Trade Finance Global (TFG) sat down with Ameriabank to discuss how shifts in the global trading ecosystem have affected the Armenian economy. 

The global trade finance industry has seen significant shifts over the last few years. 

The pandemic’s impact on the trading landscape acted as a double-edged sword; on the one hand, the adoption of digital tools was expedited, and on the other, supply chains suffered under the strain of lockdowns. 

The year 2022 has added to such complications, seeing global food and energy crises, high inflation rates, and geopolitical challenges stemming from the Russia-Ukraine conflict. 

To gain an insight into how this affected the banking terrain in Armenia, TFG’s Annie Kovacevic spoke with Gayane Mirzoyan (GM), head of the payment instruments and escrow division at Ameriabank. Mirzoyan’s expertise extends to letters of credit (LCs), bank guarantees, documentary collections, escrow services, and import and export financing.

Can you tell us a little bit more about Ameriabank?

GM: Ameriabank is the largest financial institution (FI) in Armenia, offering corporate, investment, and retail banking services. 

In 2021, Ameriabank was the first in the market by key financial performance indicators with the following market shares: assets (15.6%), liabilities (15.9%), loans (16.9%), equity (14%), and net profit (23.4%).

In recent years, Ameriabank has continued efforts toward digital transformation, improving efficiency during the pandemic and increasing demand for digital services. 

Driven by growing consumer demands, the bank has developed and launched a digital ecosystem covering virtually all banking services. 

What does the current trade and supply chain finance landscape look like from an Armenian perspective?

GM: The Armenian trade and supply chain finance market is represented by banks with a full spectrum of products in line with international rules, regulations, and local legislation. 

Armenia is primarily an importing country but has seen rapidly growing export levels in recent years; larger local companies have become more informed, actively using trade and supply chain finance tools to facilitate their operations. 

The demand has also been growing among small- and medium-sized enterprises (SMEs) that use such tools for transactions with new counterparts, receiving better trading terms and financing in more convenient conditions. 

Armenian banks support SMEs by offering services tailored to their unique needs.

How do you think that COVID-19 impacted banks and trade finance in emerging markets?

GM: In general, COVID-19 and the Russia-Ukraine conflict have negatively impacted banks in emerging markets. 

COVID-19 introduced restrictions worldwide, raising concerns about the timely delivery of products and services. 

Lockdowns imposed by governments caused companies to bear tremendous losses, disrupting operations and supply chains. 

However, Armenia saw the introduction of several governmental programs to help companies cope with the consequences of the lockdowns and delays. 

These new measures, combined with the support programs adopted by local banks, allowed the most vulnerable companies to overcome challenges. In turn, banks began to look for ways to revise and diversify their trade finance business. 

Despite the pandemic, in 2021, Ameriabank sustained strong results, with the bank remaining the Armenian trade finance market leader. 

Additionally, Ameriabank is actively involved in trade facilitation programs with all major international FIs, including European Bank for Reconstruction and Development (EBRD). 

In addition to its issuing bank status with many international FIs, Ameriabank is the first Armenian bank to receive confirming bank statuses under the EBRD’s Trade Facilitation Program (TFP) in 2013 and under the Asian Development Bank’s (ADB’s) TFP in 2018. 

What is your view on the impact of the recent Russia-Ukraine conflict on banks and trade finance in your market? How has this impacted clearing, access to foreign exchange (FX) services, and settling international payments?

GM: From a trade finance perspective, the main difficulty in Armenia is blocked transportation routes. Companies have been bearing additional costs to change usual routes and bypass conflict regions.  

Simultaneously, with the introduction of new sanctions on Russia, intermediary banks took a somewhat evasive approach to transactions for parties related to, or routes involving, Russia––irrespective of whether such parties or goods fell under sanctioned lists. 

The same situation happened with international companies covering the Armenian region, with offices in Russia. Here, once again, the intermediaries would reject such transactions.

This catalysed a shift wherein businesses considering trade finance products looked for alternative business opportunities with new partners, via new routes and in new countries. 

Ameriabank has provided continuous support to its clients and worked out quick solutions to maintain the business continuity of client operations.

How can digitisation help innovate in cross-border payments and escrow banking?

GM: As international e-commerce is growing exponentially, cross-border payments have become well-integrated into the daily operations of businesses. 

Digitalisation and innovation have become pivotal components for improving the customer experience. The primary focus on improvement is to secure seamless, instant, and cheaper cross-border payments for the banks to remain competitive among peers and keep pace with technological change in the global marketplace. 

Some of the latest technologies––such as machine learning, artificial intelligence (AI), application programming interface (API) connectivity in payments, virtual account management, and digital escrow––are considered the directions the banks are leveraging. 

All of these features are aimed to ensure visibility and transparency of payments and decrease risk exposure and process complexity. 

Beyond the customer experience and retention benefits, digitalisation of the transactions allows FIs to expand into new markets and ultimately achieve a better return on investment (ROI). 

What are your thoughts on CBDCs?

GM: The rapid spread of cryptocurrencies issued by private businesses has prompted central banks worldwide to adopt their own central bank digital currencies (CBDCs). 

The primary rationale behind this is a desire for better control over the currency. Like many central banks, the Central Bank of Armenia has considered a concept of its own digital currency, but not much progress has been made in this direction yet.

Some of the benefits of central banks issuing digital money include better-regulated options for using digital currencies, reduced inefficiencies, and shortened payment value chains. 

Central banks can also offer better-controlled options for using digital currencies to reduce inefficiencies and shorten the payments value chain.

It is clear that CBDCs make transactions straightforward and offer financial inclusion for people without physical access to banking. 

However, most concerns and ongoing debates are focused on the high volatility and risks associated with digital currencies issued by regulators, particularly privacy risks for citizens and security issues.  

What does the future of banking look like in Armenia? Where are the growth areas?

GM: Armenia has a strong and relatively stable financial system dominated by well-capitalised banks. 

Tested against COVID-19 and post-pandemic economic shocks, this assured stability will be integral for further development. 

Among other challenges, banks are facing changing consumer behaviour. The digitalisation of financial services allows banks to embrace new technology, rapidly integrate new digital services, and shift to a more flexible organisational structure, including governance and risk management policies. 

As the leading bank in the country, Ameriabank, for several years now, has invested considerable financial and human resources in its digital transformation. 

This includes upgrading all of the components mentioned above and creating seamless digital solutions across a range of financial products, all to secure a leading position in the technologically-enriching banking industry for the coming years.