Trade Finance Goes Hi-Tech: Unveiling the Digital Transformation of an American Bank in Indonesia
The bank is a prominent global financial institution, catering to large corporations and governments by providing a wide array of banking, investment management, risk management, and other financial products and services.
As one of the largest financial institutions in the United States, it serves over 67 million consumers and 3 million SMEs. International operations in 35 countries include a significant presence in south-east Asia, where the bank aspires to be the leader in corporate banking.
The bank offers extensive trade and supply chain finance solutions that enhance visibility, provide cost efficiencies, mitigate risks, and strengthen relationships for key corporate clients. It empowers clients to engage in international business with greater ease and security, providing tailored-made solutions for importers/buyers and exporters/sellers. Additionally, it offers a global network of financial institutions to streamline cross-border transactions for its clients.
The Transformation Preamble
Corporate banking is undergoing a technology-led shift, driven by the evolving needs of customers. To keep pace with ever-changing customer expectations and stay relevant, this prominent North American bank embarked on an extensive digital transformation initiative across various markets, beginning with Indonesia. Taking a holistic approach, the leadership team at the bank looked to make strategic investments in core corporate banking systems, payments, and treasury platforms.
As part of this larger transformation, the bank also wanted to embrace digitalization of its trade and supply chain finance operations to harness the market potential.
Here, the bank wanted to enhance the speed, efficiency, and transparency of trade finance operations, all while providing clients with increased convenience and flexibility. The bank wanted to address the following–
- The bank was operating with three independent systems for trade finance, payments, and GL causing increased manual effort in trade and supply chain finance processing. The bank desired system integration to eliminate processing delays that could disrupt service delivery.
- The legacy mainframe system’s lack of modularity created compliance challenges with local data regulations. Non-compliance of this can lead to fines, penalties, and legal consequences for the bank. Therefore, they sought a flexible and adaptable system that can adhere to diverse data compliance regulations in various regions.
- The bank’s system offered limited parameterization capabilities and lacked user-driven customizations, limiting its ability to meet users’ unique needs. The bank desired a more flexible system that enables faster customized implementation and seamless integration of RESTful APIs. This will help them to adapt to changing business requirements, significantly impacting its success and competitiveness in the marketplace.
Choosing the Right Technology Partner
The bank wanted a dependable technology partner with an agile, scalable, and secure platform, comprehensive front-to-back capabilities, functional and architectural robustness, and proven market credentials, to guide it through the transformation.
Thus began a rigorous evaluation of digital banking technology providers around the world.
Towards the end of this exercise, the bank chose Infosys Finacle because of its componentized multi-layered architecture, real-time payments capabilities, vast experience in managing multi-country implementations, and proven global as well as regional market credentials in corporate core banking and treasury transformation.
Finacle was rated highly in the technical evaluation, particularly in the space of innovations led by APIs, open banking and blockchain.
Specifically on Trade Finance and Supply Chain Finance modules – the bank chose Infosys Finacle due to the below reasons:
- A unified, comprehensive platform that offers a host of products across trade and supply chain finance value chain, supporting seamless operations across the value chain.
- Industry standards-compliant: The solution supports the latest trade finance, and payments messaging standards.
- Declarative and RESTful APIs: All solution capabilities are exposed through APIs to enable banks to connect with ease and co-innovate with customers, partners, and the extended developer ecosystem.
- Robust security framework: The platform offers comprehensive multi-layered security capabilities and is compliant with the latest industry standards.
- Truly 24*7 and real-time processing capabilities to enable agile trade finance operations.
- Multi-entity, multi-currency, multi-byte, multilingual and multi-time zone capabilities, standardizing and centralizing trade finance operations across international and domestic subsidiaries.
Setting Out on the Transformation Journey
The transformation program spanned across corporate core banking, corporate payments, customer information file (CIF), and treasury. Finacle Core Banking modules, such as demand deposits, commercial loans, trade finance and general ledger, were implemented all in a bank-in-a-box approach. This has helped to streamline and automate operations.
The successful implementation, completed on time, showcases Finacle’s ability to orchestrate and execute complex transformation programs with agility and efficiency.
Promising Business Outcomes
Opening-Up New Business Horizons
- By leveraging the Finacle Trade Finance module, the bank successfully acquired a new range of supply chain finance capabilities, encompassing Payable Finance products. These capabilities include key components such as flexible business rules, Agreement Management, Invoice Management, and Reporting.
- As a result, the bank’s corporate clients now have access to a convenient all-in-one solution for their trade requirements, including sourcing, agreement management, financing, and reporting.
- The system enables the bank to define, compute, collect, and report FATCA tax effectively.
- It also provides the ability to generate account statements with multiple addresses and fiscal calendars.
Unlocking Flexibility and Agility With a Host of Capabilities
- The out-of-the-box support for a wide range of trade and supply chain finance products enables the bank to gain speed to market in launching products in new and existing markets.
- Through extensive parameterization and business user-driven product design, the bank has the ability to create tailored trade and supply chain finance products with ease, requiring minimal effort.
- The bank has access to Finacle’s extensibility toolkit that facilitates customization of business rules, user interfaces, processes, and reports.
Better Operations for Enhanced Efficiencies
The bank gained access to a range of efficiency enablers that drive process refinements throughout the various stages of the trade finance workflows:
- The enablement of funding and invoice realization processes covers all stages of the supply chain finance, starting from request initiation to financing.
- The bank is equipped with comprehensive processing capabilities, including the computation and collection of margin, fee, and interest. It also provides tracers and advices, all available on a unified platform.
- The bank benefits from an integrated, secure, and scalable reporting engine that offers a variety of features. This includes out-of-the-box standard reports as well as the ability to generate custom reports on-demand.
- The bank has access to an extensive suite of open APIs, facilitating seamless collaboration with partners, Fintech companies, corporate clients, and the wider developer ecosystem, ensuring ease of integration.
The bank is equipped with key enablers to refine business processes across key trade finance products such as letters of credit, bank guarantees, and bills:
- Improved system wide interoperability with standardized text templates
- Auto-parsing, data extraction, and population of inward messages to enhance process efficiency and reduce error rates
- Unified instrument views across events, charges, contingent transactions, and maker-checker to improve transaction visibility and efficacy of trade events such as charge collection, autorenewal, margin release, auto-closing of entities, and automatic tracer generation to enhance efficiencies across the trade finance lifecycle
Improved Risk and Compliance Management
The bank now has the extensive product capabilities to mitigate operational risk, such as audit trails, deal versioning, exception management, together with automated AML/CFT/KYC adaptors, 4-eye check /maker-checker and more.
- Host of asset management capabilities such as classification, NPA provisioning, charge-off and recovery to enable banks reduce credit uncertainties.
- Powerful limits management with drill-down features and a user-friendly graphical interface to curtail undesired credit exposure.
The bank adheres to holistic compliance to global standards for trade and payments processes, to facilitate interoperability between multiple countries and also enable faster transactions.
In Conclusion
The digital transformation journey of the Indonesian operations covering trade finance and supply chain finance have enabled this large American Bank to unlock new business horizons and enhance operational efficiencies. By leveraging the comprehensive capabilities of the Finacle Trade Finance module, the bank has the ability to create tailored trade and supply chain finance products with ease, requiring minimal effort. The bank has embraced modern technologies and integrated open APIs to drive collaboration, agility, and innovation. With streamlined processes, improved risk management, and adherence to global compliance standards, the bank is well-equipped to navigate the ever-changing landscape of trade finance in the digital age.
