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

Dear Members and Friends,

Believe it or not, we have already come to the end of the first quarter of 2018.

Emerging markets experienced benign growth and market activity over the past 12 months, with demand for emerging market assets and services flourishing over this period. Investors are expected to continue moving money into emerging market credit, but February gave us a taste of what market volatility could be like, when it begins to reign in, as there were times where we thought that cracks could get deeper. However, normality was soon restored.

There are differing views on market direction; one school of thought suggests that over the near-term markets could continue to see selling pressure as some investors seek to crystallise gains generated over this bull market. Others believe that with strong expected earnings growth and more attractive valuations investors will dip back in and buy equities and emerging market credit once again.

Whatever the outcome, what is expected to be extremely challenging in the months ahead is the escalation of the whole trade war situation announced by the US a few weeks ago; if it will remain confined and controlled or whether it will impact the greater scheme of things. US president Trump has often opined that there exist a number of countries which might be taking advantage of the US and is renegotiating NAFTA, having exempted Canada and Mexico from the tariffs as long as they reach a new agreement. At this juncture, it is yet unclear of how widely dispersed and deep the trade war situation could get. But either way, this situation is expected to be a major global theme for 2018.

In the March edition of the ITFA Newsletter you will find an interesting article entitled ‘’Trade Finance Collaboration set to step up in the year ahead’’ by Adeline de Metz, Unicredit. We also have an article by Andre Casterman, ITFA Fintech Chairman, ‘’What are the ‘Data Monetisation’ Challenges facing Transaction Banks?’’ The ITFA team also provides a brief on the trade finance seminar organised jointly by ITFA and CUNEF, which took place in London on 14 February. ITFA is delighted to welcome three new members; Intix, Sierra Leone Commercial Bank Limited (SLCB) and TradeTeq Limited.

As you all know,  preparations for the 45th Annual International Trade and Forfaiting Conference which will be held in Cape Town between the 4th and 6th of September, are well underway. As we speak, the conference programme is being finalised and will be available in the coming days. Registrations are flowing in, but we remind our readers about this year’s Super Early Bird price, which is available till 15 April. We urge you to register before then.

This year we will be greeting you at The Table Bay Hotel, a hotel which is perfectly located against the stunning backdrop of Table Mountain and the Atlantic Ocean. We will be hosting 2 networking sessions with dedicated rooms which will make great networking opportunities – one of the reasons why our annual conference is so well attended.

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

TRADE FINANCE COLLABORATION SET TO STEP UP IN THE YEAR AHEAD by Adeline de Metz, Global Co-Head of Trade Finance at UniCredit

Adeline de Metz, Global Co-Head of Trade Finance at UniCredit and member of the recently established ITFA FinTech committee, looks back at the trends that emerged in 2017 and takes a view on the year ahead. Notably, there is a resurgent appetite for growth among banks, as they join forces with other industry players to bring cutting-edge solutions to the market in order to meet ever more demanding client needs.

With 2017 now behind us, it’s time to reflect on how the trade finance industry has developed over the past year, and to look ahead to consider what 2018 has in store. Firstly, there’s a real sense that banks are redoubling their focus on growth after a period of caution marked by regulatory and compliance concerns such as anti-money laundering and know-your customer requirements. With this spirit of growth returning, banks are actively developing new solutions, a trend that looks set to continue in 2018 – with collaborative efforts featuring increasingly prominently. Supply chain finance is one area set to continue reaping the rewards of industry co-operation – thereby helping to mediate the growing number of trades settled under open account terms – while SMEs are also set to benefit from upcoming blockchain advances. 

Supply chain finance allays open account concerns 

The shift from traditional documentary trade to open account transactions continued unabated in 2017. Traditional instruments such as letters of credit still have their place, of course – particularly for corporates trading in high-risk geographies – yet the popularity of open account for cross-border trade continues to grow. Europe, for instance, sees 80% of all cross-border transactions conducted via open account. Despite the simplicity and lower costs of open account trade, however, increased counterparty risk and reduced access to credit remain worries. Supply chain finance programmes – currently growing in popularity and sophistication – help solve both problems. Suppliers are not only guaranteed payment, but are paid early, and they can leverage the strong credit rating of buyers to access credit at better rates than before. There are also benefits for buyers, particularly from a working capital perspective – a good programme can strengthen supply chains and supplier relationships, while enabling the buyer to improve Days Payable Outstanding (DPO) by negotiating longer payment terms. Buyer-funded programmes can also represent a good use of surplus cash in the current climate of negative rates. 

The field is also innovating rapidly. Buyer-centric solutions that are usually reserved for larger businesses are now evolving to bring in smaller buyers. Similarly, supply chain finance programmes used to support just a few of the largest suppliers, but solutions are now on the market serving many more suppliers, including smaller businesses, across a wider range of geographies. Joint supply chain finance solutions offered by banks and fintechs are also set to feature prominently in 2018. UniCredit has worked with a number of fintechs to offer innovative supply chain finance solutions, ranging from digital portals that auction approved supplier receivables, to those that are able to quickly onboard suppliers anywhere in the world. This is an important development, as problems with supplier onboarding can often limit the success of supply chain finance programmes, with many suppliers put off by a lack of automation and overly complex documentation. As awareness and availability of this kind of solution grows, so will the number of supply chain finance users. 

Blockchain to boost European trade 

In Europe, another way that banks are looking to support corporates with open account trade is we.trade, previously known as Digital Trade Chain. Developed by UniCredit in partnership with seven other banks, we.trade is a digital platform that uses distributed ledger technology and smart contracts to help European SMEs access trade finance. The platform connects all trading parties and registers the full, end-to end trading process – making it fully transparent. It is also fully automated – accelerating the order-to-settlement process – and should ultimately boost trade throughout the continent. 

Looking ahead to 2018, there is now a roadmap for full deployment of the platform. The first test will go live in February, followed by full deployment in the summer, when UniCredit will run a pilot in Italy and Germany. Given this timeline, we.trade is set to be one of the first commercially viable blockchain solutions in the industry. 

Industry collaboration fuelling progress 

The most promising solutions we are seeing all have something in common: they are the result of industry players working together to solve client problems at a new scale or level of sophistication. Last year saw the “competition versus collaboration” question debated almost ad nauseam. Yet as we enter 2018, the question is largely settled, with bank fintech collaboration emerging as a valuable way to ensure client needs are met in full. 

Yet the manner in which banks and fintechs collaborate is also important. Rather than leaving corporates to search independently for their fintech and bank partners – which may raise issues around funding and lead to clashes of approach – banks and fintechs should work together as part of a collaborative “ecosystem” where both sides can ensure they can co-operate from an operational point of view. Working together and drawing on past experiences, banks and fintechs can proactively approach clients with ideas, or involve them early in the development of joint solutions in order to match their requirements precisely. 

UniCredit favours this collaborative approach and we continue to monitor the fintech landscape for opportunities. Furthermore, we believe this culture of co-operation may well be the dominant theme of 2018. Shared resources, complementary capabilities, and different viewpoints all enable digital innovation to be executed more effectively – creating something bigger and better than one organisation could working alone.

WHAT ARE THE 'DATA MONETISATION' CHALLENGES FACING TRANSACTION BANKS? by Andre Casterman, Chair of ITFA FinTech Committee, and Chief Marketing Officer at INTIX - the data management FinTech

Whilst transaction data is now firmly established as a new economic asset, financial institutions are facing several challenges to monetise the vast amount of transaction information flowing through their systems. Understanding those challenges before embarking on a “Data” project is essential.

Challenges impeding data monetisation

Following regulatory requirements, most financial institutions (FI's) have taken greater care at organising their transaction data. The archiving, reporting and screening obligations have created many dependencies on their ability to search through and report transactions, whether residing in long-term archives or in production systems. Implementations have usually been completed at department or system level and as part of the pressing regulatory agenda, thereby often missing the bigger picture.

Whether leveraging new "Artificial Intelligence" capabilities or not, financial institutions have realised that monetising the vast amount of transaction data ought to be their next ambition level.

In order to get there, financial institutions need to become aware of four types of "Data" challenges: accessibility, visibility, infrastructure and delivery.

“Financial Institutions have realised that monetising [...] transaction data ought to be their next ambition level.”

Focused approach and specialised technology are required

Data management solutions designed specifically for the financial services industry help financial institutions adopt a focused approach. When assessing available solutions, FI's should revisit them against the four types of challenges as proposed below:

•        Accessibility challenge: the data management technology solution must enable to connect to hundreds of internal systems seamlessly

•        Visibility challenge: the technology needs to be provided jointly with deep expertise in financial messaging in order to handle both industry standards and proprietary formats

•        Infrastructure challenge: the ideal solution must provide a dedicated high-performance data management layer to address all reporting, tracking, measurement and alerting requirements

•        Delivery challenge: upgrades to such data management solution are to be prioritised, developed and rolled out independently from those applied on internal transaction processing systems. FI's must avoid integrating "data" requirements within existing processing systems.

“The specialised data management solution should be  implemented separately from the plethora of existing and future transaction processing systems.”

The INTIX technology makes it happen

By combining advanced big data technology and expertise in financial messaging infrastructures and standards, specialised FinTech players such as INTIX bring the appropriate set of capabilities to deliver comprehensive data management solutions. Business requirements related to transaction reporting, tracking and metrics as well as exception monitoring and alerting can all be addressed in a successful and efficient way.

Acting as an enterprise-wide data management layer, such dedicated technology can be implemented across various business areas and, five in particular, for transaction banks:

Once such technology is in place, the opportunities to put transaction data at the service of your clients are only limited by your imagination and creativity. Monetising transaction data will be achievable.

ITFA AND CUNEF EDUCATIONAL TRADE FINANCE SEMINAR, LONDON - 14 FEBRUARY 2018

This year, 14 February not only marked a day of romance but also brought with it another trade finance educational seminar. The event was organised by ITFA and CUNEF in association with Bank of America Merrill Lynch and was aimed at promoting Trade Finance as an exciting career path amongst university graduates and the young professionals in the industry. 

The seminar commenced with an introduction about ITFA, and its role to future talents of Trade Finance. As the event progressed the attendees had an opportunity to learn about international trade flows and risks involved, the  role of banks and partner organisations, mechanics of letters of letters of credit and business cases directly from the senior executives. 

From technical aspects to career choice, the current panel of ITFA Young Professionals shared their professional journeys and discussed the skills required to make a successful start in the world of trade finance. 

The evening concluded with a networking session where graduates could mingle with trade finance professionals from banks, insurance, law firms and publishing. 

NEW ITFA MEMBERS

ITFA welcomes three new members to the Association: -

INTIX helps financial institutions become both client - and data-centric. INTIX addresses the challenges faced by all financial institutions when it comes to aggregating transaction data from multiple sources, delivering the appropriate analytics and insights as well as tracking end-to-end transactions and spotting exceptions that require handling. INTIX shields end-users from the complexity of handling numerous internal systems, transaction semantics, messaging formats and e-channels. For banks adopting SWIFTgpi, the INTIX Transaction Tracker maximises granular visibility on internal payment processing steps and performance.

Thanks to improved accessibility to financial transactions and visibility on actual processing, financial institutions serve their clients better and track their performance more effectively.  They develop a competitive advantage which drives client satisfaction and business growth.

Acting as a collaborative FinTech serving financial institutions, INTIX helps its clients transform data into a new economic asset. Mr Marc Braet will be the main contact person for all ITFA related matters.

Sierra Leone Commercial Bank Limited (SLCB) is a financial institution engaged in Banking since 16 February 1973. They have branches in 13 strategic location in the country with undermentioned products and services forming their operations. They are a fully digitised bank bringing in innovative financial inclusion solutions such as Mi Yone SLCB Kiosk and Mi Yone SLCB Teller.

Wholesale Products - overdraft, invoicing discounting, term loans, time loans, bonds & guarantees, leasing, sale & leaseback, project finance, cheque/draft purchase mortgages, collateral management, syndications, club deals, commercial paper, current accounts, call deposits, term deposits, collection accounts, teller implants, dealership finance, investment banking, bills discounting and payroll processing.

Trade Finance Products - import letter of credit, export letter of credit, post import finance, funds transfer, bills of exchange, avilisation of bills of exchange, guarantees/SBLC, collections, bankers acceptance.

Treasury Products - forex, local currency, foreign currency accounts, government securities, treasury bills, bonds, SWAPS, futures, commercial papers, placements.

Transaction Bank Products - credit cards, debit cards, e-alert, e-statement, internet banking, salone link, mobile money, SWIFT, cash management, teller implants, SMS banking, utility bill collection, Point of Sales (POSs), bureau management, e-collect and contact centre.

Mr. Idrissa Kamara will be the main contact person for all ITFA related matters.

TradeTeq Limited provides the network for trade finance funders, investment managers, originators, and corporates to connect, interact and transact. TradeTeq delivers advances credit analytics, reporting, investment and operational solutions. TradeTeq transforms trade finance assets into transparent and scalable exposures. 

Mr Christophe Gugelmann will be the main contact person for all ITFA related matters.

SAVE THE DATE

May we take the opportunity to remind our readers about the ICC Austria Trade Finance Week. For more than a decade ICC Austria has been hosting its annual signature conference, the ICC Austria TRADE FINANCE WEEK, which takes place from 18^th-22^nd of June, 2018 in Vienna.

The week consists of four different events:

·         14^th Global Conference on Bank Guarantees, 18/19 June 2018

·         Case Studies on Bank Guarantees and Letters of Credit, 20 June 2018 or alternatively

·         The Golden Rules of Inventory Finance , 20 June 2018

·         12^th Global Conference on Letters of Credit 21/22 June 2018

Each conference is attended by more than 170 expert trade finance practitioners from around 45 countries. Attend the most important technical Trade Finance conference week to get the latest up-dates and best drafting exercises and do not miss meeting your peers and most renowned experts from around the world.