make assumptions about GDP, freight costs, or any future trade negotiations

This picture of trade is very much more negative than that of the World Trade Organisation (WTO). There are two reasons for this. First, the WTO bases its forecasts on volumes rather than values. Thus, while we may see volumes of trade increase, its real value may not increase – either because of inflationary pressures or because the US dollar remains comparatively weak. Second, the WTO picture is often over-optimistic, and its estimates of global volume growth of 3.6% in 2017 made last July already look awry in the light of flat trade towards the end of the year. The WTO is itself forecasting slower trade growth globally in 2018 of 3.2% and the value projections show a similar decline on last year.