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How digital transformation is redesigning trade finance

How EY guided one bank to adopt an agile, design-based approach to digital transformation to boost the success of its trade finance function.

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How can trade finance direct its digital ambitions?

Trade finance has reached a crossroads, with the path to progress marked by digital transformation.

Global trade is facing a period of heightened uncertainty owing to ongoing trade tensions, market volatility and the continued fallout of the COVID-19 crisis. Now more than ever, banks that facilitate international trade are aware of the importance of digital operating models, and the benefits they can bring.

Although digital transformation continues to sweep across the banking industry, banks facilitating international trade are still eagerly searching for better ways to revamp their age-old trade finance functions – and do so quickly.

Given the highly complex nature of trade finance, and the fact that each trade transaction requires the input of multiple people in various locations worldwide, banks must seize the opportunity to transform their trade finance functions now, to compete successfully in the future.

At the root of the industry’s slow shift to digitization is its heavy reliance on paper. Although alternatives to documentary trade finance are on the rise (including supply chain finance to distribute short-term credit to provide working capital for the buyer and seller), the services trade finance provides to importers and exporters still require documenting millions of transactions each year. This drives associated compliance checks as necessary protections against financial crime.

To digitally transform these manual processes, one bank looked to an external partner to support this change through innovative design and customer experience solutions, while also unlocking value rapidly to improve short-term profitability.

The bank recognized the need to transform its operational processes to deliver a better customer experience, reduce costs and facilitate secure global trade practices. It understood that by redesigning its trade finance ecosystem, it would have greater oversight of its data, platforms and processes – which would also help to curb financial crime and boost trust among its customers.

It began by working with EY teams to reframe its end-to-end approach to digital transformation.

An efficient, digitally advanced trade finance function is crucial for banks today, but many still need to take the necessary steps to transform to remain relevant in the modern age. 

 

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Reimagining the trade finance digital journey

Technology-enabled sessions allowed the bank to explore new ways to transform its trade finance platform and customer proposition.

Our approach to reimagining how the bank could propel the digitization of its trade finance functions began with thought-provoking collaboration, which underpinned the ultimate transformation journey. To adopt a holistic stance to its digital transformation framework and develop a unique, overarching digital strategy, the bank scrutinized each layer of its finance function, from cost and control to customer experience, to deliver maximum value across the transformation program. 

Our plan was not to initiate an A-to-B-to-C program – our aim was much more radical – the sustainable transformation of the bank’s trade finance function.
Vincent Kock
Director, EY EMEIA Business Transformation

In practice, this involved the EY team gathering together a highly distributed network of people from across the bank and offering the collaborative focus they needed to think and ask questions about the best ways to propel digital transformation.

“Our plan was not to initiate an A-to-B-to-C program – our aim was much more radical – the sustainable transformation of the bank’s trade finance function,” said Vincent Kock, Director, EY EMEIA Business Transformation.

EY’s wavespace™ innovation sessions offered the bank’s product, operational process and technology specialists the environment they needed to structure their thinking on how to reimagine their digital transformation framework – from core banking components to engagement channels, existing digital capabilities, and analytics platforms.

According to Vincent Kock, Director, EY EMEIA Business Transformation, “These wavespace™ sessions allowed the bank to move very quickly to look at the complexity of what they were looking for and how they could improve its trade finance function.  By facilitating these sessions, EY offered the bank the speed and reliability of services, which was needed to reshape its role in global trade.”

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Trade finance: a digital opportunity

Banks can remodel their trade finance functions through digital transformation, to match the needs of global trade now and beyond.

The ideas and opportunities that derived from EY’s approach invariably translated into a new vision of how the bank’s trade finance function could operate. By reimagining a global end-to-end process that addresses the function’s core transformative needs, EY teams helped to shape and articulate how structured, quality data, well-designed processes and appropriate control design and deployment could revamp an age-old industry such as trade finance.

“Banks are used to binary change – regulatory driven or process cost optimization – but redesigning your business is more complex,” says James Sankey, Director, EY EMEIA Corporate, Commercial and SME Banking.

Together with the bank, EY teams helped to: 

  • Accelerate the design and delivery of transformation initiatives across the bank’s trade finance function
  • Validate targeted design
  • Design future processes across multiple products to inform further business and technology development
  • Identify and prioritize simplification opportunities across trade finance to reduce costs now and simplify the transformation later
  • Run team-by-team sessions to challenge opportunities and accelerate benefit quantification and delivery
  • Improve efficiency and customer service while addressing existing control gaps
  • Provide insight for potential development and investment initiatives
Banks are used to binary change – regulatory driven or process cost optimization – but redesigning your business is more complex.
James Sankey
Director, EY EMEIA Corporate, Commercial and SME Banking

By helping to accelerate the rate of change, trade finance can enable a new transformative mindset among banks to invest in their digital future and help the industry to thrive.

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