The transaction banking business may be undergoing dramatic disruption but the financial institutions active in this space are rising to the challenge and taking advantage of the opportunity to transform their banking business

The transaction banking business is undergoing dramatic disruption, driven by fast-changing technology and customer behaviour. It also faces persistent headwinds including low interest rates, increasing regulatory scrutiny and reduced margins.

Impressively, the financial institutions active in this space are rising to the challenge and taking advantage of the opportunity to transform their transaction banking business, as shown by the innovative submissions in this year’s awards categories.

The Banker’s Transaction Banking Awards are unique in recognising project-based innovation. Each entrant is encouraged to not only outline their overall strategy but also provide up to three examples of how the innovation(s) will help improve their clients’ businesses. 

It is an important differentiator, as this method gives banks outside the top global transaction institutions equal opportunity to win an award for outstanding service to their customers. Of course, the top-tier institutions are also in the running.

This year the main theme of digitalisation, which has dominated the awards for the past few years, continues apace. While 2016 was the year that virtual bank accounts came of age, this year many banks have already built out new products on top of this important innovation.

New technologies, such as application programming interfaces (APIs) and blockchain, have gained in importance in 2017. The Payment Services Directive 2 and the UK’s Open Banking regulations, which both become effective in January 2018, may be driving adoption of open APIs in Europe, but many across the world are beginning to appreciate the impact they will have on th  e future of transaction banking. 

Likewise, many banks are experimenting with blockchain, or distributed ledger technology. The difference from previous years is that many can report real-life applications that will effectively transform specific processes, particularly in trade finance. 

Transaction bank divisions are also engaging in more partnerships with fintech start-ups to solve specific pain points. They are learning from their fintech partners and using agile development and design thinking methodologies, which has the added effect of fostering a faster pace of change within the incumbents.

Impressively, many banks are seeing the value in co-creating with their clients and are developing bespoke solutions, especially at the regional level. This has allowed regional players to step up their transaction banking capabilities and demonstrate a true understanding of their customers’ needs, in some cases rivalling the global players.

This year’s winners show just how far the transaction banking industry has come in rising to market challenges and reinventing itself. Congratulations to all of the 2017 winners.  

Global and Western Europe

Winner: ING Wholesale Banking

ING Wholesale Banking (WB) has scooped the most sought-after title as the leader in transaction banking in western Europe and globally. The bank appears to be going from strength to strength. 

Throughout the past year, ING WB has performed well – successfully growing its business, including transaction services, while maintaining a prudent risk profile. It is selective and grows in market segments that are healthy, while ensuring that its portfolio remains appropriately diversified and within its risk appetite. 

The key to ING WB’s success? Mark Buitenhek, global head transaction services at ING, says: “Transaction banking is all about customer experience. More than ever, customers are demanding simple and efficient products, a seamless and integrated experience, and flawless execution. These demands are the starting point of everything we do. We have developed innovative products, such as virtual cash management, digitalised our offering, worked on improving our customer services and simplified our product offering.”

Its innovative virtual cash management product ensured that it also won the cash management category (see page 58), but it was also the dynamism of this business line that clinched the accolade. As one judge says: “ING has achieved very strong growth in cash management despite operating in one of the most challenging markets – western Europe. Its clear business strategy and client-oriented product offerings have attracted numerous clients. The fact that it has emerged as one of the winners post-RBS withdrawal – notwithstanding the absence of a formal referral programme – has further demonstrated ING’s strength in cash management.”

Over the past year, ING has focused much of its efforts in driving forward innovation in its home market of western Europe, which is the reason it picked up the regional award. 

For example, the bank has implemented real end-of-day cross-border cash balancing in the region, as the shift from notional pooling to physical cash concentration accelerated over the past year, driven by regulatory pressure. ING WB’s solution offers fund concentration at the end of day on the master account and individual end-of-day runs to set participating accounts on target at local end of day.

Physical pooling results in a greater volume of fund transfers between legal entities, viewed as inter-company loans. To meet regulatory requirements, these loans must be accounted and remunerated ‘at arms’ length’. The bank added a real-time loan administration tool to help clients improve their inter-company loan management. The tool has self-learning capabilities: where loans cannot be matched against existing records, the user simply applies an action that is then followed on subsequent occasions. 

ING WB has also launched customised reporting consisting of aggregation services and transaction detail services. This solution enables clients to have their end-of-day and/or intraday statements aggregated and/or detailed on several criteria, for instance by transaction type. In developing these services, the bank has responded to many client requests for more flexibility and customisation of their statements. Aggregation services and transaction detail services are available in most western European countries and the bank is rapidly expanding these services into other ING countries.

As proof of its desire to reinvent itself, ING is currently partnered with more than 90 start-up fintechs dedicated to creating innovative solutions for banking needs, such as money management, payments, lending and mobile on-boarding. These open, collaborative programmes involve multiple partners and provide access to their respective networks, allowing the start-ups to accelerate their development. For example, Easy Trading Connect, the winner of ING’s 2016 Innovation Bootcamp, successful completed the first large oil trade using blockchain technology. 

In the trial, with Société Générale and trading house Mercuria, the time to process a transaction was reduced from three hours to 25 minutes. This breakthrough proves that the commodity trade finance sector, where processes are largely paper based and labour intensive, can be digitalised. Easy Trading Connect can bring clients greater efficiency, lower costs and fewer risks and delays.  

In future ING will continue to accelerate its ability to transform and to do things better, faster and cheaper, “ensuring a ‘wow’ experience in all our interactions”, according to Mr Buitenhek. To futureproof the bank, he believes that ING might even have to disrupt itself and find new growth areas beyond banking via platforms and third-party offerings. “We want to bring the best together,” he says.

Africa

Winner: Standard Bank

Standard Bank Corporate and Investment Banking continues to be leading light in transaction banking across its home markets in Africa, picking up the regional award for the second year in a row. 

“Standard Bank remains committed to identifying, managing and leveraging growth in Africa,” says Hasan Khan, the bank’s group head, transactional products and services. “We are delighted to have received this award for the second consecutive year, which serves to highlight our commitment to partnering with our clients, looking at building the financial infrastructure that will power the growth of Africa’s markets and economies.”

The bank is building out its transaction services, as shown by its awards submissions this year, particularly in trade finance and cash management.

One judge says: “As one of the leading providers in Africa, Standard Bank’s trade finance offering is instrumental to the trade flows in and out of Africa. In a challenging global trade environment, where most players are experiencing revenue decline and, as a result, reducing balance sheet for the trade finance business, Standard Bank’s commitment to trade finance makes it even more important to the overall economic development of Africa. It is also introducing digital solutions into a less developed African market.”

Standard Bank uses its expertise on the ground in 20 markets on the continent to help its clients manage the risks inherent in their trade activities. For example, the bank helped a large commodity trader procure raw agricultural inputs in South Africa through an invoice financing facility to support the local entities procurement requirements.

The bank tailored a facility worth R750m ($56.7m) over a maximum of 120 days. The deal displayed the bank’s ability, from an open account product perspective, to provide sector-specific solutions. It will be facilitated through an online technology platform, showcasing Standard Bank’s ability to automate, streamline and simplify a complex structured trade.

Standard Bank has invested in its Business Online banking portal, with such enhancements as a consolidated electronic view of clients’ liquidity positions, which saves time, expense and the inefficiency of having to physically consolidate spreadsheets across multiple markets. 

The bank has also built out its integrated mobile money solution through Business Online. Customers can now receive same-day statement receipts to speed up their reconciliation process, as well as attain real-time value and finality of their mobile collections.

Asia-Pacific

Winner: Yes Bank

While the Indian banking industry is experiencing much upheaval, the country’s fourth largest private sector bank, Yes Bank, is not only keeping pace but, more importantly, innovating at the same time. The bank has distinguished itself in 2017 through a new range of products and services to stay abreast with business and market dynamics, which means it takes home the award for Asia-Pacific. 

In addition to winning this year’s supply chain finance award (see page 62), Yes Bank has proven it is a well-rounded transaction bank, in tune with its customers’ needs.

For example, Yes Bank has gone beyond traditional virtual account solutions, which were limited to facilitating inward credit and ignored a key client demand for greater ease and automation of reconciliation. Its eCollect solution uses application programming interfaces (APIs) and structured reports to bridge the gap between receipt of funds and reconciliation. eCollect is a plug-and-play solution for faster customer onboarding and eliminates the need for bank involvement in generating virtual account numbers. It also integrates bank and client systems to enable real-time validation, transaction processing and enterprise resource planning updates. 

In the payments space, Yes Bank is using APIs to enable sub-member banks – those that cannot connect directly with the central bank’s clearing and settlement facility – to take fund transfer requests from their customers and within seconds communicate the unique transaction reference number to the sponsor bank. Similarly, the inward payments received on behalf of their customers are validated in the sub-member banks’ core banking system and the amount is credited to their customer accounts or returned on real-time basis if the account is not valid.

Additionally, Yes Bank recently launched its On-the-Go app for an on-demand food delivery company, which wanted to pay staff expenses and incentives. The solution is a file upload-based instant money transfer (IMT) implementation, enabling a remittance based on an active mobile number up to a limit of Rs25,000 ($390) per beneficiary per month. Without having an account, the beneficiary can visit any IMT-enabled ATM and withdraw cash by providing details received on SMS from the remitter. This has led to an estimated 50% reduction of cash handling risk and a 30% reduction in overall risk.

Central and eastern Europe

Winner: Raiffeisen Bank International

Raiffeisen Bank International’s (RBI’s) strength in payments and cash management in central and eastern Europe (CEE) won it The Banker’s transaction banking award for the region. Over the past year, the bank has extended cross-border cash pooling to new countries, centralised its card-acquiring solution and launched a business banking app.

Sabine Zucker, managing director and head of RBI’s trade finance and transaction banking division, says: “RBI strives to improve services and cross-border payments by constantly increasing speed, efficiency, transparency and information and at the same time adapting to the increasingly demanding regulatory environment.” 

For example, RBI has extended cross-border cash pooling to Albania and Kosovo. Even though there is no local cash pooling system in place within Raiffeisenbank Albania and Kosovo and despite complex legal requirements, RBI provides individual cross-border target balancing solutions for the two countries in euro, US dollar or local currency. The bank can now offer cash
pooling solutions – where legally possible – throughout the whole CEE region.

In line with fast-changing market developments in central Europe, RBI has centralised its cross-border acquiring business, Cross-Border Merchant Services, which provides local currency settlement through local RBI entities.

Wizz Air, for example, has selected RBI as one of its card-acquiring partners. Tamas Szegedi, back-office manager at Wizz Air Hungary, says: “Local currency settlement that RBI is providing to Wizz Air is enabling us to avoid a significant part of currency conversion costs, which leads to significant financial savings.” 

RBI is constantly investing in the development of new services in the field of digital banking. The RBI Business Banking App for mobile liquidity management with state-of-the-art authorisation and security standards provides full access to customers’ accounts and liquidity from a smartphone or tablet. Customers get access to all transactions which have been prepared for authorisation and are able to sign payments for the entire Raiffeisen network in Austria and 12 CEE countries.

“By continuously investing in service excellence, technology and new developments in the fields of digital banking, RBI maintains its leading position as a reliable partner across the CEE region,” says Ms Zucker. “We will continue working directly with customers to define and understand their needs, and then custom-make solutions and product innovation.”

Latin America

Winner: Bank of America Merrill Lynch

While the emergence of fintechs, digital commerce and the growth in cross-border payments are challenging traditional transaction banking, Bank of America Merrill Lynch (BAML) is adapting to these changes by taking a holistic approach to clients and by focusing on innovation.

“The key to our success is collaboration – we collaborate with our clients, emerging technologies and industry consortiums to invest in and introduce new technologies,” says Fernando Iraola, head of Latin America, global transaction services, at BAML.

He adds: “Innovation is driving the future of transaction services, and we are focused on creating innovations that enhance the client experience. We regularly engage our clients, leveraging their feedback and working with them to develop new solutions that will help them grow and thrive in Latin America, while connecting them with the rest of the world.” It is this drive and passion that made BAML a shoe-in to take home the transaction banking award for the region.

Over the past 12 months, the bank has invested in its infrastructure and expertise to enhance solutions throughout the region, at a time when many of its competitors are scaling back services. In addition, the bank expanded local capabilities in both Brazil and Mexico, the two largest economies in the region.

For example, in Brazil, due to Nova Cobrança regulations, clients are no longer able to issue unregistered boletos (a type of payment). BAML enhanced its Brazil Boleto Collections solution with an online boleto registration service, allowing clients to immediately register issued boletos in compliance with the regulation. 

In Mexico, the bank introduced enriched text for debits and credits. This enhancement provides all information related to each payment/receipt transaction enabling clients to much more easily reconcile their incoming credits.

Also in Mexico, BAML enhanced its referenced collections service for those clients paid by cheque through a partnership with a local banking partner. The new offering doubles the branch network available for cheque deposit without the need for clients to open an account with the local bank. 

BAML’s approach to client engagement and innovation gives it a competitive advantage. By engaging with clients, leveraging their feedback and working with them to develop new scalable solutions, the bank has a proven recipe to deliver timely, relevant, innovative solutions that meet the unique demands of its clients doing business in Latin America.

Middle East

Winner: Mashreq Bank

Mashreq Bank has a clear focus around customer challenges and objectives, which has led to innovative solutions specifically tailored for the Middle East – so it is no wonder that it picked up the regional award this year. 

According to Rahul Jayakar, head of global transaction services, products and trade, Mashreq Bank has developed a digital strategy for transaction banking that has resulted in easy-to-use solutions and consistent customer experience across delivery channels, supported by a robust cyber security programme.

“Clients today are increasingly demanding transparency, real-time information for transactions and cash positions to get an enterprise-wide view on business. We are always keen to be at the forefront of developments which are new to our corporates in our pursuit to offer our customers the best services available,” says Mr Jayakar.

One judge highlighted the bank’s customised bulk cash and cheque deposit machine, called ‘Mashreq Monster’, as well as its e-wallet integration service and cardless cash withdrawal, as worthy of recognition. 

The Mashreq Monster is aimed at the fast-moving consumer goods sector. Additionally, the bank has partnered with a leading exchange house, with a wide network across the United Arab Emirates, to act as its collecting agent. Customer employees can deposit cash, including foreign currency, and cheques at the exchange house using specially designed deposit slips to aid customised reporting and reconciliation.

Additionally, Mashreq Bank developed a bespoke solution for a leading e-wallet provider in UAE. The customer wanted a single platform to perform top-up service, e-collections, merchant payments, real-time notifications, integration with its own system and auto-reconciliation – and the bank delivered on these requirements.

The bank has also enabled cardless cash withdrawals from Mashreq Bank ATMs. Transactions can be initiated 24/7 from the online banking portal. Once a transaction is approved, a code is sent to the beneficiary’s mobile. The service is supported on Mashreq Bank ATMs in other countries, which means a central treasury team in UAE can seamlessly support the immediate petty cash requirements of international branch offices.

Mashreq Bank will continue to evolve its transaction banking strategy to maintain its leadership position by providing innovative solutions to keep pace with customer behaviour. “We have also embarked on using some cutting-edge technology such as artificial intelligence, and are progressively robotising our processes to improve client’s experience, while at the same time making the entire transaction journey truly digital,” says Mr Jayakar. 

Nordics

Winner: Nordea

For the second year in a row, Nordea has scooped the prize for the Nordics, unsurprising since it has been working tirelessly to create a new type of transaction banking business over the past three years. It has been a visible pacesetter in digital development and future banking initiatives throughout the region.

Erik Zingmark, co-head of transaction banking at Nordea, sees the Payment Services Directive 2 and the move to open banking as the most interesting challenge facing transaction banking today, but one which also presents the biggest opportunity for banks in decades. “This will affect banks both on the demand as well as the supply side and it could eventually reshape the whole business models for large parts of the current business,” he says.

In response to this challenge, Nordea’s transaction banking division launched its open banking portal targeting external developers in March this year. More than 700 developers signed up within the first couple of weeks. In June, it took another step and launched the first pilot programme with a selected group of 22 customers, fintechs and innovative third parties. 

The second phase of the pilot programme is set to start in the fourth quarter of 2017, when selected companies will gain access to Nordea’s production environment application programming interfaces. 

Nordea’s clients’ business models and financial infrastructure are changing too, as many companies become more digital. Mr Zingmark says: “This is something that treasury needs to be on top of and naturally we need to support our customers in their ambitions.”

In February 2017, Nordea launched AutoFX, a cloud-based foreign exchange solution that enables customers’ accounts to be swept automatically to reduce excess balances or, alternatively, topped up to eliminate negative balances, as well as automating hedging strategies and optimising interest costs in a cash pool. This solution was co-developed in collaboration with a large Nordic customer in the media industry, to help modern treasury functions automate their daily routines and risk management. 

In the payments space, the bank teamed up with Danske Bank on MobilePay in Denmark and Norway, and launched Siirto, Finland’s first real-time payment service and cross-banking mobile payment platform. Soon after, the bank launched Samsung Pay in Sweden and the Nordea Wallet mobile solution. By developing its mobile payments offering, the bank wants to add a rich user interface and introduce services that help its customers to take full control on their spending. 

North America

Winner: Bank of America Merrill Lynch

North America has seen new shifts and developments in payment networks, globalisation and digitisation that coincided with major geopolitical events over the past year. Yet Bank of America Merrill Lynch (BAML) came through the turbulence with flying colours, picking up this year’s regional accolade for transaction banking. 

“In this environment, it was critical we maintained dual focus – delivering services to clients for essential daily needs, while also developing the next generation of solutions,” says Galen Robbins, head of global transaction services (GTS) for commercial banking, business banking and small business at BAML.

And the strategy paid off. BAML’s business in North America continued to deliver results for its clients and the firm over the past 12 months. The bank was also able to make enhancements on several fronts.

For example, in December 2016 the bank launched the CashPro Accelerate web application with a select group of clients. Two major components drove the direction and design of the solution. First, for many companies, the cost of automation provided by vendors is a barrier to entry. Second, market analysis continues to show that companies prefer Microsoft Excel as their tool when working with their financial data.

The CashPro Accelerate web application is a direct user interface to Microsoft Excel using Office application programming interface technology to seamlessly connect client workbooks. The lightweight app allows clients to custom map and automate their banking data into dynamic Excel spreadsheets and reports.

Hilani Kerr, head of North America large corporate GTS at BAML, says: “Innovation is an imperative given the seismic factors changing global commerce today – including the proliferation of digital payments networks and the opportunities presented by artificial intelligence. Key to client satisfaction is the elimination of friction – both from our existing processes and from any innovation we bring to market.” 

In September 2016, Microsoft and BAML conducted a proof of concept (PoC) for standby letter of credit (SBLC) issuance and advising using blockchain/smart contracts via Microsoft Azure’s blockchain-as-a-service. 

The objective was to demonstrate that blockchain/smart contracts could streamline the inherently paper-based and inefficient SBLC process by digitising the transaction, and making it available to all parties in near-real-time in the cloud. The PoC was successful in validating the potential benefits and framing a path to commercialisation of blockchain for trade transacting.

Cash management

Winner: ING Wholesale Banking

ING Wholesale Banking engineered a stellar performance in cash management between the first quarter of 2016 to the first quarter of 2017, as shown by a 40% increase in clients using ING for international cash management and 35% growth in its corporate card offering. Its performance impressed the judges, alongside its comprehensive set of initiatives to take the bank digital. 

As Dick Oskam, ING’s global head transaction services cash solutions, explains: “Our strategy is aimed at helping our clients overcome the challenges they face on their path towards digital and operational transformation. ING has invested in innovative solutions that address our clients’ increasing demand for speed, transparency, traceability and centralisation in cross-border payments.”  

While 2016 was deemed the year that virtual bank accounts (VBAs) matured, ING Wholesale Banking has taken the concept to the next level. It has linked VBAs, which replace current accounts, including those held in other countries, together with virtual ledger accounts (VLAs). 

A VLA is a flexible multi-bank reporting dashboard that acts as a fully functioning alternative to a treasury management or enterprise resource planning system. It is essentially an administrative sub-account that allows treasury to allocate cash without segregating it physically. Treasurers have a near-real-time overview of cash positions, payments and collections – including at third-party banks – in up to 80 currencies and across multiple countries.

VBAs and VLAs are the two pillars of ING’s virtual cash management (VCM) solution, which allows companies to retain all the benefits of local accounts while gaining centralised oversight of funds and minimising administrative costs. “VCM is a proprietary solution that directly addresses our clients’ needs by offering them one single bank account without losing the benefits of local payments across different countries,” says Mr Oskam.

Furthermore, VCM can be used by corporates regardless of their technological sophistication or harmonisation level. Simply, it helps companies improve their reconciliation, while lowering the barriers to entry for complex payments-on-behalf-of and collections-on-behalf-of structures.

“As a frontrunner in innovation, we will keep developing new solutions that facilitate centralised cash management, visibility and control to help our clients build for the future,” says Mr Oskam. “The Payment Services Directive 2 is offering our clients a great opportunity in this respect.”

Payments

Winner: Bank of America Merrill Lynch

Bank of America Merrill Lynch (BAML) has scooped this year’s award for payments due to its product innovation, including enhancements to its online and file-based banking portal, CashPro, and its partnership with fintech player ModoPayments. 

This comes at a time when the payments industry is undergoing extensive change because of globalisation, smaller payment sizes and technology, according to David Kretz, BAML’s head of global payments in global transaction services. “We have a tightly integrated team – comprising product, technology and operations – that is focused on delivering highly competitive solutions in a globally consistent manner. We also work closely with innovation partners, both inside and outside the bank, to develop succeeding generations of products,” he says. This is obviously a winning strategy for BAML’s transaction banking business, which continues to grow its revenue year on year.

The bank has expanded its international payments capabilities via CashPro, including its cross-currency automated clearing house (ACH) footprint. BAML now provides a more cost-effective ACH solution to clients in 60 countries in 22 currencies, ideal for non-urgent, recurring transactions. The bank is planning to expand the service to cover more than 100 countries and 50 currencies.

BAML’s FX Trade & Pay is another innovative solution, one that turns the ‘pay and trade’ approach on its head. It reverses the workflow to provide foreign exchange rate transparency upfront, as well as give access to additional trading/hedging tools. With one platform, treasurers can make foreign exchange trades in advance and then use the funds to execute cross-border payments.

BAML’s partnership with Modo is illustrative of the bank’s innovative approach to payments. The fintech company helps the bank connect to emerging payments networks using Modo’s digital payments hub that sits between existing bank systems and digital wallets around the world.

With access to Modo’s Coin-operated hub, BAML’s customers can reach new populations in a cost-effective manner, which is of increasing importance in the new ‘gig economy’, where temporary or freelance workers are sourced from around the world. 

Mr Kretz says: “We expect there to be continued globalisation and innovation in payment forms; as such, we will continue to expand our payment reach and product breadth. We believe the best approach is a collaborative one, where we can partner with fintechs such as ModoPayments, as well as traditional leaders and consortiums.” 

Securities services

Winner: HSBC Securities Services

To navigate the huge changes happening in the transaction banking industry, such as increased transparency, new technology, client demand for more and better data, and greater risk awareness, HSBC Securities Services (HSS) has made gains in automating and redesigning key processes. The aim is to achieve improvements in service in order to realise cost efficiencies and accommodate investment in key growth areas such as digital and data.

“Our transaction banking clients now place a significant focus on ancillary services,” says Cian Burke, global head of HSS. “These include pure banking activities such as foreign exchange and cash management but, in HSS, we are also seeing an increased focus on the provision of ‘data and digital’ services that include innovative initiatives leveraging blockchain, asset digitisation, robotics, applications programming interfaces and biometrics.”

As part of the bank’s overall digital transformation strategy, HSS is researching how assets will change in the future and the type of assets clients may ask a custodian to hold and service. For example, HSS has designed and built an Ethereum-based blockchain to cover the end-to-end process for proxy voting. The solution allows all participants in the process to contribute immediate, validated and immutable updates to a distributed proxy voting ledger. 

The proof of concept was recently shown to clients in Singapore, garnering a great deal of interest, and the product has been deployed on Amazon Web Services’ cloud platform so it can be rolled out to clients on a pilot basis.

In addition, HSS has further enhanced its experience in helping clients access China’s interbank bond market (CIBM). After China further liberalised the CIBM in February 2016, HSBC helped the first overseas financial institution to gain access to the CIBM. 

HSS also won a first in the Chinese green bond market and worked with Bank of China on structuring a workable bond trustee solution. The Bank of China is establishing a $5bn green covered bond programme, from which a $500m pioneer green covered bond was issued, to internationalise the domestic green bond market. These bonds are traded on the CIBM and the funds were used in eligible green projects in renewable energy and pollution prevention in China.

Supply chain finance

Winner: Yes Bank

Supply chain finance (SCF) is beginning to see disruptive elements coming together to drive adoption among large corporates, which is of great importance as supply chains lengthen due to globalisation and offshore production. It is a useful tool for companies trying to improve their working capital position and supplier relations. SCF is also a way to unlock access to credit for small and medium-sized enterprises.

Yes Bank’s developments within this space is an impressive example of innovation, and the bank is utilising new technology to establish itself as a pioneer in this space.

For example, the pan-Indian bank is deploying distributed ledger technology and application programming interfaces (APIs) in a supply chain vendor financing solution, which is what made the judges sit up and take notice. A client, which has more than 40 suppliers in its vendor network, is using the solution to move towards a paperless process, as well as reduce the time to disbursement and improve transparency.

This blockchain project is worth going into the details. The client produces a paper-based purchase order and the vendor creates a paper-based invoice and manually logs it into the client’s enterprise resource planning (ERP) system. At this point, Yes Bank connects to the client’s ERP via an API and stores the invoice data on a Hyperledger blockchain.

The client then sends the invoice details to the bank through an API, which – after validation – are brought into the blockchain, discounted and the funds are disbursed to the vendor. On the due date, the solution facilitates an automated debit from the client’s account by the bank. The business logic and rules are captured in a smart contract.

In addition, Yes Bank created a web-based platform where the parties to the transaction, i.e. client, vendors and the bank’s departments, can track the invoice status in real time.

The results are impressive. The solution reduces the end-to-end turnaround time from four days to almost real time. It saves on paper, staff hours, courier charges and reconciliation efforts. In addition, it ensures secure and immutable online transactions.

As one judge says: “I really like the supply chain vendor financing on blockchain – a good example of a real-life blockchain application.”

Trade finance

Winner: Deutsche Bank

Nine years after the global financial crisis, it is not a lack of liquidity that has caused the trade finance funding gap of $1500bn, but the cost of provision, according to Daniel Schmand, global head of trade finance at Deutsche Bank. 

“The inevitable tightening of anti-financial crime and prudential regulation that followed have made many emerging economies – the very geographies that need trade finance – harder to bank,” he says. “Digital transformation to improve transparency and reduce administrative costs in our flow business is therefore a continued focus, along with our structured export and commodities businesses.” 

The bank has completed several outstanding deals over the past year, illustrating its global delivery capabilities and full product range. For example, it played a key role in the Fangyuan Group’s $385m working capital financing in September 2016. This established the Chinese copper producer’s profile in the structured commodity trade finance market, enhancing its reputation with major international trading houses such as Trafigura and Mercuria.

Deutsche Bank is also working closer with export credit agencies. A particularly transformational deal related to the rebuilding of Ecuador’s main hospitals after an earthquake in April 2016. In July 2016, the bank signed two deals totalling $78.3m with the Instituto Ecuatoriano de Seguridad Social (IESS), the Ecuadorian social security and health provider. 

With IESS as the borrower, Ecuador’s Ministry of Finance acted as guarantor. The deals were structured through eight-year door-to-door buyer credits from Spain’s export credit agency, CESCE, which could use its guarantee facilities for transformational infrastructure with a significant social impact.

In the vanilla/flow business, Deutsche Bank is supporting the European Bank for Reconstruction and Development (EBRD) Green Trade Facilitation Programme. In December 2016, Deutsche Bank confirmed a standby letter of credit issued by the National Bank of Greece for €102,900 to cover the export of solar modules from Germany. This small confirmation is an example of how a low-risk, self-liquidating instrument was used to leverage the support of the EBRD and help Greece develop its green energy provision.

The bank has committed to investing in digitalising its trade finance business. Mr Schmand says: “Our digital roadmap is clear – we are digitising data and the processes, be that through optical character recognition, robotics or strategic partnerships and projects. We are building capability to harness [client data] and deliver even more efficient trade finance offerings.”  

Judging panel

Francesco Burelli, managing director, global payments strategy lead, Accenture

Enrico Camerinelli, senior analyst, Aite Group

Eric Li, research director, Coalition

Joy Macknight, deputy editor, The Banker

Wim Raymaekers, head of banking markets and gpi, Swift

Didier Vandenhaute, partner, PwC

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