Large companies in Asia are turning to bigger banks in the region for support as they navigate disruptions caused by the U.S.-China trade war. In some cases, that means passing on lower-priced providers of trade finance for access to big banks’ international networks and expertise.
This was revealed in 'Greenwich Leaders: Asian Large Corporate Trade Finance 2019', based on replies from 590 respondents, including 128 Indian companies.
Gaurav Arora, Head – Asia Pacific & Middle East, Corporate & Institutional Banking, Greenwich Associates explained that banks that are better coordinated internally and are tech-forward are likely to benefit more in this scenario.
Q: How can Indian banks benefit from the outcome of global companies rerouting supply chains following the US-China trade war?
A: Banks can play a conduit role in helping companies explore potential opportunities for routing supply chains through India, by exploring proactive advisory opportunities. India hasn’t taken the lead in taking advantage of the trade war but the opportunity is large.
Q: Can only large banks with broad networks help these companies find the right locations and partners?
A: Network definitely helps. However, how you position that network or bring that network to clients is important. For e.g. a bank might be present in only in 12 states versus one present in 25. What matters is how you are able to pull the network together in credible manner.
Q: How can smaller banks use technology as a tool to help companies finance and execute these changes?
A: Technology is playing a big role as an enabler in terms of trade finance as supply chain financing solutions/programs become digital end-to-end. It is easier for a smaller bank to embed itself in the supply chain and they play an important role in complex supply chains, where they are better equipped to assess credit risk for smaller companies than a global bank.
Q: Nearly 45 percent of participants of your study were approached by at least one bank about trade finance solutions incorporating APIs, fintech innovations and/or blockchain. How many respondents actually finalised a bank because of their tech stack?
A: We found that less than 5 percent of corporates went ahead or are in the process of adopting new/emerging technologies. Banks pushing these technologies have the capability to deliver the same. But, there is a big difference in a one-off transaction and scaling it to cover the entire market. We are not seeing many examples of the latter, but a lot of use-cases.
Q: How can banks build their internal processes to offer higher value service skillsets?
A: Leading Indian banks are already doing due diligence, assessing credit risk, etc. Right now, they are mostly adding value around the ‘financial’ capital.
They can offer more ‘support’ for the actual supply chain program i.e. introduce new suppliers, be the conduit for larger companies into the market.
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