However, if you run a small to medium-sized business, you might be surprised to learn that big banks still provide major benefits to SMEs, especially when it comes to new digital services in the arena of global trade.

Specifically,

by leveraging their extensive networks, international banks have created innovative digital platforms that help SMEs execute several traditional trade tasks, such as finding and accessing foreign market data, and using data analysis, algorithms and blockchain for business matchmaking and payment solutions.

In most cases, banks have decided to combine forces and offer their services together, providing an easier way for SMEs to manage business internationally. Interested in some of the more popular banking and trade solutions for SMEs in international business? Here’s a useful list below.

we.trade

When people think about banks and trade, a name that immediately pops in mind is HSBC. Along with other 15 banks, and in partnership with IBM, the former Hongkong and Shanghai Banking Corporation established we.trade, the first international trade platform based on blockchain.

What Is we.trade?

Essentially, by sharing credit data with all the other members, and being completely digitized, we.trade aims to solve the two main issues in international trade:

• Finding a trusted partner
• Getting paid

When the parties carry out a transaction on the platform, one party will tick the box requesting a letter of credit. A network bank will pick up the call and authorize the credit.

At that point, the seller is sure to receive payment by the authorizing bank, or another network bank, with any documentation or bureaucratic requirement being done online.

We.trade was launched only in 2019 and it is a relatively new service. Member banks are: CaixaBank, Deutsche Bank, Erste Group, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, Société Générale, UBS and UniCredit.

Club Trade Alliance

Started at the same time as we.trade, Club Trade Alliance focuses on two more basic issues for SMEs approaching international trade:

• The world is huge: where is the best place for me to find local partners?
• How can I find local partners that I can trust?

Club Trade Alliance answers to these needs by offering comprehensive market data of almost any country on the planet (around 25,000 market reports from 186 countries). There are market trends, country economics, and also tariffs, regulations and tax matters. 

Moreover, Club Trade Alliance claims that it can combine this data to provide its SME clients with the perfect market and the perfect partner. In fact, there are more than 21,000 members offering 80,000 opportunities, according to the company’s website. Being all backed by banks, trust should not be an issue.

Club Trade Alliance was originally sponsored by Banco Santander, Spain’s largest bank, and now includes a network of other 13 banks: Abu Dhabi Commercial Bank, Attiijariwafa Group, Royal Bank of Canada, CIMB, Crédit Agricole Group, Eurobank, KBC Group, Industrial Bank of Korea, MUFG, Nordea Group, Siam Commercial Bank, and Standard Bank.

Opportunity Network

This banking marketplace, also called ON, was originally founded in 2014 almost entirely backed by Intesa SanPaolo, Italy’s largest bank.

Since then, it has evolved into a network of 30,000 members, backed by several global banks, including Credit Suisse, UBS, Citizens Bank, YPO, Intesa Sanpaolo, Vietinbank, Sterling Bank, and ABN Amro, according to the ON’s website,

In the beginning, ON accepted only medium-large companies (the minimum acceptance rate used to be USD 1 million), and companies had to be invited by a member bank.

Nowadays, however, any company with revenue above USD 2.5 million can join the platform after going through a sanction-free and anti-money laundering (AML) check. They also now offer a LITE membership for start-ups and small companies with over USD 250k in revenue or liquid assets.

ON is truly and solely a matchmaking platform: Members post what they need and the marketplace’s algorithm should match them with comparable businesses looking for the same thing.

The solo banks

Some large banks have decided to go alone and provide business matchmaking services using their own networks exclusively.

The following three are the most relevant:

Industrial and Commercial Bank of China

ICBC launched ICBC Business Matchmaker with the goal of making it easier for Chinese companies to find foreign buyers, and vice versa. If you are familiar with trade in China, you will know that sourcing a proper supplier is not a trivial task. This service aims to make this task easier.

China Construction Bank

CCB also joined its domestic competitors by launching CCB Match Plus, this year. The aim is the same as other matchmaking platforms, but CCM Match Plus combines a digital marketplace with physical events, such as trade fairs and exhibitions.

The interesting thing about these two Chinese platforms is that they are not confined just to merchandise, but offer opportunities also in real estate, infrastructure, and renewable power, for both investors and operating companies.

Lloyds Banking Group

The British conglomerate launched Lloyds Bank International Trade Portal back in 2016, a platform that helps its SME clients export to new markets. The platform resembles Club Trade Alliance in its focus on market trends and regulations. However, it offers only a directory of potential partners and lacks a matchmaking process.

Alternatives outside the banking industry

Banks have made vast digital improvements in the arena of international trade and business—especially for SMEs. Yet, international trade has been running on other digital platforms for roughly 20 years. The most important and well-known online B2B platforms are Alibaba, GlobalSources, DHGate, eWorldTrade and go4WorldBusiness.

While hosting hundreds and thousands of small businesses and trading products of any kind in huge volumes, these platforms function exactly like big markets, where buyers and sellers trade a single item (or a single batch).

Businesses interested in non-banking marketplaces similar to ON or Club Trade Alliance, i.e. platforms that encourage business matchmaking, should look at the likes of Enterprise Europe Network and Globartis.

These new platforms encourage firms to find long-term partners to establish solid partnerships. You will not have the assurance that a bank may provide, but the application and connection process is much more streamlined.

The post How banks are supporting SMEs and global trade through their own digital marketplaces appeared first on Trade Ready.

After years of skepticism about their security, value, and staying power, it seems that cryptocurrencies like Bitcoin are ready to take on the world markets. There’s serious speculation that central banks will begin to hold cryptocurrencies in 2018. Investment firms such as Goldman Sachs have released information to clients about investing in Bitcoin, and CBOE Holdings has begun to sell Bitcoin futures.

This means the time has come for those in international business to look at how Bitcoin and other cryptocurrencies will affect global finance.

Cryptocurrencies are now predicted to disrupt the way people do business, and those buying and selling across borders stand to benefit.

The basics of cryptocurrency

Put simply, cryptocurrency is a digital financial exchange for goods and services, but cryptocurrencies like Bitcoin are so much more complex.

Bitcoin can be purchased as a basic money exchange and then used as currency. Every time money is exchanged through Bitcoin or a similar cryptocurrency, that transaction is recorded in a detailed public ledger. The ledger forms a long chain of verified transactions in chronological ordered. These ledgers are referred to as blockchains, and the blockchains are a big part of what excites people about the possibilities opened up by cryptocurrencies.

The benefits of cryptocurrency for international trade

For those buying and selling goods and services across borders, cryptocurrency offers a host of benefits. Some of the cryptocurrency and blockchain technology are poised to disrupt trade finance include:

• A lack of exchange rate. If you’re dealing with many international suppliers and buyers in a variety of countries, you have to deal with a myriad of exchange rates. If everyone is using Bitcoin, however, you’re all dealing in the same currency with the same value, without the constant hassle of monetary exchange.
• Fast money movement. Cryptocurrency transactions are near instantaneous. The transfer itself posts immediately, and it takes only about 10 minutes for payments to be validated in the blockchain.
• Secured payments. The money you receive when you take a Bitcoin payment is also secure. Users need to have the money available upfront, so there’s no chance of payments bouncing or credit transactions being canceled.
• Lower taxes and fees. Because cryptocurrency is a peer-to-peer monetary system, there are no taxes that govern them, and transaction fees are almost nonexistent.
• Detailed records. The blockchains created from cryptocurrency transactions create clear, secure records that can be tracked and verified. There’s talk of tying contracts and shipments to transactions within the blockchain to make business and logistics easier to track. With blockchain technology backed by cryptocurrency, processes could become more efficient, easier, and transparent. In fact, companies are so interested in the possibilities of blockchain technology that Danish shipper Maersk has partneredwith IBM to pilot a blockchain shipment-tracking system.

The drawbacks of cryptocurrencies

Of course, there are drawbacks to cryptocurrency that have slowed its adoption. First and foremost, the future of cryptocurrencies remains uncertain. While a single Bitcoin is now more valuable than an ounce of gold, economist and financial heads warn that cryptocurrency is another trend that will result in a burst bubble. From a daily user standpoint, there are problems with cryptocurrency as well. Bitcoin isn’t legal in all countries, and therefore can’t be used everywhere. And because users must have the cash on hand to make purchases, buying on credit — which businesses often do — isn’t yet a possibility.

The future of Bitcoin in international trade

While many are debating the future of Bitcoin as a tech bubble versus a viable long-term currency, it’s likely at least some of the technology created by Bitcoin is here to stay. From quick transfers to the thorough records created by blockchains, businesses and institutions are looking at how they can use cryptocurrency and related technologies to make doing business easier and cheaper.

Regardless of how the future pans out for cryptocurrencies, it’s clear that savvy business owners should be exploring cryptocurrency and blockchain technologies to see how they could benefit and make a move to capitalize on the technology.

The post How Bitcoin could shake up international trade appeared first on Trade Ready.

Blockchain is on everyone’s lips these days – nowhere more so than in the trade finance world. This technology has the potential to clamp down on fraud, streamline supply chains, and enhance companies’ liquidity. As the prime facilitators of trade, banks are as eager as any to bring the benefits to their corporate clients.

Making blockchain a reality, however, will take time and require a practical approach. Banks will have to identify targeted “use cases” – determining exactly how and where blockchain can bring improvements.

Strong collaboration between financial institutions and technology firms will be needed to bridge technical gaps, while success will depend on agreeing common standards and frameworks.

Back to basics: how blockchain works

Blockchain technology relies on a “distributed ledger” – a cache of digital information to which all users of a certain computer network have shared access.

As stages 1 & 2 of the diagram show, any addition to this record – created by a new trade or transaction – is logged as a “block” of data. All members of the network are notified of this action (stage 3), and at least one of the members must accept the change as valid (stage 4).  Once verified, this new block is “chained” to the previous blocks of data (stage 5).

Bulking up security in trade

This authenticated data chain results in high degrees of transparency and security most welcome in the trade industry. The ledger is visible and accessible (i.e. “distributed”) to all counterparties involved in trade – whether banks, buyers, sellers, shipping companies, insurers, forwarders, customs officers, inspection bureaus or regulators. Should a new transaction be attempted, this entire network must first accept any modification to the chain as legitimate.

Blockchain could thus form a key ally for banks in their fight against fraud. Banks must always be on the lookout for the risk of “double-financing”, for example – the chance that another bank has already been allocated the trade’s receivable, or that another transaction is already using the invoice presented for financing as collateral. The permanent and essentially tamper-proof record offered by blockchain would mitigate this threat.

Blockchain facilitates automation and risk mitigation

Yet the advantages do not stop there.

The distributed ledger would offer a bank comprehensive and real-time insights into its corporate customer’s entire supply chain – from the initial order of purchase, to assembly, inventory, payment and final delivery.

Without having to spend time and resources on manually processing and matching data, the bank could more efficiently identify positions in the supply chain where risk mitigation and financing are needed. Funds could be released in a timelier manner, and the risk of non-payment would be eliminated, enhancing  with the company’s liquidity as a result.

“Smart contracts” represent another exciting prospect of blockchain. These contracts are designed to carry out pre-defined actions automatically when set off by a particular event in the supply chain. For example, once the delivery of goods to an importer has been effected, a smart contract would ensure that funds are automatically released to the exporter.

At Commerzbank, we’ve already used the underlying concept of the smart contract when facilitating trade with the Bank Payment Obligation (BPO). The BPO is a new trade finance instrument positioned between open account and the letter of credit. It provides payment assurance on the automatic exchange and matching of digital trade data – without presentation of paper documents – to complete a transaction.

The journey to blockchain is far from straightforward

The application of the smart contract idea is certainly an important step towards realising the full potential of blockchain in trade. But a range of challenges will be met along the way.

For a start, banks must establish exactly how distributed ledgers can enhance their corporate customers’ trade. Whether they want to speed up provision of financing, improve a customer’s working capital, or mitigate payment risk, banks will need to identify the right use cases for blockchain, and find exactly where new solutions are needed. This will be much more productive than merely attempting to replace tried-and-tested trade solutions, such as the letter of credit or guarantee, with an alternative based on the distributed ledger.

There will also be technical challenges to overcome. Banks and companies will need to invest resources into developing blockchain’s digital interfaces, spend time getting to grips with the technology, and ensure that data security in their blockchain systems is up to scratch. They will also have to agree to standards that can ensure that the software underpinning new blockchain processes will work with legacy systems.

Meanwhile, the trade finance industry will require crucial harmonisation when it comes to offering and using blockchain platforms.

The standout advantage of blockchain is its interconnectivity. This would be wasted if different trade finance parties used various distributed ledger technologies, underpinned by incompatible systems.

Collaboration will be the key to integration

Progress, therefore, will rely on the banks, technology providers and all other stakeholders in the complex trade finance ecosystem being able to work together. They must not only agree to set standards, but also to share insights and useful experiences.

It is for this reason that the R3 consortium, a group of more than 70 financial institutions including Commerzbank, are committed to the research and development of distributed ledger technology. The Euro Banking Authority Working Group for Cryptotechnology for Trade Finance is another group which seeks to explore use cases for blockchain for corporate customers.

Blockchain has the true potential to enrich companies’ trade – but success will take time, collaboration, and hard work from the banks.

The post Can the banks come together to bring the benefits of blockchain to their clients? appeared first on Trade Ready.