Internet of things to shake up trade finance
Trade finance is one area of wholesale banking that is set to be transformed by the internet of things. At yesterday’s The internet of things and banks’ core platforms session most of the discussion was about the wider issues of banks’ digital transformation. But when the panellists were asked by Cathy Bessant, Bank of America Merrill Lynch’s chief operations and technology officer, where the concepts could be applied to wholesale banking, it was trade finance that was highlighted.
Oliver Bussmann, group chief information officer at UBS, said trade finance documentation “takes a lot of time and paperwork”, which can sometimes run into 500 pages. The relationships between the customer, insurance company, bank, buyer and seller can all be connected with the internet of things. These parties can be linked with where the goods are, which in turn can be connected to the contracts underlying the trade transactions. “It is an area that is ready to be disrupted,” said Bussmann.
The physical goods can be wired to the internet, by tagging a bag of rice, or putting a tag around a container, for example, said Michael Gorriz, group chief information officer, group technology and operations officer at Standard Chartered.
Patrick Maes, chief technology officer and general manager, strategy and planning, global technology services and operations, ANZ, said: “there is an opportunity to link the elements in the value chain with the financial transaction”. Also, he noted that chief financial officers expect more convenience in their role; now they want to be able to do their liquidity management from the golf course, he said.
The topics in the session also touched on the wider transformation that banks need to undergo to be able to take advantage of the internet of things, as well as the challenges they face in the move to digitalisation.
“I do not think there is any bank in the world that can call itself a digital bank,” said Maes.
One of the challenges that banks face is in becoming ‘ecosystem’ players. Bussmann said financial institutions and banks have to think about how the internet of things can also be applied to micropayments and smart contracts. Also, he said, financial institutions need to consider how to move from operating in a centralised to a decentralised model. This also needs to be done in a trusted and reliable way, he said.
The notion of trust is now also changing. Previously trust was based on a human relationship, but now in the digital world trust is gained when something is delivered and fulfilled, said Gorriz.