How SWIFT is supporting the digitalisation of trade finance

While the payments journey has enjoyed widespread digitalisation, with SWIFT gpi playing a major part in this transition, trade finance is a tougher nut to crack, but it is getting there.

Trade Finance TV talks to SWIFT’s Head of Trade & Supply Chain, Huny Garg, and Senior Product Manager, Bridget Cosgrave, about how SWIFT is supporting banks and corporates with trade payments. SWIFT has around 2,000 corporate members in addition to its 9,000 banks as members. These corporates are driving digitalisation of transaction processes to reduce operational, legal and credit risk.

“Many corporates still have highly manual processes for documentary credits,” says Garg. He explains that around 50 of them use the  SWIFT messaging service MT 798, a digital envelope that accommodates import and export letters of credit and guarantees in a multibank environment., and that this needs more bank support.

“We have this remarkable trust with the community, says Cosgrave. And this applies to trade finance messages. She adds, “A big part of our brief is the bring the key SWIFT gpi principles, to the trade finance use case.,” these are trackability, transparency, service level agreement with banks and the ability for all parties on to have an observer function along the transaction journey. Tune into Trade Finance TV in advance of Sibos London 2019 to hear more.

Transcript of interview:

Clarissa Dann Good morning and welcome to Trade Finance TV on location. I’m Clarissa Dann, your presenter, and here we have in the studio Bridget Cosgrove and Huny Garg from SWIFT. They’re here to tell us a bit more about the corporate and the bank journey in trade finance when it moves from what’s been very much an analogue journey, now moving into the digital space. So over to you, how is it all going?

Huny Garg So at SWIFT we have over 2000 corporate members in addition to the main building brands that we have. And that’s a fact which is not very widely known. But if you look at the cash side of our corporate structure, it has been on a digitization journey for quite a while. But we have yet to be installed and for the individual done the strategy management systems, which has been the driving force behind the no-longer-payments, digitization industry.

If you compare that to trade, many of the corporates still have highly manual processes when it comes to documents. Sometimes we see corporates having very advanced strategy operations, but the trade finance section is still not even accesible fx. So that’s been the sort of reality, but that has been changing. We have seen an increasing realization that there is a huge amount of operational risk, legal risk and credit risk in trade operations, and they have been focusing heavily on digitizing those flows as well. So as a result, we see a higher adoption of digitization of trade systems, trade processes and trade documents in all.

Clarissa Dann And you’ve just joined SWIFT, haven’t you Bridget? What are your impressions?

Bridget Cosgrave So the beauty of SWIFT is that we have this remarkable trust with the community and that gives us a legitimacy and it gives both the corporates and the banks comfort that when they’re using the SWIFT messaging platform,they’re using our dedicated trade messages; the MTC7 series for the banks, and the MT798 for the corporates. They can rest assured that they will get the message through to their counterparty, and it will alleviate many of these operational risks that Huny has alluded to.

We’re particularly excited about MT798, because it is an envelope message that the corporates can use with a great deal of flexibility, it does not require them to completely reengineer their operational processes. And we work very closely with our SWIFT-certified partners and certified applications to allow them to bring that onboarding to completion as quickly as possible.

Clarissa Dann Thanks to that. Now at Sibos (The SWIFT International Banking Operations Seminar), certainly a few years ago, we heard quite a lot from some of the corporate speakers about why they use SWIFT MT798 and what it was doing for them. So could you perhaps elaborate a bit more on the traction of this messaging and how it’s gathering popularity in the corporate arena?

Huny Garg The primary reason MT798 is getting traction is that it is helping corporates when using multiple banks, what their process is, find a single channel of communication with them; it’s very important for any digitization journey, for the starting point and the endpoint of a digital, otherwise there will be a need for more paper. So whether it is the issuance of thousands of guarantees for the corporate, centralization of trade operations, or improving for exports and reducing the discrepancies, all these processes can only be digitized if they have a good end point to the start point, which happens to be a message either sent to a bank or received from a bank or multiple banks. And that is where SWIFT comes in and we are able to connect a corporate who has multiple banking partners in a seamless way to be able to communicate with them. As a result, we’re seeing a huge amount of adoption for guarantees and export especially, and the growth rates are about 60% in 2018. And that’s about a third year in a row we’re seeing similar kind of growth for the adoption of it.

Clarissa Dann How many corporates we’ve got using it, roughly?

Huny Garg We have approximately 50 corporates who are using it today, and we have a very strong plan as well.

Clarissa Dann And one of the things we’ve been looking at, we’ve been really admiring the journey of SWIFT GPI and how that’s given transparency and trust to everybody in that transaction journey. Do you see a similar experience unfolding for MT 798 or the entire MT7 series?

Bridget Cosgrave Yes, indeed we do, Clarissa, that is a big part of our brief, is to bring the GPI principles, have a unique tracker, transparency, SLAs from the banks and the ability for all parties on the transaction to have an observer function on where the message is in the chain, and these four key principles  GPI lend themselves very well to the trade finance use case. What we’re excited about is to engage with corporates and to look at how we can bring those principles to a GPI for trade in the near term.

Huny Garg It’s a process of discovery to a great extent, because some of these things intuitively make sense. Trade processes are more complex than payment processes, and the principles of GPI have improved the speed of payments and the transparency of the delivery of detailed in a much more efficient manner which should work for trade intuitively. But some of these use cases have to be worked upon and explored with banks jointly with the corporates. And we are very excited and we think that it makes sense, so let’s see what happens.

Clarissa Dann What is your outlook for the next year in terms of progress on this, just to conclude? How bullish are you feeling about further adoption?

Huny Garg For further adoption, what we have learned is that there are a few friends that we need to work with in the industrry, that need to be more banks supporting the digital trade channel that is MT 798. While we see strong interest in India, especially China and the Middle East. There’s improving connectivity in India last year. So there needs to be more banks supporting this, and we are working with the industry on that. We need to bring better awareness among corporates and banks about the benefits of MT 798 and to help them build the business case for themselves. And the third piece is the continued improvement in the product and implementation processes, because connecting to SWIFT and being ready for them in 798 is a journey in itself. And we are quite heavily focusing on how we simplify the process of joining MT 798.

Bridget Cosgrave And I think the beauty is that, you know, anyone who is here at the show knows the SWIFT logo, knows that SWIFT exists and that it has this tremendous trust mandate. But very few understand what goes behind SWIFT and how they can use that, they can leverage that for their operational efficiencies. And that’s our challenge in the coming year.

Clarissa Dann Thank you both very much for coming in studio, and thank you all for watching Trade Finance TV on location.

Published on September 17, 2019

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