Convergence has been one of the themes we have been espousing now for a couple of years in the CEP advisory service as latest gen tech, regulatory demands and market forces provide both the opportunity and necessity for systems and process adaptation by banks and their industrial constituents.
This posting appears in the Paypers and focuses in on yet another area where a convergence is occurring – cash management and trade services.
‘Historically, cash management and trade finance have existed in parallel, however, this situation is now changing. Some factors that have led to this change include:
- the entrance of innovative disruptors in both cash management and trade finance
- the acceleration of online B2B purchasing
- the reduction of supply chains and the proliferation of domestic faster payment systems.
Collectively, these and other factors are driving the increasing convergence of cash and trade to support a more integrated commercial environment.’
In various research we have released in the past two years, for example Supply Chain Finance Market Review, we cite the convergence of cash cycle solutions through digital capabilities, as various disparate systems that are traditionally decoupled are now coming together through easier integration (APIs) and multiple provider partnerships and collaboration. The authors make the same point in the case of cash and trade, in some cases supported by regulators.
‘Finally, it is worth noting the proactive stance of regulators to cash and trade finance innovation, both individually and jointly. Various regulators have established sandboxes to facilitate the development of new disruptive technologies, which cultivates the accelerated innovation of cash and trade integration. Governments have also been active with initiatives supporting the same goals, such as Singapore’s Networked Trade Platform.’
There are a number of examples where specific technology trends provide impetus to update and transform systems. We have pointed this out as well, such as in the case of PSD2 having a knock-on effect causing banks to re-imagine payments hub products and approaches. The posted article is worth a few minutes review to gain some perspective on one of the clearly unfolding trends across commercial banking.
‘Cash and trade may not yet function as one, but there are clear signs that they are moving in this direction. Numerous factors, ranging from real-time cross-border payment tools, increasing B2B volumes and demand, to the use of disruptive technologies, are all driving integration. This places an onus on banks to facilitate this by engaging with fintechs and trade platforms alike, to the ultimate benefit of clients.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
