Deepesh Patel, Editor at Trade Finance Global, interviewed Enno-Burghard Weitzel (EW), Senior Vice President Strategy, Business Development, Digitization at Surecomp, to discuss MSMEs’ struggle to access finance and how technology can be crucial to trade growth.
MSMEs constitute the majority of business in every region across the world. Yet this industry sector faces the greatest hurdle in accessing finance, due in part to the unavailability of public information on their financial statements
Why is tech the key to facilitating trade growth?
EW: Trade finance is a means of financing that is designed to be self-liquidating, and, as such, is not directly linked to a company’s individual credit rating. Yet all too often, credit agencies’ references rely on financial statements and records.
Modern technological solutions can play a pivotal role in connecting banks and other financiers with these types of corporates, thus facilitating access to funding they might not otherwise be able to access. The efficiency gains from technology can accelerate and streamline the trade finance transaction process, which reduces transaction-related costs, and, in turn, boosts trade activity and fosters MSME growth.
Funding aside, why has tech historically been less accessible to the mid-market?
EW: Trade finance software is very specialised. Until recently, banks across the globe were using software installed on-premise on their own hardware. Such deployment models provide a very high level of security, which is necessary in the banking industry. However, they also require a dedicated IT team to run both the software and the hardware; hence, the cost of implementing on-premise software solutions is relatively high.
This is the key reason why sophisticated trade finance software solutions are adopted predominantly by larger banks or dedicated trade finance banks. Mid-sized banks, and those that run trade finance as one of many business lines, have historically not had the financial and IT resources to use a specialist trade finance solution.
Is ‘laggy’ cloud adoption in emerging market mid-tier banks hindering trade growth?
EW: Not really. As cloud operations are maturing, more and more regulators are approving the use of public cloud services for banks. This frees up banks from having to run IT hardware and having to maintain aging IT systems on-premise. Now they can benefit from using Software-as-a-Service (SaaS) cloud-based solutions, which are paid for with a monthly subscription fee, which also reduces heavy upfront IT investment and reduces the total cost of ownership (TCO).
Cloud-based solutions also eliminate the technical reliance on internal IT teams, allowing banks to focus their attention and energy on providing better service to their customers. It can already be seen that banks who are adopting a cloud strategy fast do provide better customer service, win greater market share, and earn better financial results. As a result, every single bank that is adopting cloud services will be supporting the growth of trade for MSMEs.
Are the banks’ corporate MSME customers pushing their banks hard enough?
EW: Well, that’s a good question. Experience shows that, in general, large customers are more effective at pushing banking partners to fulfil their requirements. MSMEs typically only have a limited voice – if they have access to bank financing at all. So it would require strong advocacy to amplify the voice of the MSMEs and push banks to cloud adoption in order to lower the entry hurdles for trade.
The tech industry is pushing, the regulators need to push, and industry associations are pushing as well. For example, the ICC is currently driving an international campaign – ‘Trade Now’ – which is specifically designed to push support for MSME trade. Every voice counts.
What is Surecomp doing to encourage mid-market cloud adoption?
EW: Last year we launched our Trade Finance-as-a-Service (TFaaS) offering, which provides the opportunity for holistic, cloud-based trade finance technology, as well as open, API-based access to our fintech partner, Marketplace. Since then, based on market feedback in light of the pandemic, and to help fuel the post-COVID-19 economic trade recovery, we’ve now revamped our TFaaS offering to specifically address the MSME market.
We are very proud to be able to offer our leading DOKA-NG™ trade finance solution as a cloud service to banks, deployed within 10 weeks and for a very competitive price. Starting at $50,000 per year, banks can now enjoy the benefits of the world’s most widely adopted back-office solution, which can help them to streamline internal workflows, accelerate transaction processing, and connect to the world of digital trade.
A 10-week deployment of back-office trade finance processing is game-changing for the mid-market. How can you guarantee success in such a short time frame?
EW: We’re leveraging our experience of more than 35 years in the trade finance industry. Our solution is the most advanced in the market: we’ve honed our deployment skills over many years, and we can now provide it as a fully cloud-hosted service.
Instead of installing on-premise and going through a cumbersome implementation project, the team can on-board themselves, as with any consumer cloud service (think Gmail, WeTransfer, Spotify), and it’s ready in no time. We’re applying the same consumer rules to the trade finance arena, enabling banks to focus on using the solution to the benefit of themselves and their MSME customers.