Treasuries often lack skillset diversity as they are usually small teams, argued Ebru Pakcan, treasury and trade solutions EMEA region head and managing director at Citi.
“Treasury teams are generally small, and they are not always very open to ideas. They don’t have a big mix of skillsets,” she said at a trade finance roundtable.
One example she cited was a resistance to real-time payments because they are concerned about real-time fraud.
When trialling new tools and techniques, “people need to see things go wrong but the solution still comes through for them to feel comfortable,” argued Pakcan.
Fraud and cybersecurity is a particularly big issue for treasuries with large operations as there are so many parties that typically interact in trade finance.
“For the last few years, the conversation was about cyber security in London, above anything else,” she said.
Growth mode
Despite some challenges, most of Citi’s clients are in “growth mode” and the conversations are very positive, according to Pakcan.
“There is a lot of conversation about how we can improve the working capital management of the customers and risk management,” she said.
While there have been many large geopolitical shifts in the last two years, such as Brexit and Trump, Pakcan says she hasn’t witnessed any large business decisions made by companies as a direct result.
“Those who have made big changes were talking about it previously,” she said.
“We haven’t yet seen any very big moves by companies in terms of changing fundamental legal structures or big investment structures. I don’t expect to see any of that any time soon,” Pakcan commented.
However, for the last six months companies have been looking at their cash sitting outside the US following a rise interest rates and US tax reforms.
What are the impediments to digitalising trade finance today?
Trade finance involves a patchwork quilt of enterprises whether it is customs, imports, exports or banks.
“Usually the slowest component dictates the speed of digitalisation,” said Murat Demirel, managing director and EMEA tread co-head, Citi.
But if something goes wrong, how do you deal with disputes when the process is completely digitalised?
Demirel argues this is one area that currently prevents the industry from becoming completely automated.
“Some of the disputes are about regulations and local laws. The fewer counterparties around a transaction, the easier it is to digitalise,” he explained.
Can blockchain save the day?
Technology is overtaking product development in trade finance, argued Parvaiz Dalal, managing director and EMEA head of working capital finance at Citi. “Technology now comes to the forefront,” he added.
Dalal reported seeing strong interest in digitalization by clients in less developed markets.
“In the Middle East, for example, we are seeing extremely high take-up of digital technology every a year…. These tools and platforms give them the ability to take their trade finance to the next level,” he explained.
However, Citi’s optimism towards digitalization does not extend to blockchain, as Pakcan said: “We have a healthy scepticism about the number of blockchain consortiums there are.
“We don’t want to place too many bets on any too many consortium systems that will never come together.
Instead, Citi has digitalised its back office to become more efficient with a high degree of success and accuracy, according to Pakcan.
“We have chosen to focus on things that are under our control. What is under our control is our own back office,” Pakcan explained.
“Every piece of trade-related paper that comes into the back offices is being scanned and digitalised,” she added.