In this 2020 interview series, TFG spoke to 20 experts in trade, receivables and supply chain finance.

An Interview with Finastra

Name: Iain MacLennan

Position: Head of Trade & Supply Chain Finance

Organization: Finastra

Interviewed by Nikhil Patel (NP), Analyst, Trade Finance Global

2019 – The Year of Open APIs?

Nikhil: In 200 words, what were the key highlights and opportunities of 2019 from an industry perspective in trade, receivables and supply chain finance?

Macro view / geopolitical

The trade dispute between the US and China, plus Brexit, have had a significant impact on trade throughout 2019. These have generated a level of uncertainty in the marketplace, which impacts both trade flows and overall investment.

Banks though have used this as an impetus to focus more on the effectiveness of trade from a back-office processing perspective. They are trying to minimise any additional costs/impacts to their customers, so innovation and efficiency are coming to the fore in their trade processing.

Technology / innovation

Rethinking the Customer Journey for Trade Finance – A Trade Finance Talks TV interview with Finastra, on Bank and Fintech Collaboration:

We see much more maturity in the offerings from fintechs as well as broader collaboration across the industry. With the use of open APIs, what were traditionally closed systems are now bringing in other capabilities to extend their offerings, for instance in document checking/compliance. The process of checking documentation against the defined trade rules can now happen in a matter of minutes using services that combine OCR, ML and AI. Previously this would have been measured in multiple hours or days.

We are also seeing fintech developments that started in other areas such as payments coming into the trade space, for instance entity or network relationships. Plus, most operations functions are seeing an increase in Robotic Process Automation (RPA) for routine and repetitive tasks.

Regulation / Compliance

Government policy continues to demand better due diligence, for instance related to Know Your Client (KYC) and Anti-Money Laundering (AML), for all the right reasons. Banks are looking to technology and big data to help address compliance to these regulations.

NP: What are your top predictions for trade, supply chain and receivables in 2020?

Macro view / geopolitical

It is a challenging environment, and at the World Trade Symposium there was much discussion in regard to whether we are moving away from a rule to a power-based system. Even if we see progress on one hand, based on the last eighteen months we know that can be reversed almost overnight. Therefore, we will likely see a continued period of uncertainty over the next twelve months.

Technology / Innovation

We will see much more collaboration with regards to open APIs and selecting services from an end-to-end trade servicing perspective. In addition, we will see new applications of services already available in other sectors within the trade space. To this end I think we’ll see significant adoption of networks that are currently in play, but perhaps not in line with their expected interaction models.  There will also be greater integration of multiple technologies to meet the “customer need” whether that is OCR, AI and ML in compliance-checking (i.e. Conpend, Traydstream or others) or another combination of technologies around network of networks and combining multiple previous isolated flows; it’s going to be exciting.

Regulation / Compliance

I am hopeful that we will start to see more policies that support digital trade, not simply the focus on due-diligence that we have seen to date. There is evidence of this but we need to see this across the globe. After all trade is global in nature.

2020 Predictions in Trade and Supply Chain Finance – A Finastra Perspective

NP: In 200 words, what are the biggest challenges in trade, receivables and supply chain finance you predict for 2020?

As we have seen in 2019 Protectionism and Policies create challenges for global trade, whether it is in allowing the effective servicing of trade or simply by providing a level of uncertainty that inhibits trade. 

We need trade to be open and fair, but protectionism and current policies are making it harder to address the $1.5 trillion global trade finance gap. Banks are finding it hard to validate the underlying SME base, so they’re reducing their engagement with that part of the market.

Data localisation policies which inhibit the open transfer of data present a challenge, as the ability to pass on information becomes problematic. What we need in trade is openness and transparency with regards to trade flows, but there is a big question about how this can coexist with the enforcement of data localisation policy.

As we know, in most if not all markets, regulation always lags technology, in this case especially for policies that relate to digital trade. Technology is a huge enabler, and a great source of market innovation, and policy needs need to catch up.

NP: What are the key priorities for Finastra in 2020?

In 2020, we will continue our journey in opening up trade for our clients and their customers.  We will utilise FusionFabric.cloud, our platform for open innovation to bring more open APIs and applications to the market to support this journey.

Having worked in transaction banking for over twenty years, I’m now seeing an appetite for collaboration and openness throughout the industry. We have a view that we know we don’t have to build everything ourselves and we can leverage a great partner ecosystem. 

Open APIs are allowing Finastra to bring the best components of other partners into our systems, allowing our customers to benefit from innovative best-in-class capabilities. 

We are part of our way through our journey onto the cloud, with our solutions already in the cloud from a trade perspective with Fusion Corporate Channels and Fusion Trade Innovation. It is now working with clients on how they adopt this new opportunity. To this end FusionFabric.cloud is a crucial enabler for us on both our cloud and open API journey.

NP: What’s your top prediction for a technology that you think will truly kick off / have the most success in 2020?

I like the “Network of Networks” concept, and I think it truly has a chance to “kick off” or “kick on” in 2020. This could give customers a user experience that they have never had previously, incorporating multiple levels of information into a seamless view, irrespective of its documentation, logistical or another form of information. Talking to a number of banks, there is a belief that the networks will be selected by the corporates and banks will integrate into these. This is a great opportunity for Finastra and we are actively pursuing this with a number of our clients. One other technology which actually links quite strongly into the network of networks is the Internet of Things, again providing a level of information that we have never had to date.

Podcast: Iain MacLennan, on Policy in an Era of Digital Trade

Read our trade finance 2020 predictions here