Given the recent upheavals and uncertainties relating to tariffs and trade, how will regional banks likely respond to the consequent shifting supply chains?
The tariff situation is set to reshape emerging trade corridors, and for banks, our role is to help clients manage risks, seize new opportunities and enhance the resilience of their supply chains – whether existing or new.
We expect both intra-regional trade and trade between Asia and MENAT to continue to accelerate, and in particular, trade from India and China into MENAT. With our deep network and unique position as the leading international bank in both Middle East and Asia, HSBC is well-placed to support clients with local knowledge as they expand and adapt their suppliers, buyers into new markets or also look to set-up corporate offices in the GCC.
How can regional banks assist with any short- or medium-term difficulties trading businesses may face in the current global economic environment?
A key focus is in helping clients to manage risk and uncertainty. Solutions like trade loans for pre-and-post shipments can help customers who are facing challenges bridge some of the timing gaps they may suddenly have between fulfillment and payment. Structured trade products can also help support our clients but also the suppliers within their supply chain and even Letters of Credit provide additional risk mitigation when trading with new buyers and suppliers.
As the world’s largest trade bank with over 5,000 trade specialists across a footprint covering 90% of global trade, HSBC is uniquely place to help clients understand the trade environment and help solve problems with innovative product solutions.
Transaction banking technology brings key benefits to trading communities, so does it follow that our current challenges will be handled more effectively than before it was adopted?
There are many learnings from the Global Pandemic in 2020 which show that the ability to digitise in trade finance is a key differentiator. It can be and indeed, has often proved to be a lifeline for businesses, and will help to control risk especially during times of uncertainty or when companies are seeing new suppliers and buyers across markets. For example, HSBC’s TradePay allows clients in the Middle East to access trade loans within minutes, giving companies quicker access to cash flow management and flexibility in their trade transactions, and the HSBC Trade Solutions platform which uses advanced technology to provide clients with real-time data analytics and insights so that companies can monitor their transactions, assess risk and make informed decisions in real time – putting them at a significant competitive advantage in an increasingly fast-paced market.
What effects are Real Time Payments systems such as Buna and AFAQ having on regional trade finance activities?
Innovations in the region’s payments ecosystem are having a significant impact on trade finance. Streamlined payment infrastructures will support supply chain financing by reducing liquidity risks and ensuring timely payments to suppliers, which is critical in sectors like manufacturing and agriculture and can help boost financial inclusion across sectors.
For financial institutions, Real Time Payments (RTP) systems are also enabling the development of more innovative trade finance products, including dynamic discounting, and are allowing for greater visibility on transactions.
However, while moving in the right direction, the streamlining of infrastructure is still a work in progress, with adaptation costs, uniformity of development and cybersecurity risks all acting as challenges to implementation.
In short, as the market continues to mature and embed, we expect that the long-term effects of RTP systems will be to drive greater financial inclusion, lower costs and deepen trade connectivity, particularly for emerging markets and SMEs.
Background
The primary benefits of RTP systems for companies include:
- Greater access to finance – with increased transparency and efficiency that makes it easier for small and medium sized enterprises to benefit off trade finance solutions;
- Greater supply chain visibility for companies, as real time payments and messaging give more visibility into payments and logistics flows, allowing companies to optimise their supply chains;
- Enhanced risk monitoring, due to detailed transaction data that enables the finance institutions to better evaluate creditworthiness of companies, reduce risks and do deep-tier financing.
How well are regional trade finance services adapting to the growing economic strengths of the GCC?
Regional trade finance services are increasingly aligning their strategies to support the GCCs growing global influence and rapid growth. HSBC has been moving in lock-step in with the region’s economic transformation and shift away from a hydrocarbon dominated economy to a more diverse, innovative-driven economy. In tandem, we have been deepening our expertise in emerging sectors such as technology, healthcare and industrials to support the broader transformation framework of the GCCs ambitious economic plans. We are also embedding ESG across our sectors and product propositions, as well as accelerating digitisation in line with the GCC strategy to help improve efficiency, reduce fraud and improve operations.”
