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Digitisation Is Leading Global Financial Institutions To Need Fintechs

Today's financial institutions are more focused than ever on making customer communications and transactions as easy to understand and secure as possible.

Posted: 6th April 2022 by Finance Monthly
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Despite the high cost and high maintenance traditionally associated with corporate portals, banks have been slow to adopt SaaS technology for helping them better manage their budgets. Leading banks are spearheading the way in facilitating digital trade services for their trade clients and prioritising the support of digital trade by relying on innovative Fintechs to build fast, future-proof solutions that can even support multi-banking capabilities.

To future-proof trade finance communications, these are the top priorities large banks are considering and some of the factors that have nudged financial institutions to pursue solutions from external vendors.

The ability to deliver a quick digital trade experience to customers

 Through trade portal as-a-service solutions, banks are now able to allow their trade customers to not only conduct transactions but over time be able to fully handle directly from a single portal application, advising as well as utilisation of electronic documents

 Many of the world’s largest financial institutions are not able to offer a fully digitised service to their trade customers due to the immense cost, time and complex implementation processes required to offer a fully digitised user journey. But with advancements in recent technologies like Bolero’s Galileo, banks are well placed to offer truly digitised experiences to their customers to conduct their business at speed and with great efficiency.

The pandemic has highlighted the inherent inefficiencies within trade finance operations and as a result, the demand for digital trade services is at its peak. Trade customers today want to conduct their business online therefore it becomes vital for banks to digitise the customer experience as quickly as possible or risk losing that customer.

Dissatisfaction with their current portal solution

As a result of corporates' digitisation of their trade finance processes, banks have been under significant pressure to provide new and improved digital services to their corporate customers who are pushing for a fully digital experience.

Some of the banks we have spoken to tell us that their existing portal solutions do not meet the requirements of their clients anymore. Corporates today are looking for solutions that could adapt quickly and flexibly to new requirements so that they could offer their corporate clients a quick and smooth transition from the old to the newer more innovative systems. They can handle their trade finance transactions as well as having all correspondence between their trade clients and the banks electronically.

Exorbitant ownership costs

For many banks, the total cost of ownership for a trade portal is prohibitive. As a result, banks are reluctant to offer their trade improved customer experiences because the setup costs are too high which in turn slows down the adoption of these services despite the incredible appetite from trade customers.

Subscription-based, turnkey solution cuts the cost of acquisition from millions to a fraction of the cost whilst also reducing the need to hire teams to build solutions and to support clients by developing new upgrades and by providing regulatory-change compliance. By replacing their legacy systems with a state-of-the-art technology platform, banks are able to deliver a more sophisticated digital experience to their customers at a lower cost than they would have paid before.

That’s not all, for smaller more regional banks that do not have many trade clients, the efforts and resources associated with installing a portal solution for their clients often are not worth it. A plug and play solution opens the market up for financial institutions of all sizes.

Freedom from technical debt

Technical debt often becomes a major factor that deters banks in their pursuit of building bespoke solutions as they do not want to deal with the expensive upkeep of their trade portals.

 We are seeing many banks that have changed course as they adopt white-labelled solutions that not only cut costs but free them from the shackles of constant updates for their trade customers. In turn, they are providing upgrades to their online banking platforms and making a positive change to the customer experience and channelling innovation into a booming industry, all without the technical burden caused by in-house solutions.

Ability to support digital trade with e-presentations

Many of the existing legacy portals we see banks use today do not allow for corporate clients to manage their own trade transactions and products like Letters of credit, guarantees, electronic bills of lading and standby letters of credit.

As corporate clients become more demanding of their trade partners to embrace digitisation and increasingly rely on technology to conduct business, banks are stepping up to the challenge by delivering enhanced user experience, improved functionality, and a broad suite of connectivity options.

Importance of structured bank communications and audit trails

Structured bank communications and audit trails between banks and clients are very important. Banks have the responsibility of ensuring that their communications with clients are structured and clearly defined to avoid any ambiguity or uncertainty. It is also important that the correct parties respond to the communication in a timely manner, such that there is an appropriate audit trail for all individuals involved.

For example: On many occasions, we have seen cases where a client receives a notice from the bank but does not respond to it immediately. In some instances, the client may not be aware of the deadline or may be unaware of what actions need to be taken as a result of receiving this notice. The lack of proper structure and clear messaging can often lead to delays in responding to requests from banks.

Lack of connectivity for corporate clients and reduced customer stickiness

As demand for multi-bank trade finance solutions has more than doubled over the last few years, an increasing number of corporates that use the services of multiple banks are finding it inefficient to work with every bank on an individual basis.

Larger corporates have the bargaining power to dictate to their banks the formats they should use, however for smaller corporates, buying or building a multi-bank solution can prove to be expensive – and then they convince their banks to work with it. The growing demand for multi-bank solutions presents a difficult hurdle for many banks that must focus on client needs.

To end; a black swan event has created chaos and new opportunities for businesses, forcing them to adapt to a new technological status quo. To navigate successfully through the technological advancements being made, corporations are undergoing a rebirth and embracing new-age technologies. Banks must do the same to keep up.

About the author: Jacco De Jong is Global Head at Bolero.

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