Banks and fintechs have not always been the closest playmates, but ITFA’s Andre Casterman is on a mission to help them work together.

As a 30-year veteran of the tradetech industry – he joined SWIFT in 1991 – Casterman is a fintech leader with a vision for change.

He is also the founder of Casterman Advisors, and he currently chairs the International Trade and Forfaiting Association’s (ITFA) Fintech Committee – a position from which he is starting to see progress in the digitisation of trade.

“Trade is still not completely digitised, but many things are progressing in the meantime,” said Casterman. 

“I think we have to distinguish what can be digitised without any need for policy change, versus the specific instruments that require policy change – change of law, for instance, or adoption of the Model Law on Electronic Transferable Records (MLETR) – in order for digitisation to be acceptable and those digital instruments to become enforceable. 

“So that’s really the major challenge: it’s that often, the technology can’t go far unless the policymakers take action.”

Complement: don’t compete

Casterman launched the ITFA Fintech committee in 2017, with the goal of driving fintech product innovation and seeking out early adopters – a role which builds on his experience at SWIFT.

“I was, indeed, already in the fintech space since 2016, and I saw much more openness from the banks to start working with highly specialised technology players,” said Casterman. 

“Gradually, I identified that those fintechs were not understood by banks, and were often perceived as potential competition.

“So, my first objective has been to clarify their positioning, to show they’re not competing – they’re helping – and to show that they are really complementing each other.” 

Bearing fruit

As of 2020-21, Casterman said his advocacy both for bank-fintech and fintech-fintech collaboration is bearing fruit.

Last year, the ITFA Fintech committee launched two major projects: the Digital Negotiable Instruments (DNI) Initiative and the Trade Finance Distribution (TFD) Initiative, both of which are gaining traction.

“We really see this theme of collaboration amongst fintechs being applied here, and the banks will benefit,” said Casterman. 

“That’s the ultimate goal: for the banks to benefit from those enhanced value propositions, and for their clients to indirectly benefit from those.”

Trust and other challenges

Another major challenge for digitisation, as Casterman sees it, is the reluctance of fintechs to work together.

He points out that fintechs don’t necessarily have to work together on an exclusive basis as partners, but instead, can work together to plug into existing business, legal, and technology landscapes simultaneously.

“There are many opportunities,” said Casterman. “But it’s not obvious to get to a point where two companies say yes, let’s go together, and build this enhanced value proposition’, because there is a temptation from some large players to believe they can do it all by themselves.”

Policy playing catch-up

Typically, advances in technology far outpace changes in regulatory frameworks, and this can clearly be seen in the hindering of banks that want to dive deeper into fintech.

For tradetech, similar problems have emerged with regard to the legal acceptance of electronic signatures in trade documents.

Casterman calls this dilemma the clash of the “policy track” and the “technology track”. 

“The technology track is often very advanced – it’s ready – and the technology vendors are keen to power some banks to make it happen,” he said. 

“Now the banks are looking at the legal side, policy side, regulatory side, and sometimes they have to wait – particularly for negotiable instruments.” 

Casterman said the ITFA Fintech Committee is keen to get electronic trade documents recognised under English law for products such as electronic negotiable instruments, Bills of Exchange, promissory notes, and Bills of Lading.

For now, however, the idea is pending a parliamentary decision, which should hopefully be delivered in 2022.

Helping SMEs directly

The move toward digitised transferable records is hoped to be popular among small- and medium-sized enterprises, whether under common law or contract law.  

“SME clients will go for it, as long as they get working capital,” said Casterman. 

“Whether it’s a Bill of Exchange that is transferrable, or, under contract law, and not so transferrable, but still enforceable for the founder, it is not as important.” 

In 2020 ITFA recently, developed the electronic payment undertaking (ePU) to provide a solution for trade finance originators who want to digitise negotiable instruments on the basis of contract law.

“It’s still enforceable, but it requires a specific contract. And, within the ePU, we provide a template for this to take place, on the basis of the Enigio technology that is the same one that would be used for the common law solution,” said Casterman.

One for the bankers

In all his work for the ITFA Fintech Committee, Casterman reminds his audience that fintechs are trying to help the banks, not hinder them.

His goal is to get the bankers “on stage”, as he said at the ITFA Annual Conference in Bristol this month, and to make them see the same value proposition that he sees in electronic transferrable records.

“I want bankers on stage talking about their implementations, talking in their own words about the value propositions they have been able to develop,” said Casterman.

“We really want to make sure we deliver what we want to deliver to the banks, so they can deliver to their clients,” he added.