The move in trade finance away from bank issued letters of credit to open account has motivated trade banks to rethink their client offering. At a session entitled "Innovative trade services - responding to evolving needs" discussion focused on the need for banks to add value for corporate clients in order to maintain their relevance within trade finance.
Steven S. Nichols, managing director and head of global trade services at Wachovia, insisted that banks need to change the way they think about their clients.
"It behoves us as banks not to try and justify the traditional model as a financial intermediary. We can do far more by purposefully stepping back and disintermediating ourselves. It's not all about us; it's about providing service to our clients."
"What we're finding is that in order for us to succeed in this area we need to provide value for our clients and our definition of value needs to be something more than just a word. We need to demonstrate how we can generate increased revenues, how we can reduce their costs, how we can reduce their risks, how we can increase their product offering or how we can improve their back office offering," he said.
Paul Simpson, senior vice president, emerging payment channels and global trade business at JPMorgan Chase and moderator for the session, agreed that banks need to become part of the solution rather than being part of the problem as a cost.
As a pre-requisite to that, banks must understand the way business has changed from the client's perspective. "Cash, trade and logistics are converging," said Simpson. "We should not think of things from a silo basis but from the client perspective. Think about what the corporate wants and needs and drive towards that," he urged.
Jon Richman, head of trade services at Standard Chartered Bank, said the key to putting the client first came down to "delivering efficiency".
"One way you can do that is helping them to manage data and documents better. As you're in the process anyway, become embedded within core processes and deliver efficiencies in the way they communicate," he said.
Another area in which banks could help corporates is in managing their risk. "New technologies enable you to do a lot more. They allow you to monitor all events across the process and identify various events where you can finance risk better."
Cooperation between trade banks was also highlighted as key to evolution for the industry. Alain Biscaye, managing director and head of global trade services at BNP Paribas, described an initiative to set up a Trade Services Utility (TSU) which would standardize processes across the industry.
This year 10 banks have started to design and test a prototype TSU which will introduce automation in stages and coordinate standards, messaging (via XML and SWIFTNet), and matching and workflow. The pilot phase is due to start in 2005.
"We are developing an interesting project that will answer most if not all the questions raised by the industry. The banks are willing to share common infrastructure in order to meet customer requirements," said Biscaye.
JPMorgan's Simpson called for more banks to join the initiative. "If we all do this together - not 10 banks but 50 or 60 - we have the opportunity to reshape an industry that, to be frank, over the last 200 years has not seen a lot of change. TSUs are a good opportunity to collaborate and drive the marketplace to be more efficient. We cannot assume the status quo is the way the business is going to be run."
Michael P. Riley, director of corporate trade payables at Lowe's Companies - America's sixth largest importer - said he saw a continued role for trade banks. Given the multiple documents and processes relating to payment involved in trade he suggested that "the best place to consolidate all of that is with the bank".
However, he noted that corporates had a growing wish list that would need to be met. "Banks must be client-centric. You need to find out what your customer needs," he said. And gone are the days when banks tell their clients which silos to use, in future clients would dictate the format. He called for "standardization with flexibility" and greater visibility within the trade finance and supply chain processes. "Really understand what [customers] need, understand their process," he urged.
