Companies See Success With Digital and Blockchain-Based Global Trade Finance
Date: Friday, March 29, 2019
Source: Sourcing Journal
Trade financing is a big deal in the highly global apparel industry. Modern tools like digital, cloud-based software and blockchain can help businesses get the funding they need faster than ever.
RTS International, for example, is managing $1 billion in financing on the cloud-based Infor Nexus trade platform.
Fashion suppliers in Africa, the Americas, Asia, Europe and the Middle East turn to RTS, which specializes in factoring for global apparel and footwear businesses, for pre- and post-export financing. “Plugging into Infor Nexus’s digital platform has enabled us to become a strategic partner to our customers, while enabling us to increase revenue and reduce risk and costs,” Luis Mondragon, RTS vice president, said in a statement.
An Infor Nexus user since 2010, today RTS works with more than 100 buyer communities. Infor Nexus automates the three-way buyer-supplier-RTS relationship, from processes and communications to how critical trade documents are transmitted. This approach ensures visibility and transparency, and speeds up approvals and settlements.
“We can leverage a supplier’s transactional and milestone data to deliver unique and creative financing. Capital is provided based upon the credit of the buyer, not the supplier’s balance sheet, without assuming new debt,” Mondragon noted. “Infor Nexus’s electronic document management and digitization tools automate approval processes and increase days of available funding, allowing us to finance shorter-term maturities that are not possible in a traditional paper environment.”
Anoop Dhanda, finance director for Orient Craft Ltd., says RTS helps his company reduce the risk of disruptions to its cash flow and offer immediate liquidity, helping the supplier make better use of its banking limits.
“We recently started a relationship with RTS International to factor invoices from our customers, such as Zara and Abercrombie & Fitch,” Dhanda added. With Infor Nexus as its single network, Orient Craft, which produces ready-made garments and home goods to U.S. and U.K. retailers, is able to manage numerous factories and customers access capital all in one place.
Companies that move from error-prone manual processes to a digital platform can better ensure they’re compliant with international rules and regulations, according to Infor’s EVP of manufacturing and supply chain Rod Johnson.
“Customers on our network benefit from a single platform delivering multiple forms of credit risk products, such as payment assurance and factoring; or trade finance solutions for pre-shipment, receivables, payables and inventory financing,” Johnson noted. “RTS International was an early adopter of digital trade financing technology and has leveraged it as a catalyst for business growth.”
In the third quarter of this year, seven banks expect to launch a digital trade finance network. The participants signed a memo of understanding for the initiative last fall, including The Australia and New Zealand Banking Group ANZ, Banco Santander, BNP Paribas, Citibank, HSBC, Standard Chartered and Deutsche Bank. A Banco Santander manager told Reuters in October that the goal of the alliance was to reduce the barriers for companies involved with global trade to secure financing.
Notably, earlier in the year Banco Santander dabbled in a trade initiative involving blockchain, a technology that Bain & Co. seems to think might be the answer to some of the challenges inherent to movement of goods around the globe. In July Banco Santander, a founding partner of blockchain-based we.trade, announced it had conducted the first blockchain trade transactions in its home country of Spain. we.trade is a joint venture between Deutsche Bank, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, Société Générale and UniCredit.
“The we.trade platform is a live blockchain based trade platform. These transactions prove that we.trade is a robust and commercially viable proposition,” we.trade COO Roberto Mancone said in a statement. “We are delighted to have launched for the first time in the world, a blockchain based platform that enhances the overall customer experience when trading internationally. The next step will be getting buy-in from additional banks and their customers in Europe and further afield.”
For its part, Bain estimates that incorporating blockchain into global trade activities could add $1.1 trillion to trade volumes by 2026, above the $16 trillion estimate for 2018. Bain described how nearly a year ago HSBC and ING enabled the first blockchain transaction for trade finance, taking less than 24 hours to settle the payment to Cargill for a soybean shipment versus the typical 5- to 10-day standard for manual, letter-of-credit transactions.