Citi, HSBC Join Bank Group In Global Trade Finance Effort

Citi, HSBC and Banco Santander are among seven major global banks that are banding together to form a cross-border trade finance network, Reuters reported Thursday (Oct. 17).

Along with ANZ, BNP Paribas, Standard Chartered and Deutsche Bank, the financial institutions (FIs) have signed a Memorandum of Understanding (MOU) to make trade finance more affordable and efficient for trading companies. The banks have also agreed to partake in a digital trade information network, working to standardize the trade finance process to lessen risk and, therefore, lower financing costs for borrowers.

As Reuters explained, trade financiers each have their own relationships with different standards for exporters and importers. Collaboration can address the fragmentation between businesses, suppliers and lenders.

In an interview with the publication, Rogier Schulpen, Banco Santander global head of trade and working capital solutions, said this MOU is “the first time that these banks will come together to set a standard … that will allow cheaper access to finance because the risks are going to be reduced.”

The banks plan to use the network to increase small and mid-sized business (SMB) access to trade finance, allowing those businesses to submit purchase orders and invoices to receive trade finance. The trade information network will allow lenders to verify information and reduce the risk of fraud.

According to Schulpen, 20 additional banks are readying to join the initiative, while 60 large corporations are reportedly in talks to participate. Reuters compared the network’s governance model to that of SWIFT‘s, which standardizes connectivity.

Standard Chartered also recently announced an initiative with Huawei to deploy Internet of Things (IoT) technology for enhanced supply chain data analysis in an effort to strengthen its trade finance offering. Other FIs, including HSBC, have been experimenting with blockchain to streamline the data exchange necessary to facilitate trade finance.