Hari Janakiraman, head of Global Trade and Supply Chain Products and International TSC Products Solutions at ANZ, discusses how the pandemic has fueled innovation in trade finance.
Global Finance: What was the most important lesson you learned at ANZ in 2020?
Hari Janakiraman: The most important lesson from our perspective was that if trade finance is to continue to work, we have to move away from paper documents faster than ever before.
GF: How has the pandemic accelerated that process?
Janakiraman: What happened in the last 12 months or so, from a trade finance perspective, was an acceleration toward adopting digital initiatives—from the most basic receipt of customer instructions via an electronic bank channel to, in some cases, emailed PDF documents.
An increasing number of employees and customers want to participate and become part of established, sophisticated digital solutions. These could be digitized bills of lading, digitized invoices, or platforms that provide access to sublating [assimilating] trade finance at a very large scale using digitized purchase order, invoice and shipment data.
When the initial phase of Covid-19 struck and countries locked down, banks could not send documents by courier, because courier services were not available in certain countries. In a matter of weeks, they changed their policies and processes for accepting documents under letters of credit via email and other electronic channels.
GF: Give us an example of improved efficiency.
Janakiraman: When it comes to the final delegated authority for trade finance deals and transactions, I’m at the end of the process. I typically would get a long chain of emails that had various documents and attachments. If everything were proper and available, it would take me about 45 minutes to understand what was being presented and make a decision. Now, I get notifications saying that I have something to review. When I open the system, all the documents and facts are neatly organized and nothing is submitted without the proper information. It has reduced by half the time it takes me to decide.
GF: Many technological changes were made in haste. How permanent will these adaptations prove to be? Will companies go back and implement more-elegant solutions?
Janakiraman: I don’t think that they will go back to earlier methods; they are only going to move forward. At the start of the pandemic, we concluded that we would need to accept electronic signatures on various types of documentation from our customers within a couple of weeks. We came up with a very basic strategy regarding which documents we could accept with e-signatures. There are sophisticated e-signature solutions on the market, such as cloud-based e-signatures and QR codes, that we brought into our business to provide our customers and ourselves with a better experience.
The pandemic also provided a good case for the trade industry to have a dialogue with legislators and governments regarding modernization of laws to enable greater digitization of trade documents. Different countries are at different levels in their digitization adoption. For example, some states in Australia probably do not recognize electronic signatures affixed to indemnities and guarantees, so you need a wet signature.
We accelerated use of technology to digitize products such as guarantees and supply chain finance. These changes are here to stay and grow.
GF: Has the situation led to the adoption of technologies that were not already in the bank’s development pipeline?
Janakiraman: It is more a case of accelerating what was in the pipeline before the pandemic. In terms of new thinking, it is more in how we can accelerate investments in that space so that we can adapt and expand them into other areas within the bank. E-signatures would be such an example; we are looking at how to adapt and build on solutions originally built for our retail customers.
GF: Where do you expect these trends to take you in 2021?
Janakiraman: We expect continued growth and use of machine learning and artificial intelligence in trade finance. Their use started in our operations area, but we expect that to grow. We also expect to use machine learning in other industries and for it help with regulatory processes, such as monitoring trade-based money laundering and other financial compliance issues.