Digital leaders DBS and Triterras are accelerating innovation to meet mission-critical demand from businesses under pressure from Covid-19.
With the onslaught of the novel coronavirus pandemic, employing the latest technology to digitize business operations and processes isn’t simply about creating greater robustness anymore; it’s become mission-critical for businesses. So says John Laurens, group head of Global Transaction Services at Singapore’s DBS Bank, our 2020 Most Innovative Bank in Asia-Pacific.
“For many firms, be they large or small, contact-free interactions with customers, suppliers and among employees has become a prerequisite to continuing or restarting operations in the new Covid-19 world we’re living in,” says Laurens. The result has been “widespread and rapid acceleration of digital adoption across the markets in which we operate, fast forwarding adoption rates by at least two to three years within the past two to three months. While sadly against the backdrop of the human tragedy that continues to unfold around the world, the increased pace of digital adoption by our customers has been truly breathtaking.”
Businesses need essential banking services, but in a contact-free manner. DBS is facing an accelerated demand for digital banking solutions, including fully digitized, paperless trade financing processes combined with contactless payments, says Raof Latiff, group head of Digital, DBS Institutional Banking Group, and Global Transaction Services product management.
“We have in place an end-to-end digital workflow for document exchange for cash and trade transactions, online account opening, loan applications, electronic payments and collections, reconciliation, reporting and general administrative functions for our clients,” he says. To ensure the sustainability of supply chains, “we’ve accelerated and developed several digital trade financing facilities across the region, ensuring that our anchor clients and their ecosystems of distributors and suppliers have access to funds to tide them over the global liquidity crunch.”
Through the health crisis period, blockchain continues to be a focal point for innovation. Triterras, our Most Innovative Fintech in Asia-Pacific, has added modules—trade discovery, risk management and trade finance, with an insurance module to be launched soon—to Kratos, its blockchain-enabled trade finance and trading platform serving small to medium-size enterprises (SMEs). The risk management module allows lenders to conduct industry-grade know-your-customer/anti-money laundering (KYC/AML) checks, borrower credit report checks, and checks on bills of landing and other key documents. “This helps lenders better assess the borrower’s profile before deploying the requested funds,” says Srinivas Koneru, founder and chairman of Triterras.
The Trade Finance module gives lenders easy access to all trade documents and enables them to originate loans anywhere in the world, allowing SMEs to pursue new opportunities with more confidence. It also provides the borrower with insights and analysis on how the lender is using its funds.
“On Kratos, we’ve had over $5 billion worth of trade transactions recorded since June 2019,” says Koneru. “We have also deployed hundreds of millions of dollars in trade financing since February. Our effective modules are a key aspect of our fast growth.”
In order to close the persistent credit gap for SMEs, however, Koneru says more funding and funding sources are needed.
“Trade finance used to be dominated by large banks. Now that the banks are unable to meet the demand, alternative lenders like funds and private equity managers are interested in entering this space,” he says. But there are challenges. “For example, it is very difficult to originate a loan in Asia and track it appropriately while sitting in London or San Francisco,” says Koneru. “This is especially true since funds, unlike banks, typically do not employ a large back office team to do KYC/AML background checks and detailed transactional document checks at every level. Also, fraud is common, partially because the current process lacks transparency and document alteration is plausible.”
“Blockchain addresses fraud and lack of transparency in the trade finance industry and should be integral in linking lender and borrower,” Koneru argues.
“Since Kratos is blockchain enabled, all trade events are captured in real time, and hashes [a cryptographic signature for each string of data] are stored in blockchain,” he says. “Once a document is uploaded, it cannot be modified; it can only be updated with a new one. There is high traceability, with each action recorded. This limits fraud to a great extent.”
Blockchain also adds much-needed visibility across the trade chain, encouraging lenders to look more favorably on borrowers, he says, which should improve SMEs’ access to trade finance.