In the first blog in this two-part series, I wrote about the key business challenges trade banks are facing in today’s increasingly digital marketplace. In this follow-up blog, I focus on the technology challenges and the type of technology platform trade banks need to succeed.
State of the trade technology market
Shifting customer expectations in banking paired with new technological breakthroughs and methodologies are affecting the delivery of bank services.
API usage has greatly enhanced the ability for bank applications and platforms to communicate with one another in an understood language. Indeed, interaction with these new business networks is nearly impossible without leveraging the latest communication protocols. Interoperability is critical to success, particularly as the number of mobile services and external networks that banks must connect to has expanded.
Distributed ledger technology (DLT) and blockchain have taken the industry by storm, promising more secure and efficient access to bank products. Whether or not the technology is a panacea, it has become imperative for large banks to involve themselves in consortia and platforms to make sure they do not lag behind the competition. If 2017 was the year of proofs-of-concept for DLT, then 2018 was the year of commercialization. Several DLT platforms had launched commercial offerings by the end of 2018.
Intelligent process automation (IPA), in the form of artificial intelligence, machine learning and natural language processing, is beginning to be used in commercial products, particularly in the area of chatbots and intelligent data capture. IPA has the potential to alter the landscape dramatically for back-office operations. In the near future, we may see smart workers leveraging their digital counterparts to perform document examination, early compliance and anti-money laundering reviews. This will lead to an increase in straight-through processing, freeing up resources that can then focus on value-add activities for bank customers. With access to the appropriate data warehouse, these same technologies also can enable the use of advanced analytical techniques to gain critical information about customer behavior for the purposes of cross selling and risk mitigation. Understanding and accessing this data is key to maintaining an edge in an increasingly competitive market.
An agile development approach is driving the deployment of new technologies, delivering in iterative, short sprint cycles to maximize the output for corporate customers. Lengthy product development is no longer acceptable; banks are increasingly pushed to react faster to the market, particularly with the rise of FinTech firms. FinTechs frequently collaborate with banks for balance sheet, customer access and regulatory reasons in the short term. They often can outmaneuver traditional financial institutions when engaging with demanding customers. The sheer volume of new entrants in the FinTech space is dizzying, and even the most diligent product managers struggle to differentiate vaporware from a legitimate service provider.
Transforming the trade business
All of today’s trade finance challenges, both business and technology, can seem insurmountable. However, success, growth and profits await the financial institutions that tame the maelstrom of change engulfing the industry. To prosper in this increasingly digitized environment, leading banks are deploying robust technology capabilities to meet rising customer expectations while anticipating future demands.
These capabilities include the following:
- Single, global platform to support end-to-end operations
- Support for multiple products, including traditional trade, open account, collateral management and cash management products
- Hosting on a cloud-based infrastructure
- Core architecture that ensure banks can connect to their own web applications, while also offering ease of connectivity to external business networks
- Agile product development approach that ensures banks are always on the cutting edge
Sitting on the sidelines is no longer viable. Banks are under pressure to rise to the challenge of today’s expectations in order to retain clients, increase earnings and capture new business. A strong technology partner can help you navigate the transition to next-generation trade finance. CGI Trade360 offers the above capabilities and more to help trade banks meet fast evolving market demands, supporting many of the largest trade banks’ customers and bank operations. To learn more about our work in this area and your organization’s challenges, feel free to contact me.