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TOP 10 BANKS FOR GLOBAL TRADE 2021

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Archives, Banking, Global Trade Daily, International Banking

TOP 10 BANKS FOR GLOBAL TRADE 2021

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It is strange to think that there had been an optimistic outlook for global trade ahead of 2020. Circle back to the end of 2019, and that was the case, with global recovery expected off the back of a sluggish year.

The COVID-19 pandemic, described by IHS Markit as the largest black swan event since The Second World War, quickly dashed any chance of such a rebound being realized. Instead, lockdowns, restricted movement across borders and sweeping economic and social uncertainty—coupled with uncertain U.S. trade policies, Brexit and other external factors—saw 2020 become a year like no other.

Indeed, global trade was forced to adapt and continued to serve as a vital lifeline that helped to keep supply chains flowing and boost confidence wherever possible.

Banks played a vital role. They accelerated digitization strategies, with technologies such as blockchain and artificial intelligence further coming to the fore over the past 12 months. As ever, they altered their offerings, and each became more or less attractive to those corporations partaking in global trade. 

Here, we reflect on these offerings and rank the top 10 banks for global trade in 2021. 

The banks in this list are not acclaimed based on the volume or value of transactions. Rather, they have been recognized owing to their commitment to service–through innovation, targeted solutions and meeting the specific cross-border trade needs of those corporations that they serve.

Size and stature do not always equal best-in-class. Many of the banks listed here are indeed major players, but we have focused on those institutions harboring some of the key qualities to look for when selecting a provider.

A series of different criteria have factored into this, including:

-Competitive advantages

-Pricing

-Product and service innovation

-Financial robustness and security

-Knowledge of local requirements and conditions

-Customer satisfaction

-ESG compliance

Citi

Citi is globally renowned, currently operating in more than 90 markets and transacting in over 130 currencies. 

The company prides itself on a knowledge and understanding of local markets–a skillset that is particularly useful to those embarking on expansion across borders or looking to ramp up trade activities in new countries. It tailors its services to each region and country rather than taking a one-size-fits-all approach. 

Citi is also a key figure in driving global industry technological transformation. Its digital toolkit comprises key connectivity solutions such as integrated APIs (application programming interfaces), and it has also positioned itself as leading innovator in the usage of blockchain. 

HSBC

Where global trade is mentioned, HSBC is never too far behind. The bank recently took the top spot in Euromoney’s Trade Finance Survey for a fourth year running, testament to its ongoing investments into further financial skills, digital capabilities, and product innovation. 

The bank actively positions itself as a thought leader with the publication of key export insight reports, while its Trade Forecast Tool imparts crucial short- and long-term knowledge on prospects in key markets whilst prioritizing user-experience. 

Its services include a renowned Ex-Im Bank Working Capital Guarantee Program alongside currency exchange, documentary collections, export collections, FX trading, trade credit insurance and more. 

UniCredit

UniCredit offers a wide variety of global trade finance services including global securities services, export finance, internet banking and transactional sales via its Global Transaction Banking business. Despite being built on a network of more than 4,000 key banking relationships that span 175 territories globally, the bank primarily caters to its core customer base in 14 core Central and Eastern European markets alongside 18 other countries worldwide.

The firm is renowned for its innovative attitudes toward product development including its award-winning Trade Finance Gate client portal, and market leading customer service. 

Deutsche Bank

With 130 years under its belt, Deutsche Bank is one the most experienced providers of finance for global trade. Its integrated global network spans 80 locations in 40 countries, its primary area of expertise being the navigation and management the risks associated with import, export and domestic trade transactions. 

The company has a strong presence in key emerging markets spanning Asia Pacific, Central and Eastern Europe and Latin America. Here, it imparts key services including advisory and distribution services, documentary collection, documentary remittances, financial supply chain solutions, letters of credit, standard remittances, structured commodity trade finance, syndicated trade loans and trade receivables finance.

Standard Bank

Plaudits can be paid to South African figurehead Standard Bank in the realm of technological innovation. The firm leverages APIs to connect its internal systems with those of its clients. As a result, approximately 80 percent of its issuance procedures for lines of credit and guarantees are automated, with average execution time of just one minute.

The company excels in trade document management. Its core services include trade finance open account and supply chain solutions, documentary trade finance and international payments, and it’s also working closely on product development with fintech partner Traydstream.

Santander Group

Santander has positioned itself as a leading light on environmental, social and corporate governance, and is a truly valuable player in the global trade community. During the pandemic, the company sought to deliver solutions that would dampen economic hardships by addressing the needs of the individual countries in which it operates, offering financial assistance to SMEs that reached a peak of $1.2 billion daily between April and May 2020.

The company also reacted dutifully in other ways, namely through the development and deliverance of various digitization projects that prioritized public health. 

ING Group

With its 57,000 employees serving 39.3 million customers, corporate clients and financial institutions in more than 40 countries, the vast majority of ING’s business is conducted in European markets. The company offers an array of international payments, cash management and trade finance services including letters of credit, documentary collections and guarantees.

ING Group is an initiating member and key investor in Contour–a trade finance project seeking to transform the status quo through the deployment of blockchain-based technologies. 

Bank of America

As the name would suggest, Bank of America remains a stalwart and fan favorite serving the North American market. During the pandemic, the firm introduced its Intelligent Treasury Roadmap–an initiative built to optimize client treasury operations and working capital.

Through operational simplification and ongoing advisory expertise, the bank’s Global Transaction Services team was able to successfully help clients mitigate risk and detect and manage fraud during what was both a turbulent and opportunistic period.

BNP Paribas

BNP Paribas remains one of the top trade finance banks globally, operating more than 100 dedicated trade centers in 60 countries. Among its core specialties are the bank’s export and import services and solutions built to optimize cash conversion cycles.

The firm primarily prides itself on imparting key knowledge and expertise. Its network of 350 trade finance experts is readily leveraged to provide tailored training programs based on the location and requirements of individual client companies.

Commerzbank

Commerzbank’s headline figures include 50 billion pounds in trades spanning 150 markets and 50 currencies annually. Albeit an established player with a 150-year legacy, the firm has proactively invested in new technologies including that of blockchain. 

To this end, 2020 saw the company mastermind the first Turkish-German trade finance transaction of the Marco Polo blockchain network alongside Isbank.

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Archives, Banking, Global Trade Daily

Ushering in a New Era of Efficiency for Trade Finance   

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Trade finance has earned a reputation for an industry reluctant to adapt in the face of change. Characterized by unwieldy and cumbersome legacy processes, the industry has seemingly remained stagnant whilst other sectors have steamed ahead with digitization. But, the pandemic has prompted the call for change that the trade finance industry has sorely needed for years, and steps towards technological innovation have been seen, most notably across the Asia Pacific. These technological advancements are helping to revolutionize the trade finance space and, hopefully, trigger a coordinated, global approach to creating more efficient trade.  

The list of challenges that trade finance faces, point to an industry reliant on paper. Incorrect documentation and KYC, non-interoperable systems and manual reconciliation could all be overcome with appropriate technological input. These issues are now finally being addressed by various progressive digital solutions. 

One of the technologies which seem most encouraging is enterprise blockchain. Trade is a fundamentally decentralized system. The industry is heavily intermediated – predominantly by banks that help to facilitate transactions and provide the financing behind them, but also by insurers, customs officials and other market participants. Firms have tried countless times to apply centralized solutions to this decentralized system, but, unsurprisingly, none have really worked. 

The decentralized nature of blockchain makes it a perfect fit for trade finance. For the first time, the entire industry is getting behind technology and moving it into real-world deployment at a record pace. 

Meanwhile, regulators are working with technology providers to understand how to audit and gain insight into the transactions taking place on these new blockchain-based platforms, and ensuring suitable laws are in place, including those relating to electronic documentation and electronic signatures. 

The architecture underpinning the entire ecosystem of trade is undergoing complete digital transformation – but how are participants benefiting from this change? 

Sizing up the challenge  

Many of the processes and technologies underpinning trade finance have not been modernized in decades. The result is that those transactions continue to rely on paper-heavy processing, unsuitable for the current digital age. Traditional technology required corporates to log into multiple portals and juggle relationships and documentation for each shipment. 

These inefficiencies in trade finance mean that nearly USD $1.5 trillion of demand for trade finance is rejected by banks, according to the Asian Development Bank (ADB), with 60% of banks expecting this figure to increase over the next two years. Developing markets that rely heavily on access to trade can be severely hindered through these outdated processes. 

In addition, businesses all over the world must navigate the growing threat of cyber-attacks, changing regulations, and ever-changing sanctions lists. Despite this complexity, cumbersome and time-consuming paper-based exchanges are still commonplace.  

Take, for example, invoice financing. While a common activity, managing invoice payments and terms can be slow and inefficient for companies and their trading partners. They must navigate different currencies and jurisdictions, each with unique requirements in terms of contract terms and payments.  

By digitizing these manual processes and superseding aging legacy systems, technology such as blockchain has a real impact on reducing the costs, risks and delays to participants involved in trade finance.  

If applied effectively, the technology has the potential to unlock the potential $1.5 trillion opportunity in global trade finance. Companies of all sizes will benefit from better visibility into trading relationships and easier access to financing options, beyond point-to-point relationships, to a global network of trading parties.  

Calling for a decentralized network  

Blockchain’s integration across the financial services ecosystem has delivered some encouraging results so far. While the rollout has been more gradual than some of the more over-enthusiastic predictions, many see it as a brilliant innovation capable of remedying a lot of the operational pain points perturbing financial services. As such, there is growing debate about how blockchain can provide decentralized solutions to solve many of the problems facing trade financing.  

One such solution is real-time visibility, which is available via permissioned access to authorized network users and gives buyers and sellers unprecedented transparency into the status of their transactions.   

This single source of truth and use of smart contracts could remove a number of inefficiencies in the paper-heavy processes that exist in trade finance, such as negotiations of letters of credit. In addition, settlement finality removes the need for intermediaries to perform reconciliations. All of these applications could streamline the entire process.   

Coordinated action  

In order to move towards a truly digitized and connected ecosystem for trade finance, mass adoption on a global scale is essential. This elusive network effect can only be achieved if technology players prioritize forward-thinking and inclusive integration solutions that lower the barriers to entry for all types of companies involved in the trading process.   

If only a handful of firms adopt a blockchain solution for invoice financing, for example, the solution is useless if one company needs to trade with another that is outside this circle of early adopters. All the other benefits of blockchain such as speed, efficiency and lower costs mean nothing if you cannot use the platform to connect with the necessary counterparties.   

Marco Polo is a key example of a solution built for its market. The Marco Polo Network provides an open enterprise software platform for trade and working capital finance to banks and corporates and allows for the secure exchange of data and assets between participants. The network leverages blockchain to provide a rapid and secure way to access working capital and efficient solution to provide trade finance. When it launched in 2017, it introduced to the market an integrated solution to overcome critical trade finance challenges including lack of connectivity, time-consuming processes and high onboarding costs.  

Although blockchain has the potential to revolutionize trade finance, it is unrealistic to expect an industry that is still one step behind to adopt new technology in a ‘big bang’ moment. In reality, most businesses will continue to use their long-standing legacy systems throughout this transition to a fully digitized space. Blockchain platforms that offer high levels of interoperability with existing infrastructures will therefore prove themselves to be the best fit for purpose in the move to digital.  

__________________________________________________________________

As Head of Trade and Supply Chain at R3, Alisa is responsible for trade strategy, standards and governance design. Alisa was previously a senior economist at the Asian Development Bank and holds a PhD from MIT.

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Archives, Banking, Global Trade Daily

How to Raise Pre-Seed & Seed Funding: 5 Alternative Strategies

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Want to learn how to raise seed funding for your startup? You’re in the right place.

For growth-focused startups, getting access to capital early means that you can scale faster.

The seed round is the first official stage of equity funding. That means that you can expect to give up some ownership, typically in equity or a convertible note, in exchange for capital. (Earlier pre-traction rounds are sometimes called “pre-seed” funding, and may consist of a “friends and family” round, or acorn round.)

But how can you raise seed funding, or even pre-seed funding?

Venture capital is an option, albeit a longshot. Research shows that less than one percent of startups get VC funding. Of that fraction, just 2.2% of funding went to Black founders, and only 2.7% went to female founders. Plus, this process of pitching to VCs often takes months or even years. For many founders, VC funding isn’t really a viable option.

At this early stage, it’s unlikely your startup will qualify for a bank loan. Banks typically look for 3+ years of business history before even considering extending credit.

So if you’re an ambitious founder who doesn’t fit the mold, how can you raise pre-seed or seed funding?

Fortunately, a new wave of seed funding sources is emerging, designed to be more accessible and more founder-friendly. Here are 5 alternative ways to get seed funding for your startup.

Republic

Republic leads the venture crowdfunding space. It’s a platform app that lets startups raise capital through crowdfunding from individual and institutional investors. Said more simply, it’s Kickstarter for startups.

This crowdfunded approach lets startups raise pre-seed and seed funding from a healthy network of enthusiastic investors, without needing to spend hours on pitch meetings.

Republic does require startups to go through a tough screening process; only around 5% of startups will be accepted. That said, they do offer a unique opportunity to get in front of a lot of different investors quickly, without needing to pitch each individually. It’s a tough but streamlined way to get seed funding for your startup. Learn more about how they evaluate startups here.

If you decide you want to apply, you can do so here.

Chisos

Here at Chisos, we’re offering a brand-new way of investing in idea- and early-stage startups through a two-part approach we call a CISA. The CISA is a unique combination of equity and an income share agreement. Unlike other investment options, you can qualify for pre-seed and seed funding from Chisos even before you have a product or any revenue.

We’ve designed the CISA to be fair to founders. Here’s how:

-Repay the CISA with a percentage of your income, but only when that income is above $40K.

-When you repay the CISA, you’re also buying back some of the equity initially granted to Chisos.

-You have complete freedom to use the capital as you see fit.

-You’ll never pay more than 2x the original investment amount, adjusted for inflation.

We’re built on the idea that funding shouldn’t be limited to a tiny handful of founders. Instead, we’re on a mission to democratize entrepreneurship.

We’re writing checks of $15,000-50,000 to invest in idea-stage startups and side-hustle businesses. Want to see if you qualify for pre-seed or seed round funding?  Apply here.

KnowCap

If you’re planning to use seed funding to hire a team, why not skip a step and trade equity for expertise? That’s the thinking behind KnowCap. KnowCap connects companies to a team of startup experts that cover key functions, including marketing, sales, engineering, and strategy.

These experts work directly with founders to provide coaching, strategic guidance, and in many cases, actually creating value by building an MVP of the product, creating new brand identity, and setting up calls with potential customers. In exchange for access to this “knowledge capital,” founders grant KnowCap equity.

While it’s not pre-seed or seed funding in a traditional sense, it’s a great alternative to help founders build a strong foundation from which the company can grow.

Learn more about KnowCap here.

Zebras Unite

Zebras Unite is a startup co-op that’s built explicitly to serve founders that traditional VC overlooks and undervalues; namely, women and people of color. What started as a community has evolved into a source of capital.

You’ve probably heard startups described as “unicorns”; Zebras Unite is an intentional rejection of the unicorn model of success. (You can read more about this concept here.)

Zebras Unite is the place for founders who believe that business should support society, rather than define it. If you’re building a community-focused, mission-driven organization, you’ll probably feel right at home in the Zebras Unite ecosystem.

To be considered for funding, join the Zebras Unite online community.

State & Federal Startup Grants

There is a bevy of grants for early-stage startups and small businesses. Unlike most other seed funding sources, grants don’t require you to give up equity or pay the money back.

Startup grant programs typically focus on serving otherwise underserved groups, such as minorities, veterans, people from rural communities, and non-profits. They also typically focus on advancing specific sectors, like education, technology, and healthcare.

Unfortunately, there’s no central database that covers all available grant opportunities, so you’ll need to spend time researching if you pursue this path. Here’s a list of a few good places to start, including:

Grants.gov

OpenGrants

Challenge.gov

SBIR.gov

So that’s it! Now you know 5 new ways to raise seed funding for your startup.

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William Stringer is the Co-Founder and CEO of Chisos Capital, a company that invests in ideas, and the founders with potential to bring them to life. Through our proprietary investment approach, the CISA, we write checks to idea- and early-stage entrepreneurs. Inspired by the desert oasis of the Chisos mountains, Chisos Capital seeks to democratize opportunity.

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Archives, Banking, Global Trade Daily

Virtually Fraud-Proof: Why Now is the Time to Grow Your Virtual Card Program

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One of the business stories coming out of the last year is the dramatic growth of electronic supplier payments. In Q4, Nacha, National Automated Clearinghouse, reported a 15 percent year-over-year increase in B2B ACH payments. The unfortunate sidebar to that story is the rise in ACH payment fraud. In all likelihood, we’ll see a corresponding 15 percent increase in B2B ACH fraud— possibly more, since remote working restrictions left many organizations vulnerable to attack.

As organizations work to improve their defenses against ACH fraud, they should also ramp up their use of virtual cards as much as possible since that is the most secure way to pay suppliers. Supplier objections to fees have always acted as the barrier between the status quo and advanced payment options. With the way the B2B payments landscape is changing, and in light of rising fraud, it may be worth revisiting those conversations with suppliers. Or, for some companies, possibly initiating that conversation for the very first time.

Not the Same as Plastic

Despite its decade-long presence, I still meet a good percentage of people who have never heard of virtual cards—or if they have, they don’t know how they work. Many companies today use a plastic card to pay their suppliers. Alternatively, they use purchasing cards when they purchase supplies. Those physical cards often get lost or stolen. The number can also be stolen even without possessing the actual card.

Virtual cards use the same networks as plastic cards, but they offer several layers of protection that make them fraud-resistant. They are sometimes called single-use cards because the 16-digit number provided can only be used once. That alone is significant. It’s simply not as attractive to fraudsters to steal single-use information. It’s far more appealing to get a regular card number or hack into a supplier system to divert ACH payments. Those are scalable, repeatable types of fraud, if you will.

When it comes to single-use cards, the card number is associated with an amount and a merchant ID number. Each piece of information must match the details provided for transactions to go through. This strict requirement makes single-use virtual cards very difficult to take advantage of.

Really, the most susceptible virtual card risk is employee misuse. You can even eliminate that risk by using virtual cards through a payment services provider—they usually have an indemnification process in place.

Fast, Guaranteed Funds

The big fraud protection benefit is obviously on the buying side, with the buyer receiving a rebate, which helps to defray AP costs. But what about benefits on the supplier side?

Prior to joining Nvoicepay, I sold into accounts receivable. The big concern there is to collect and reconcile payments as quickly as possible. Virtual cards can help on both counts. Virtual card funds reach their designated accounts in 24 hours from the time the payment is approved while checks and ACHs can take up to 10 and two days, respectfully. There’s value in being able to offer AR teams quick payments.

What’s more, these are guaranteed funds. Once they run the card, the funds are theirs. This isn’t always the case for ACH and check payments, which can fail or bounce. Wire payments are the only other payment type that is guaranteed, but they’re expensive to issue and time-consuming to set up, which is why they’re not usually used domestically.

When it comes to reconciliation, plastic cards are hard to reconcile at scale, but virtual cards can be wrapped into a technology solution like the one I used to sell, which automates those processes.

A More Nuanced View

When it comes to fees, there’s still a misconception that accepting virtual card is expensive for suppliers. I do think 2020 acted as a tipping point where suppliers are looking at fees in a more nuanced way. Fast, guaranteed funds are nothing to sneeze at in an environment where many of their customers might be struggling.

Suppose you scale your program and set up a portal for suppliers to receive virtual card payments. In that case, you can receive level two and level three discounted processing. That can often significantly minimize your fees. I’ve seen instances where fees went from 2.5 percent to 1 percent.

Volume and payment size are components of those discounts—if you make large volume payments, you might get a better overall rate and better rates on smaller payments. But access to data is another component. The additional data associated with virtual cards helps issuers mitigate fraud risk. Other data is transmitted with the payment—data that can be used for economic analysis and even for marketing.

It appears that in 2020, COVID-19 did more to move companies off checks and onto electronic supplier payments than all the sales and change management efforts of the preceding decade combined. While the initial response was to adopt ACH payments, companies maturing their electronic payment programs will find virtual card a strategic component that promotes fraud protection and supplier support.

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Kristin Cardinali is Vice President of Regional Sales at Nvoicepay, a FLEETCOR company. Her experience in sales and sales leadership spans 16 years, and includes positions held with companies like Capital One and Billtrust. With Nvoicepay, she delivers scalable payment solutions to mid-market and enterprise companies. Kristin has received several accolades, including Sales Rep of the Year & Quarter, and multiple President’s Awards.

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Archives, Banking, Global Trade Daily

Safety First: How to Handle Supplier Banking Data

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2020 was an eventful year for business payments. We saw expansive leaps in digitization, accompanied by new challenges. Remote work forced accounts payable departments to pay more suppliers electronically, primarily by ACH or direct deposit. In many cases, companies began making ACH payments before they could adequately secure remote networks and environments and without new protocols and procedures to ensure the secure handling of supplier bank account information. The rush to pay suppliers electronically in the new remote environment exposed them to various fraud schemes, targeting ACH payments. While ACH fraud was already on the rise, cybercriminals exploited the pandemic and the rapid shift away from paper check with greater voracity than ever.

Knowing the increased risk with ACH payments is critical when you receive requests to change bank account information. According to our internal data, these requests are common, with suppliers changing bank accounts roughly every four years. But change requests are also the most common avenue for fraud, specifically VEC (Vendor Email Compromise). In this type of attack, criminals hack into supplier systems, monitor invoice flow, identify a potential weak spot among the supplier’s customers and then reach out to someone in accounts payable to request a bank account update. Often, they time this sort of change just ahead of a large payment.  If successful, they route the payment to an account they’ve set up only to close it once they receive the funds.

AP teams stay vigilant when they receive requests to change banking information. But really, they always need to handle bank account data securely. If this data is intercepted, it gives fraudsters fuel to make their schemes more credible. IT departments need to secure company networks and environments. AP departments need to have stringent, repeatable processes for collecting, validating, and storing the information.

Collecting the data

Start with identifying the information you need to store. In addition to the routing, account numbers, and other remittance information, you may want to add security questions or other uniquely identifying information.

This information should never be transmitted via email, which is extremely unsafe. It’s shocking how open people are with the information they share using that communication method. There’s a lot of naivete surrounding the notion of business email compromise, or BEC. The FBI documented over $26 billion in reported losses from BECs between June 2016 and July 2019. According to the 2020 AFP Payments and Fraud Control Survey Report, BEC schemes were the most common type of fraud attack last year, with 75 percent of organizations experiencing an attack and 54 percent reporting financial losses.

With such attacks on the rise, banking data really should be sent via a secure portal or encrypted email. It’s tempting—especially at the beginning of a new supplier relationship—to want to extend trust and make enabling them for payment fast and easy. Don’t do it. Safety comes first. Make it clear to your supplier that you’re doing this to protect their company and yours. They should understand and appreciate that—it’s a yellow flag if you encounter pushback on that request. While it’s uncommon for Vendor Email Compromise (a subset of BECs) to occur during initial onboarding, requests to make exceptions to processes (especially if combined with a sense of urgency) are hallmarks of phishing or fraud attempts. Make sure your team is well trained, so alarm bells go off in that scenario.

It’s not just during the supplier enablement process that this information needs to be protected. Suppliers routinely send invoices that include bank routing and account information via email. Again, this is well-intentioned—the aim is to make it easier for the customer to pay them, but it’s also risky. Using a secure portal is the best solution.

When accepting sensitive information over the phone, be sure to have phone validation procedures in place to ensure the person you’re talking to is an authorized representative of the supplier.

Validating and securing

When you’re setting up a relationship with the supplier for the first time, AP should work with procurement to validate all the contract information. They may also want to use a third-party tool or service provider that connects into banking networks to validate and authenticate account identity and ownership. There are many such tools on the market.

If you’re switching an existing supplier from check to ACH, you may already have some visibility into their banking data as another way you can cross-check their information before making changes.

Once validated, information must be securely stored. Where housed on paper, companies should implement a level of physical protection such as locked in a file cabinet, but we know files are often kept in a folder on someone’s desk or—in the age of remote work—someone’s car or home. Many companies keep supplier data in spreadsheets. If someone were to intercept that information, it would be in peril.

When storing supplier banking information in an ERP system, ensure access is tightly controlled through strict permissions workflows and frequent audits of current user activity.

As traditionally check-heavy companies rush to meet the demands of electronic payments, they may miss critical steps necessary to safeguard supplier banking data and should partner with their IT, Security and Compliance teams to build a robust system of access, monitoring, and review. Outsourcing the responsibility to a payment provider is another consideration to make where resources and skillset are limited.

With the pace of change and new security threats upon us, focus on worse-case scenarios may leave you feeling helpless and overwhelmed. Preparation is key to successfully managing change. Identifying these scenarios will help you predict and prepare for the challenges and pitfalls ahead as you safely transform your accounts payable flow.

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Angela Anastasakis is the SVP of Operations and Customer Success for Nvoicepay, a FLEETCOR Company.   She has more than 30 years of leadership experience in operations and product support. At Nvoicepay, Angela has been instrumental in leading Operations through rapid growth, while maintaining their 98% support satisfaction rating through outstanding service.

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Archives, Banking, Global Trade Daily

How are Digital Banking Facilities Helping During COVID-19 Pandemic?

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Digital banking reduces a person’s bank visits and manual work, along with saving time. The COVID-19 pandemic has accelerated the process of digital banking due to its numerous benefits. Smartphone usage has resulted in an additional surge in digital banking during the COVID-19 pandemic. Moreover, swift transactions, 24/7 banking facilities, and smooth mobile banking have flourished the digital banking industry.

If you ask your grandparents or any person old enough to have witnessed changes in technology, they will tell you about the endless hours spent in a bank just to get one task done. The story doesn’t end here though; efforts to keep track of all transaction receipts, cheques, passbook records, and pending payments seemed to be tiring in those days. Don’t you feel lucky now to be born in an era that has tremendous technological facilities and scope?

According to a report published by Research Dive, the global digital banking market is projected to cross the $1,702.4 billion mark by 2026, from a significant market share of $803.8 billion in 2018, and exhibit CAGR of 10.0% in the 2018-2026 forecast timeframe. The exponential rise of technological development is suggested to be the driving force of the digital banking market growth.

What is Digital Banking?

Ideally, banks are boring yet important part of our lives. Boring because one has to wait for long hours in queue just to get cash or transfer money. If you hit your rewind button, then, about 30 years ago, banking systems dealt with a lot of paperwork. Computers and the internet were not advanced enough to run quickly. A lot has changed to date but a huge push to go digital came from the COVID-19 pandemic. This outbreak changed the shape of the entire banking industry by making it go digital.

In simple terms, digital banking means converting all traditional banking services to online or digital mode. These services could be deposits, transfers, withdrawals, applying for various financial services, account handling, loan management, and bill payments. Digital banking eliminates the need for paperwork such as demand drafts, cashing cheques, or pay-in slips. One has the complete liberty to perform all banking activities 24/7 without literally going to the bank. Digital banking facilities are accessible with a stable internet connection and any electronic gadget like mobiles, laptops, or tabs.

Customers’ preference for banks with digital banking options forced several small and large banks to go digital. Banks didn’t expect that consumers would opt for online banking services at a faster pace, and hence creating digital banking provisions at an accelerated rate in all financial institutions for clients became a necessity. Deloitte’s 2019 banking and capital market outlook suggests that banks are trying to match consumers’ expectations regarding banking by turning towards digital banking services. Moreover, ‘create digital capability’ was cited by 28% of banks as their foremost initiative. Almost 50% of the banks are making digital banking their top priority.

What are the Benefits of Digital Banking during the COVID-19 Pandemic?

There is a significant advantage of fund or money transfer as digital banking skips the hassle of issuing demand drafts or cheques. One can simply transfer money from one account to the other without visiting a bank from the safety of their homes. This ensures a low risk of COVID-19 infection and the liberty of transactions anytime and anywhere. A few notable options for online money transfers are IMPS (Immediate Payment Service), RTGS (Real-Time Gross Settlement), and NEFT (National Electronic Fund Transfer).

Apart from this, one has the luxury of downloading e-bank statements at any point in time. These bank statements can be saved on mobile phones or laptops and can be accessed easily. This prevents the need to visit banks and take printed copies of statements, thus preventing unwanted contact during the COVID-19 pandemic. Moreover, the installation of ATM machines in every nook and corner is aiding people in withdrawing cash, be it day or night.

Bill payments can be smoothly managed with digital banking by simply logging in to your bank account. All kinds of bills such as electricity, phone, gas, and television can be completed via digital banking. Mostly, several banks have auto-debit facility to pay bills automatically whenever issued. For instance, HDFC bank has started a pre-paid mobile recharge facility as part of the digital banking initiative. In addition to this, one can open a fixed deposit account in seconds, invest in mutual funds, and apply for loans and various insurance policies as well.

The rise in smartphone usage and the availability of strong network connectivity has paved way for mobile banking systems. Since everyone nowadays possesses a smartphone, one can download apps for transaction purposes. Google Pay, Apple Pay, BHIM, SBI’s Yono, Payzapp and many more are gaining popularity amidst the COVID-19 outbreak. For transactions, one just has to scan a QR code or know the phone number of the beneficiary. Mobile banking apps are like mini-digital banks that include all banking services on the go.

If at all you have to stop a cheque process, then simply log in to your account and click on update cheque process. Furthermore, one can track credits and debits of the account as banks send SMS or e-mails of transactions. These notifications aid in preventing frauds and one must report them as quickly as possible to the bank authorities. Beyond this, digital banking displays transaction history and any pending payments as well.

The Future of Digital Banking

This title wouldn’t have existed 50 years ago due to a lack of technical knowledge, but today this heading seems relevant. The digital banking sector will continue to grow in the upcoming years with a few changes in technology. Several banks are already utilizing artificial intelligence for meeting the financial demands and expectations of customers. Today it is artificial intelligence; tomorrow, it will be something else that’ll augment digital banking to a greater height.

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Chaitali Avadhani is currently working in the content writing industry and has a Master’s degree in journalism and mass communications from Savitribai Phule Pune University. She is naturally attracted towards writing and is harboring experiences in the same field. Apart from this, she is a certified mountaineer and has passed out from Himalayan Mountaineering Institute, Darjeeling. Outside the office she is actively engaged in fitness activities such as running, cycling, and trekking.

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Archives, Banking, Global Trade Daily, Software

Here are the Top Tips for Preventing ACH Credit Fraud

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Forced to work from home during COVID-19, accounts payable departments have accelerated plans to move away from paper checks and pay more of their suppliers by ACH. That, in turn, accelerated another trend: fraud. Through social engineering, fraud attacks on ACH credits are most commonly known as Business Email Compromises or BECs.

According to the 2020 AFP Payments and Fraud Control Survey Report, for the first time, in 2019, BEC schemes were the most common type of fraud attack experienced, with 75 percent of organizations experiencing an attack and 54 percent of those reporting financial losses. ACH credits—outgoing payments from buyer to supplier—were targeted in 37 percent of BEC schemes.

The problem has only gotten worse in 2020. In the September edition of their Fraud in the Wake of COVID-19 Benchmarking Report, the ACFE reports that 90 percent of respondents have seen an increase in cyber fraud frequency from July through August. This included BECs.

Three-quarters of respondents said that preventing and detecting fraud has become more difficult in the current environment, and more than 90 percent expect attacks to increase. Organizations are under siege, and nearly one-third have received no guidance from banking partners about mitigating ACH credit risks.

What can organizations do?

Defeating BECs requires a multi-pronged approach. Ongoing anti-fraud training is important because these emails are getting more convincing every day. Fraudsters have become experts in user data and A/B testing, which reduces elements that alert their victims of illegitimate changes to their accounts. Strong internal controls are also important and network security, which prevents parties from gaining access to internal systems.

Here are four ways to help reduce your risk of ACH credit fraud.

1. Handle with Care

Thwarting ACH credit fraud is all about handling supplier banking data securely, which accounts payable must have on hand to transmit their payment file to the bank. This data is often stored in the ERP system, or sometimes on an Excel spreadsheet, where AP staff has been recorded during supplier onboarding. Sometimes it’s stored when a supplier updates their information. Fraudulent change requests are one of the most frequent avenues of attack.

Let’s say you’ve got a new person in accounts payable who isn’t fully trained yet. This person gets an email from a supplier, asking to update their bank account information.

Your new hire, eager to please, fulfills the request, inputting a new routing number and bank account, unaware that a million-dollar payment to that supplier is going out the next day. Nobody realizes what’s happened until two weeks later when the real supplier calls, asking for payment.

By then, it’s too late to reel ACH payments back in. You can call the FBI and the bank. They may try to help you, but if the thieves are sophisticated enough, they’ve already moved the money to offshore accounts, and it’s completely gone.

2. Secure Information

You should never use an unsecured email for banking information updates, although a surprising number of companies still do. It’s too easy for a hacker to intercept one of those emails and use the information within it for their own means. If they get contact or bank account information, they can pose as legitimate suppliers and circumvent internal controls. Some businesses even keep information in spreadsheets or their ERPs, but systems like those aren’t designed to store data securely.

Some companies allow suppliers to update their own information in supplier portals. That might work, provided that companies manage secure portal access and verify all updates. However, if suppliers can log in and update information, it’s likely that hackers can access the same information with very little resistance.

The most sophisticated approach that I’ve seen so far includes a trained procurement team, who verifies and validates all changes that come through.

There are a couple of drawbacks to this approach. It’s a big IT investment with plenty of labor asks. Even then, it’s still prone to internal fraud. At the end of the day, even the best systems will still have their risks. The goal is to minimize them.

3. Look at Fees

Companies often try to shift the risk and time burden to others, with some success. For example, they may choose to pay their suppliers by card., which puts the risk on credit card networks. In cases of card fraud, it’s more likely that payments can be canceled or refunded.

Virtual cards offer even more security because they provide unique numbers, which can only be used by a specified supplier for a specified amount. The big drawback is that not all suppliers accept cards—there are fees to consider.

An organization I’m familiar with pays many of its suppliers with PayPal. Their supplier­­­­—most of them small businesses—are located around the world. AP doesn’t have the time or staff to verify payment information, validate bank accounts, and deal with ongoing updates. As the intermediary, PayPal handles all that and guarantees that the funds go to the right place. But, here again, suppliers pay a hefty fee—in the neighborhood of three percent.

4. Shift the Risk

There really is no perfect system in place, which is why we’re seeing ACH credit fraud rise in tandem with the rise in ACH payments. But there is a perfect way to shift the risk to companies that are built to withstand the verification and validation burdens. Today’s payment automation providers manage supplier information, so individual companies no longer have to spend valuable time on it. It’s similar to handing the reins to IT and procurement departments to lock down the database and institute controls. The difference is that working with a provider removes the time investment and liability.

Think of payment automation providers as a means to outsource risk. Their sole focus is to ensure secure, on-time payments to your suppliers without causing costly overhead. They have perfected the systems and processes for hundreds of thousands of AP departments across the United States, and in ways that businesses would be hard-pressed to replicate.

Businesses used to worry about check fraud above all else. While they still have to pay attention to that aspect, it’s become a low-tech form of fraud that’s easy to understand and plan for. As companies shift to electronic payment means, they’re increasingly experiencing sophisticated cyberattacks, which target much larger sums and are harder to defend against. With such attacks growing, businesses may find that outsourcing professionals is the best defense.

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Josh Cyphers is the President of Nvoicepay, a FLEETCOR Company.  For the past 20 years, Josh has managed successful growth for a variety of companies, from start-ups to Fortune 100 companies.  Prior to Nvoicepay, Josh held leadership roles at Microsoft, Nike, Fiserv, and several growth-stage technology companies.  Josh is a lapsed CPA and has a BS in Economics from Eastern Oregon University.

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Archives, Banking, Global Trade Daily

The Advantages of Blockchain over Traditional Payments

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E-commerce is expected to surpass $4.6 trillion globally by 2022, with the seamless experience of e-wallets boosting its popularity. The simplicity of services like PayPal and Stripe has helped to improve customer experience while giving merchants easy access to new markets.

Blockchain-based solutions represent the next logical evolution of this trend. By eliminating middlemen, cross-border blockchain payments can result in even faster transfers while significantly reducing costs for both merchants and customers.

The cost in trust in traditional payments

In a traditional payment flow, three to five parties facilitate a single transaction. Together, they make up what is called the “payments stack.” These different parties work together to create trust. They check that transactions can be carried out and manage the transfer of funds. At the same time, this trust has a cost, which is ultimately borne by merchants. Each party within the payments stack takes a small cut of a transaction.

A typical transaction involves a payment processor checking with the issuing bank if a customer’s card can be charged. Once a transaction is validated, which occurs within a few milliseconds, a merchant has a guarantee that they will be paid at a later date. Over subsequent days, funds are transferred from the issuing bank to the acquiring bank.

The traditional stack involves numerous charges. Card networks and other parties can also raise their fees. As recently as September 2019, Visa added a fixed charge of 0.02 EUR for merchants using 3D-Secure, which is increasingly required under new PSD2 legislation.

Cash flow, holdbacks and fraud

Cost isn’t the only issue merchants face with the traditional stack. The speed of transactions can also be a problem. While validation takes place in milliseconds, it can be days before money finally arrives in a merchant’s bank. This is not ideal for small-to-medium-sized businesses that depend heavily on cash flow to pay suppliers and employers.

When we look beyond card payments, the picture is even worse for merchants. In the US, the average B2B payment cycle takes 34 days to complete, with 47% of invoices being paid late!

So-called “holdbacks” are another issue that has come to prominence recently. Here, acquirers keep a percentage of a merchant’s revenue as collateral in case a service is not provided, and refunds must be issued. Holdbacks have particularly affected the travel industry as a result of the COVID-19 pandemic. Most travel is booked long in advance, and given the uncertainty introduced by COVID-19, holdbacks have increased significantly. This has led to reduced cash flow for merchants – and ultimately to the insolvency of Thomas Cook and Flybe.

While traditional payments are geared towards creating trust, 78% of businesses reported attempted or actual B2B payments fraud during 2018, with international fraud rising 136% from 2017–2019. Although nearly half of payment fraud is related to pen-and-paper processes, digital methods and credit cards are not immune.

Faced with this situation, it is not surprising that more and more companies are turning to fintech to reduce payment costs, particularly when it comes to B2B payments, where 1.8% interchange fees for cards introduce excessive overhead.

The promise of blockchain

When we view the payments stack as a means of generating trust, the promise of blockchain becomes clear: eliminating the stack entirely. Customers send funds directly to merchants, with transactions being verified by a decentralized network.

Blockchain promises great improvements for merchants in terms of speed and cost. No middlemen are required to check whether funds can or cannot be sent – the network will reject a transaction if a wallet has an insufficient balance. Once a transaction is confirmed, funds arrive within minutes. The only cost is a network fee, paid by the customer themselves. 

What’s more, blockchain is ideal for protecting against fraud and encouraging transparency. The fundamental problem blockchain solves – the “double spending” problem – is directly related to preventing fraudulent transactions. Blockchain is designed to make it impossible to spend coins you do not have. Moreover, since blockchains are public ledgers, regulators can easily perform automated audits.

Blockchain is also a universal solution. While the US has ACH for bank transfers and the EU has SEPA, Bitcoin works the same everywhere. No bureaucracy is required to send funds overseas. Not only does this make designing integration protocols relatively simple, but it gives merchants easy access to new overseas markets.

A 2019 report from the European Payments Council indicated an increase of cryptocurrency use alongside the growth of e-commerce.

Blockchain has too many advantages over traditional payment solutions for merchants to ignore. By accepting cryptocurrency, merchants can tap into a growing multibillion-dollar market and get a taste of a cashless, borderless future.

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Kellogg Fairbank is Executive Sales Leader for Nash Link, a solution for merchants designed to make it as easy as possible to accept cryptocurrency from customers.

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Archives, Banking, Global Trade Daily

THESE ARE THE U.S. BANKS YOU SHOULD BE TRUSTING WITH TRADE FINANCE AND CASH MANAGEMENT

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Global Finance editors, with input from industry analysts, corporate executives and technology experts selected the best trade finance banks in 97 countries and eight regions.

In addition, Global Finance selected the best banks for trade by U.S. region, a list that was based on various service categories, such as document management and export finance.

This year’s winners were revealed during Global Finance’s 20th annual World’s Best Trade Finance Providers awards luncheon on Jan. 15 in Frankfurt, Germany, during the BAFT Global Annual Meeting.

The American winners were:

New England: Webster Bank
Mid-Atlantic: M&T Bank
Great Lakes: KeyCorp
Plains: Commerce Bank
Southeast: SunTrust Bank
Southwest: Comerica
Rocky Mountains: Zions Bancorp
Far West: U.S. Bancorp 

Globally, HSBC took the top spot in Euromoney’s Trade Finance Survey for the third year running, with Deutsche Bank in second place and UniCredit in third. Citi fell out of the top three to take fourth position. One of the biggest upsets was JPMorgan, which fell to 17th after reaching ninth place in 2018.

“Many of the American banks have enough trade business in their home market,” explains Eric Li, research director at Coalition. “So it’s no surprise that when it comes to a global survey, European banks will thrive.”

Global Finance editors say the winners are those banks and providers that best serve the specialized needs of corporations as they engage in cross-border trade. The winners are not always the biggest institutions, but rather the best—those with qualities that companies should look for when choosing a provider.

A proprietary algorithm with criteria—such as knowledge of local conditions and customer needs, financial strength and safety, strategic relationships and governance, competitive pricing, capital investment and innovation in products and services—weighted for relative importance was employed by Global Finance.

A DIFFERENT TAKE FROM GREENWICH ASSOCIATES

As of press time, the most recent Greenwich Share and Quality Leaders in U.S. Large Corporate Banking was released during the fourth quarter of 2019.

“For a business that is generally considered stable and rather slow to evolve, large corporate banking is changing fast,” notes a statement from Greenwich Associates. “The globalization of U.S. corporate business coupled with a disruptive trade war, the proliferation of digital technology, the rise of fintech providers, and the strategic retreat of certain global banks are just some of the variables shaking up the corporate banking industry and putting more corporate clients and business up for grabs.”

From April through September 2019, Greenwich Associates conducted interviews at U.S.-based companies with $2 billion or more in annual revenue with 422 chief financial officers, treasurers and assistant treasurers, 441 cash managers and other financial professionals in cash management, and 136 corporate trade finance professionals.

Participants were asked about market trends and their relationships with their banks. Trade finance interview topics included product demand, quality of coverage and capabilities in specific product areas.

THE WINNER’S CIRCLE

The 2019 share list is topped by J.P. Morgan, followed by Bank of America, Wells Fargo, Citi and HSBC—in that order.

The order of the top two changes when it comes to U.S. Large Corporate Cash Management: Bank of America; J.P. Morgan; Wells Fargo; Citi; and HSBC.

“Despite the trade war between the United States and China, the ongoing Brexit saga and other signs suggesting that globalization might have temporarily peaked, U.S. companies actually increased their exposure to overseas markets last year—at least in terms of their banking needs,” according to Greenwich. “For example, the share of large U.S. companies using at least one bank for payments/receivables and/or cash management in Western Europe increased to approximately two-thirds in 2019 from just 58 percent in 2018. The uptick was equally impressive in Latin America, Central and Eastern Europe, and the Middle East and Africa.”

BANKS CHARGE INTO CASH MANAGEMENT

The biggest U.S. banks are placing a new strategic focus on the cash management business. In part, this new emphasis comes from a desire to capture the cash deposits of large companies, which provide a much-needed source of balance sheet stability.

However, banks are also looking to capitalize on an inefficiency in corporate treasury management by creating new client values. International payments, receivables transactions and even corporate cash transfers often trigger a corresponding foreign exchange trade. Some companies put those trades out to bid—but many don’t.

Even for trades up to $20 million in size, many companies simply pass the trade on to their cash management providers. For that reason, margins for FX transactions on the back-end of international cash management transactions can be especially attractive.

U.S. TRADE FINANCE AMONG LARGE CORPORATES

Trade finance is an area of renewed interest by the major banks. Citi, Bank of America and J.P. Morgan all vie aggressively to be the lead trade finance provider among U.S. large corporates, with each bank doing business with just under half of the market. Wells Fargo and HSBC round out the top five banks. Bank of America, Citi, HSBC, J.P. Morgan, and Wells Fargo are all recognized for distinctive quality and share the title of Greenwich Quality Leader.

GREENWICH EXCELLENCE AWARDS

The accompanying table presents the complete list of 2019 Greenwich Excellence Awards in U.S. Large Corporate Banking and Cash Management.

Greenwich consultants John Colon, Don Raftery and Chris McDonnell specialize in corporate banking, cash management and trade finance services in North America. Consultant Chris McDonnell also specializes in digital banking.

Archives, Banking, Global Logistics, Global Trade Daily, Stories

An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

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COVID-19 has had a devastating effect on human life. But it has also caused widespread economic upheaval for both advanced and emerging market economies as countries shut down to try to stop the spread of the virus. The U.S. for instance is set to see the most severe economic downturn since GDP was first tracked in the 1940s.

This means deep hardship for many businesses of all sizes and across all industries. Shutdowns caused many firms to entirely cease operations for a time. Now, they are grappling with plummeting demand as a result of rising unemployment and uncertainty, on top of supply chain difficulties and uncertainty as to financing resources.

Bad Timing for a Global Crisis

Although there is no “good” time for a pandemic to strike, business conditions in 2020 were already a little shaky prior to the outbreak. At the beginning of the year, the global economy had just finished its weakest year since the Great Recession, global trade was turning sour, trade finance had become more restricted and continued uncertainty from the U.S.-China trade war weighed on businesses everywhere.

If the outlook was stormy at the beginning of the year, it’s now outright bleak. Atradius economists are now forecasting that global trade will decrease approximately 15 percent in 2020, while global GDP will decline about 5 percent. The U.S. will perform below average, with a 6.1 percent decrease in GDP – largely due to its lag in controlling the virus and subsequent record high in number of COVID-19 cases, in addition to soaring unemployment as well as pressure on incomes, leading to a drop in consumption.

Will Government Intervention Be Enough?

Governments and central banks the world over have enacted measures to counteract the pandemic’s economic devastation. Early in the crisis, for instance, the European Central Bank put in place a Long Term Refinancing Operations III program, while the U.S. Federal Reserve increased quantitative easing.

Countries have also put together aid packages, such as the U.S. CARES Act and a number of packages from individual EU economies and the UK. Similarly, China is providing tax relief, state-backed credit guaranteed, and delayed loan and interest payments. Altogether, global government stimulus measures amount to approximately 9 percent of global GDP, or around $7.8 trillion.

But will this be enough? Atradius economists suggest not – not unless countries also enact vigorous policies to revitalize the economy at every level. The EU Pandemic Fund provides a good example: the $750 billion initiative will bestow loans and grants to the areas and sectors hardest hit by the pandemic, allowing for a more even recovery rate across the entire EU.

Although stimulus measures are necessary, soaring government debt levels are also cause for concern – even before the outbreak, many countries had worryingly high debt levels. The most recent baseline scenario from Atradius economists has the U.S. federal budget deficit, as a proportion of GDP, increasing by more than 10 percentage points this year. The UK will fare even worse, seeing a 13 percentage point increase in deficit growth rate. China and India are the only major economies likely to maintain moderate debt ratios through the pandemic.

All that said, low interest rates will likely stick around through the end of 2021 at least – this should help offset some of the concerns over high government debt levels. Moreover, central banks like the Fed and ECB will continue purchasing government bonds, suppressing any financial market stress.

What’s Next?

While the global economy is under undue strain at the moment, Atradius economists predict a recovery could begin as early as this year, continuing into 2021. Our baseline scenario has global GDP rebounding by 5.7 percent in 2021, with the U.S. coming in just under that, with GDP growth of 4.2 percent.

This scenario, however, is shrouded in uncertainty and hinges on a few key assumptions:

-That researchers are able to develop a successful vaccine in the near-term

-That lockdowns will be limited throughout the remainder of the outbreak

-That oil prices will remain low

-That the U.S.-China trade war will remain at a standstill

-That the rise in financing cost for firms, if any, remains limited

Should these assumptions not play out, the global economic recession could be much worse than anticipated – contraction rates could be twice as damaging as those currently predicted, with global GDP contracting 12.2 percent in 2020 and U.S. GDP seeing a 7.9 percent drop. Recovering from a contraction of this size would be a slow, painful process, although we would expect 2021 to see similar growth rates.

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John Lorié is chief economist with Atradius Economic Research. He is also affiliated with the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles in commercial and investment banking. He started his career at the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, master’s degrees in economics and tax economics as well as a bachelor’s degree in marketing. 

Theo Smid is an economist with Atradius Economic Research. His work focuses on business cycle analysis, insolvency predictions, thematic research and country risk analysis for the Commonwealth of Independent States. Before joining Atradius, he worked for five years in the macro-economic research team of Rabobank, focusing on business cycle analysis of the Dutch economy. He holds a master’s degree in economics from Tilburg University.