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Interview with Fabrice Morel

Fabrice Morel from Strategy Alliance GmbH talks to Euromoney about how Digitalisation and Fintech will change Export and Export Finance in the future.

Digitalisation is usually more talked about in trade finance, less so in export finance. What is your view?

Digitalisation has progressed massively in Trade finance in the past 10 to 15 years or so. We are talking about the management of large credit portfolios, automatic scoring and rating solutions, automated communication, and the execution of standard transactions. The first trade finance transactions have been confirmed using the Blockchain technology this year.

Export finance is a different animal, because transactions are larger, less frequent, less standardised, and subject to a lot of scrutiny and tailoring. That is not to say, though, that digitalisation is not entering the field of export finance.

What is the potential for digitalisation in export finance?

The potential is significant in several areas. Service solutions coming from trade finance can be adapted to take the friction out of processes and seamlessly connect the various parties in a transaction. This is already taking place.

However, the real potential in our view lies in the gathering and analysis of relevant information, and putting it to use for export finance. Take the example of the B2C space. In that area, technology has led to a revolution of business models. Today, people compare and buy goods with a click, and receive them delivered at their front door a few hours later. This is a very different shopping experience compared to the one we had 15 or 20 years ago.

Can this be transferred to export finance?

Well, not one-to-one of course. In export finance it is not about having an app or a website where people can buy your products. It is the process of gathering market intelligence that will be revolutionised. Big data and analytics can be harnessed to identify clients’ needs and to anticipate their demand. There is a massive amount of public information out there that is just waiting to be leveraged.

How would this work?

There are three areas that keep coming back in discussions with our customers: market intelligence, financial assessment of clients, and accessing alternative sources of funding.

Traditionally, market intelligence has been gathered through representative offices, authorised dealers, other contacts on the ground, and specialised agencies that sell information to interested parties.

In the future, as an exporter, you will know in real time where your products are needed across the globe, and by whom.

Intelligence will be accessed through systems that scan the web for all information that is relevant to your business and make it available at your fingertips. This includes any types of posts or social media conversations – Tweets, Facebook chats, local and international newspapers and information sites, as well as spoken word on radio, TV, investor calls etc.

Web-based intelligence will generate business leads from any source and in any language. Consequently, you will be in a position to put your sales people on the case quickly, pursuing business opportunities with a wealth of information to better serve clients and close deals.

A similar case applies to financial information where every piece of information that is public can be found and used. Traditional financial information like balance sheets and P&Ls will be supplemented by new types of information and ratings for example Amazon scores or eBay scores. If a client of yours has good ratings and is “liked” for the products that he sells, it will give you and financiers additional comfort to extend credit to that company. Similarly, if you find positive information about that company in Tweets and on other social media, you will again be more likely to extend credit.

The third case is access to alternative funding sources which is particularly interesting for the underserved market of small and medium-sized transactions. Fintech already offers a variety of solutions: crowd funding platforms provide loans or equity capital to individuals and small businesses; third party platforms for supply chain finance match with buyers that have excess liquidity with suppliers in need of funding; receivables financing is processed through platforms as well. New business models are created everyday, sometimes by Fintech startups, sometimes by established players like banks, and more and more by cooperation between established players and startups.

What works for domestic business today will work for international business and longer term financing in the future.

Those are exciting prospects. What are the risks in digitalisation for exporters?

Well, the major risk we see is the disruption of business models through platform providers who hold the client contacts and suddenly all your sales are going through such a provider. In other words, you could become dependent on the Amazons and Googles of the world simply because they know who needs your product.

Of course, platforms will not be the manufacturers of specialised goods and equipment. However, they will exert their power by selling you access to the client. The price to pay will be reduced margins and dependence on the platform provider and their information for your sales. If you don’t act, you could become a mere supplier to Amazon or Google in the long run.

What is your outlook for the future?

The world is transforming at an unprecedented pace. So even the long run might prove to be shorter than we expect.

The good news is that exporters and financiers have the chance to take advantage of new technologies and that there is still time to adapt your business models to the new reality. 

Don’t wait too long however. Technology offers exciting new possibilities. Use them for the benefit of your exports and for financing them.

This content is provided by Euromoney Seminars for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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