Trade Finance: Streamline Supplier Management

Trade Finance Video Q & A: Watch Now!

Trade finance is instrumental to maintaining the flow of international trade. A key aspect of trade finance operations is managing the efficient onboarding and servicing of a complex ecosystem of buyers and suppliers. To do this, a bank's trade finance operation may require 20-50 employees managing thousands of buyers and suppliers across the world, while toggling between dozens of different platforms to accomplish certain steps in their journeys. It's a highly manual, paper intensive, costly operation.

In this interview with OvationCXM's Tyler Gerber, we discuss the challenges of managing this ecosystem effectively, and he shares trade finance solutions available to streamline supplier management.

Q: What is trade finance?

A: Trade finance is a bridge between importers (buyers) and exporters (suppliers), providing the necessary financial tools and support to facilitate international trade. This typically includes processes like account opening, receivables, payables, credit management, and risk management.

Buyers might be large companies like Walmart or Foot Locker, and suppliers could be textile manufacturers in Vietnam or electronics manufacturers in Korea. Maintaining the flow of funds is crucial to their relationship. Without a cohesive system, the logistics of trade could be disrupted, holding up a shipment in Bangladesh or keeping a plane with goods stuck on the tarmac.

The goal of trade finance is to maintain the flow of funds and guarantees throughout the global trade network, facilitating these global trade relationships. By improving cash flow, cross-border market access and mitigating risk for both buyers and suppliers, trade finance operations ensure smooth transactions for all parties. Trade finance enables a highly functional financial system that instills confidence in all stakeholders in the trade relationship.

Q: How do banks currently onboard and manage suppliers in their trade finance portfolio?

A: The trade finance buyer/supplier onboarding process varies from bank to bank, supplier to supplier. That’s one of the main challenges. In some cases, they are onboarding a single supplier, a single buyer or an enterprise organization with a group of buyers and suppliers. They may be new to the bank or an existing bank customer, but each requires different processes around things like KYC.

Factoring in these different types of buyers and suppliers plus the individual products and services, there are hundreds of permutations trade finance relationship managers are expected to oversee.

Here’s a typical scenario. The bank brings on a new supplier. Program managers work to onboard them onto the bank’s platforms. Depending on the criteria, they’ll kick off one of hundreds of processes to get them onboarded, including requirement gathering, verification, jurisdictional and geographic requirements, KYC, AML and more. All of these tasks are done manually.

Once a supplier goes live, trade finance teams have to effectively manage that relationship to ensure a seamless transfer of funds. Managing cross-border compliance, transaction processing, document extraction and document checking is all managed by a single person or a single team. The systems and tools they’re working out of don’t support these day-to-day efforts.

Q: How important is supplier management in trade finance?

A: Supplier management is a critical component of trade finance. It ensures entities are onboarded correctly and that the trade finance system is configured to ensure seamless money transfers. Once everything is properly configured, money can flow smoothly and both sides of the transaction can operate without disruption. It ensures the long-term success of global trade networks.

Q: What are some of the biggest challenges in trade finance?

A: There are four main challenges created by trade finance ecosystems.

1. Complexity of Onboarding Paths: One major challenge in buyer/supplier management in trade finance is the sheer number of permutations relationship managers encounter during onboarding. With hundreds of buyers and suppliers being onboarded simultaneously, each may have unique requirements based on their origination channels, geographical locations and jurisdictions. It requires careful navigation throughout. 
2. Diverse Documentation Requirements: Different countries require different documentation which adds to complexity. Teams must manually review and manage a slew of documents, leading to potential delays and errors if something goes awry.
3. Lack of a Unified Repository: It's difficult to manage the intricacies of onboarding without a single platform that captures and holds necessary information in one centralized place.
4. Need for Flexibility: Trade finance team must onboard buyers/suppliers efficiently and effectively the first time, but also have a system that is flexible and allows them to edit journeys to accommodate different scenarios. Since global trade regulations and leadership change regularly, organizations need procedures to monitor and adjust to evolving compliance requirements quickly without slowing or interrupting onboarding processes.

Q: What do trade finance executives within banks say about the current way of doing business?

A: Banking leaders tell us the organizational complexity of the trade finance ecosystem has created a massive administrative burden. Like most commercial banking products, trade finance solutions are very much third-party enabled. This ecosystem is not well connected or streamlined, so information sharing is manual, and communication is not great. Banks also tell us the legacy systems lack flexibility. This complexity coupled with siloed information blocks visibility into journey progress for teams doing the work, but also clients who don’t know where they are in a process or what’s expected.

Q: What is the investment in time, staff and processes to manage a typical enterprise supplier network.

A: Banks make significant investments in both people and technology to manage their trade finance buyer/supplier ecosystem. Onboarding journeys can be months-long projects, and of course, servicing of those relationships is ongoing.

From our experience, a relationship manager oversees 120-140 buyers or suppliers. When scaled to thousands of customers, it requires a team of 40 to 60 people. Layering in the technology investment for multiple platforms, it can easily reach eight figures of annual investment to maintain status quo in trade finance operations.

Q: What are the business outcomes that result?

Trade finance is a collection of highly manual processes, which lead to three poor outcomes: 1) The need for more staff as the ecosystem complexity grows. As with any human process, It can become a time-consuming and error-prone process, driven by missing or redundant information in silos and the need for ongoing reach-outs to get updates or information to progress the journey. All of that leads to 2) increased operating expenses and 3) slower time to revenue. 

Q: How does OvationCXM solve trade finance buyer/supplier management?

A: OvationCXM offers three key benefits. We help build and orchestrate journeys and allow teams to manage them at scale. Then make the data from those day-to-day interactions accessible for analysis to optimize each journey moving forward.

1. Build: The platform empowers teams to create, edit, and deploy dynamic buyer and supplier journeys using a cloud-based editor. This feature provides the necessary tools for teams to manage the journeys they are responsible for. It allows for the configuration of ideal state journeys, including onboarding and management, while also accommodating various jurisdictional and geographic requirements. The system supports the creation of dynamic paths that account for the different variables across origination channels.
2. Manage: Once the journeys are configured, the platform provides program and relationship managers, who typically work across multiple systems, with a single interface to manage the entire experience from end to end. From the buyer and supplier perspective, it offers an omnichannel service gateway that delivers real-time visibility into their journeys. Users can see where they are in the process, what is expected of them, and what documentation they need to provide to ensure smooth progression from point A to point B.
3. Optimize: The platform leverages data from every interaction across jurisdictions and products to identify areas that may be slowing down the journeys. This analysis allows organizations to uncover low-hanging opportunities for automation through integrations or APIs, or adjust journeys using our no-code builder.

Q: How do organizations start optimizing their trade finance operations?

A: The first step is to schedule a journey mapping session with OvationCXM. These structured sessions bring together stakeholders from different levels in the organization—to visually lay out every step in a journey in detail.

1. Stakeholder Engagement: The first step involves gathering all relevant stakeholders from various levels within the organization. This includes management, leaders and the operational teams directly involved in the day-to-day processes.
2. Mapping the Journey: During these structured sessions, we collaboratively plot out each step of the trade finance journey. We identify all of the processes, systems and tools currently in use and the teams and third-party partners involved.
3. Identifying Pain Points: As the journey is mapped out methodically, the team works to surface pain points within the existing processes. This collaborative approach encourages insights from different perspectives and roles, providing a more comprehensive view of journey challenges.
4. Defining the Ideal State: By the end of the session, organizations will have a clear vision of the ideal state journey, which will serve as the blueprint for improvement.‍
5. Implementation of Optimized Journeys: Organizations can choose to map their ideal state directly into the OvationCXM system and take advantage of the platform's no-code journey builder plus automations and real time insights to guide ongoing improvements.

Q: What are the outcomes a bank can expect?

A: The Ovation CXM platform has delivered significant outcomes for trade finance organizations and banks. Here are some key metrics that highlight the cost and time savings:

1. Time to Onboard: Organizations utilizing the Ovation CXM platform are experiencing a 30% reduction in time to onboard. This translates to weeks shaved off their historical benchmarks, significantly speeding up the process of integrating new buyers and suppliers.
2. Journey Orchestration and Automation: With the platform's journey orchestration and automation capabilities, including machine learning models for knowledge delivery, teams have more than doubled their capacity to manage buyers and suppliers. Where program managers once handled about 120 to 140 buyers and suppliers, they are now effectively managing over 300.
3. Customer Satisfaction: The improvements in operational efficiency are reflected in double-digit increases in customer satisfaction. Bank customers are enjoying fantastic experiences, particularly with their first impressions of the services provided.
4. Employee Satisfaction: Alongside customer satisfaction, there are also double-digit increases in employee satisfaction. Teams no longer dread the chaotic nature of their day-to-day operations, often described as a "game of pinball." Instead, they benefit from streamlined processes that make their work more manageable and rewarding.

Schedule an introductory call with OvationCXM to discuss the options for updating and modernizing your trade finance journeys.