A New Era for Trade Finance: Technology, Innovation and the Drive for Efficiency

Speaking at a panel discussion hosted by J.P. Morgan in Singapore, finance and treasury directors of three major multinational firms discussed the impact that changing dynamics in international trade are having on their businesses amid globalization, protectionism and rapid advances in technology.

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Moderator & Panelists

Agatha Lee

Head of Global Trade
& Loan Products,
Asia-Pacific, J.P. Morgan

Moderator

Freddie Koh

Finance Director,
Pfizer Asia Manufacturing

Panelist

Aditya Renjen

Vice President,
Investor Relations & Treasury,
Olam International

Panelist

Christopher Teo

Regional Treasury Director,
Invista Singapore

Panelist

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How are globalization, protectionism and geopolitical risks impacting the way you do business?

Christopher Teo (Invista)

The Belt and Road initiative will have a significant impact on trade. We see it as a trade enabler, especially for investors, as China’s middle and upper classes grow. Their consumption patterns would drive our business and help sustain and stabilize our firm’s growth momentum.

Aditya Renjen (Olam)

The advantage of an agri-business like Olam is that food demand is less impacted by commodity and economic cycles. As long as trade is open, agri-businesses like ours will always have a role to play.

Freddie Koh (Pfizer)

I don't think any company will be spared from geopolitical changes, especially protectionism. For pharmaceutical companies like Pfizer, protectionism makes it difficult to source key ingredients in certain countries.

J.P. Morgan’s view

A political shift to protectionist and populist policies represents a threat to trade growth. The announcements of trade tariffs by the U.S. and retaliatory action by China have raised concerns of escalating trade tensions but our base case assumes a bumpy path of negotiation instead of a fully-fledged trade war.

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How do new banking and Fintech platforms and solutions impact supply chain financing?

Freddie Koh (Pfizer)

Supply chain financing is relatively new when compared with the U.S. and Europe I was skeptical about the benefits, but the reality is that you can leverage on your credit standing to support your suppliers with lower financing costs with mutual benefits to both parties.

Aditya Renjen (Olam)

In the food supply chain, new Fintech offerings definitely have a role to play. They can enhance traceability, reduce costs and also provide non-traditional sources of funding to those or who haven’t or can’t be served by mainstream banks.

Christopher Teo (Invista)

It’s important to keep in mind that the digitalization of trade is a journey. Blockchain won’t happen overnight. It will probably take ten years, but we want to start the journey today.

J.P. Morgan’s view

As working capital management becomes a greater priority for corporates, the supply chain finance proposition will continue to gain traction in new industrial segments, particularly oil and gas and the metals and mining sectors. Meantime, the advent of blockchain, which combines peer-to-peer networking, smart contracts and cryptography to create a decentralized ledger of transactions and other information, also opens up exciting possibilities for streamlining supply chain processes.

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Ten years down the road, where will we be in terms of trade digitalization?

Christopher Teo (Invista)

I'm a firm believer in blockchain. Also, we’ll probably see the widespread use of robotics. If you call the bank to check on your account today, you are already talking to a chat bot.

Aditya Renjen (Olam)

Trade digitalization is all about trust - whether or not to trust new systems or new ways of doing things. One key factor underlying that decision is your experience with the technology.

Freddie Koh (Pfizer)

It’s not about changes in the future because today’s technology already has the potential to transform the way that trade and supply chain work. The problem is the incentive structure. It’s favorable to retail banking, which is why you see so much innovation there.

J.P. Morgan’s view

As trade becomes increasingly digitalized, it opens the door to new players and could render traditional trade finance providers obsolete. Banks must adapt to this new environment to remain competitive. Companies must do the same. Many have already modernized their approach, where purchase orders, product specifications and design images are sent electronically from supplier to purchaser, while invoices and packing lists are exchanged efficiently over email. Digitizing trade finance is the next logical step.

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