New trade platforms to most benefit SMEs

COMPANIES trading across multiple jurisdictions - and SMEs lacking the resources of the large multinationals to trade digitally - are likely to benefit most from new trade finance platforms being developed in Asia . . .

ONE project, known as the Hong Kong Trade Finance Platform, has gone from proof-of-concept to production in 18 months.
It is just one plank in development work currently under way in Asia to allow adoption of distributed ledger systems into trade finance transactions.
Such platforms could ultimately help transform the way trade finance is transacted around the world.
For example, the Hong Kong platform could be connected to similar ones currently under development in Singapore.
Beyond that, conceivably, further work at a regional level could take on a multilateral focus, integrating other systems which may be in incubation today.
ANZ is one bank with a front seat in the current developments, witnessing first-hand what Michael Lim describes as a dramatic technological revolution that is poised to sweep across the global trade finance system.
Lim, ANZ's Head of Trade and Supply Chain, points to a decision by the Monetary Authority of Singapore (MAS) and the Hong Kong Monetary Authority (HKMA) in October last year to collaborate on development of a global digital trade network.
In December, the extent of co-operation widened, with MAS and the HKMA agreeing to jointly develop a Global Trade Connectivity Network (GTCN) to digitalise trade and
trade finance between the two cities.
GTCN is cross-border infrastructure based on distributed ledger technology (DLT). Potentially, the aim of MAS and the HKMA could be to expand the network in the region and globally.
The Hong Kong and Singapore authorities aim to build an information highway using DLT between the National Trade Platform in Singapore and the Hong Kong Trade Finance Platform, to make cross-border trade and financing cheaper, safer, and more efficient.
Lim says ANZ became party to both the HKMA and MAS projects last year.
Ping An OneConnect Financial Technology Co. was selected as the technology vendor to build the Hong Kong platform.
It is expected that the Hong Kong platform will connect with other jurisdictions, initially mainland China and Singapore.
The first live trades on this platform are expected to be done through the head offices of participating banks
Lim says that, because the systems of these banks will be connected to the platform in Hong Kong, these banks' overseas branches could effectively take part in the project.
"For example, ANZ runs the same system for its trade systems in 34 markets," he says.
"So, theoretically, our branches can connect and integrate with either the HKMA trade platform or the Singapore platform."
It is an exciting development, Lim says, although he notes that the blockchain platforms have limits at this stage.
"The key limitation is that, initially, not all trade documentation will be digitised to allow it to be transmitted or shared by these systems.
"You will still have a lot of Government documentation or bills of lading which need to be physically handled."
"Until documentation is fully digitised, banks' customers won't be able to get full efficiency from the systems.
"But what the systems will do is enable banks to match documents in an encrypted way to ensure that they are valid. This gives the bank a greater ability to reduce the risk of fraud, eliminate paperwork and give governments the opportunity to track transactions.
"This helps in the identification of financial crime and money laundering."
Lim expects companies that trade across multiple jurisdictions -- and, very likely, SMEs who lack the resources to build proprietary platforms like large multinationals to trade digitally -- to benefit most from such platforms.
 "We believe that building this infrastructure will support the big multinationals and large corporates, but, ultimately, it will be SMEs who benefit most -- because the platforms will provide the infrastructure to trade globally.
"We are very happy with the pace of progress. When you think about the development --historically a project of this magnitude would take years to get up and running."

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S'pore banking sector develops nextgen blockchain
THE Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) are leading a consortium that has successfully developed software prototypes of three different models for decentralised inter-bank payments and settlements with liquidity-saving mechanisms.
The project, conducted together with 11 financial institutions and five technology companies, is Phase 2 of what is known as "Project Ubin", which explores the use of blockchain technology for clearing and settlement of payments and securities.
Singapore now has its own national trade platform, and is building on it to broaden usage.
Another Singapore-based project is CCRManager, a global digital system that connects buyers and sellers of trade finance assets in the secondary market.
CCRManager has been created with the support of MAS as a web-based portfolio management system incorporating data analytics, market benchmarking and pricing capabilities. It currently has 52 members across the globe, including banks and non-bank financial institutions.
MIke Lim says ANZ will be able to purchase and sell assets through the CCRManager platform. "The system will help us distribute risk more efficiently and to service our customers faster."  One way the system can help, he says, is by allowing banks to recycle assets.
"Every organisation has a credit limit associated with counterparties that we deal with.
"When we get up to those limits we can recycle the assets to allow ongoing service to our customers."
A parliamentary standing committee in Australia is looking at the appropriate way forward for Australia to digitise its trade flows.
Ultimately, Lim says, the trend is to integrate all platforms into a global system. "That is our intention in the long run. We are trying to develop the broadest digital network that we can. The word at the moment is 'interoperability'.
"A lot of other consortiums in the market are engaging to discuss standards and interoperability because everybody understands that we need the broadest possible network if we are going to get maximum value."
The practical execution of projects in Asia-Pacific is driving various groups to come together and discuss the issue of possible integration, says Lim.
"These issues are also being discussed in global forums, like the World Trade Organisation, and between different countries," he says. "There is a huge opportunity here to get some consistency, and some momentum, behind work that is potentially being done at a global policy level.
"If you have got Hong Kong and Singapore and Hong Kong -- plus a consortia of banks from multiple jurisdictions -- you have a real opportunity here to develop uniform standards."
But Lim cautions that it is important to be pragmatic. "While we want global standards, it is unlikely that we will have them prior to these many systems going live," he says. "So there will be regional agreements to support major trade routes, and it will be a commercial reality that will happen faster than global standards -- because practicality will demand it."