Most industries worldwide are undergoing significant automation, transforming by embedding AI at various stages. Suchi Guharoy, Head of Global Solution Consulting at Surecomp, elaborated on the digitalisation of trade finance operations.

Across the industry, the technological revolution should enhance operational resilience by improving data accuracy and reducing costs.

Guharoy highlighted trade guarantees as a “classic case” of AI’s potential. “Embedding artificial intelligence and automation throughout the whole process can significantly improve operational KPIs,” she explained.

Banks are integrating AI in risk assessment and credit evaluation workflows: critical areas in the broader industry push toward enhanced operational efficiency.

With institutions increasingly recognising the value of automated processes in streamlining operations and improving decision-making capabilities, AI-driven solutions are set only to grow in value.

The post VOXPOP | Suchi Guharoy on embedding AI appeared first on Trade Finance Global.

Estimated reading time: 6 minutes

Across the board, most industries are rushing to take advantage of digitisation and integrate artificial intelligence (AI) to improve efficiency and drive growth. In comparison, however, the uptake of digital solutions in trade seems to be moving glacially. This is particularly paradoxical because supply chain resilience is essential for the functioning of the global economy – and the lack thereof is extremely costly.

Banks are central to the rollout of trade finance solutions, and they are well aware of the problems that can arise from lagging behind in the race to digitisation. Trade finance software for financial solutions and developments within the area are monitored closely, with banks on the lookout for technological development that could drive the industry forward.

Mahika Ravi Shankar, Assistant Editor at Trade Finance Global (TFG), spoke to Surecomp’s Head of Global Solution Consulting Suchi Guharoy, to discuss digitisation in supply chains and how AI can be implemented to resolve bottlenecks and improve resilience.

Fragile supply chains in the banking industry

Supply chain management in the banking industry is complex, a result of the many stakeholders involved coupled with high levels of regulation, both locally and internationally. Banks are increasingly turning to digital solutions to improve efficiency, but this can leave them vulnerable to cyber-attacks and data breaches, especially when third-party vendors are involved. 

The COVID-19 pandemic brought these issues in stark relief and provided a wake-up call to just how much a disrupted supply chain can impact every area of the economy. In 2021, supply chain disruptions caused delays of nearly 12 times the long-term average, knocking off as much as 5% of global industrial production in the subsequent year. 

The impact of the pandemic on the speed of digitisation was striking. “Banks overnight realised the importance of investing in a digital infrastructure and to having robust cybersecurity measures to support the changes,” said Guharoy. Institutions realised the value of real-time data monitoring and its impact on supply chain transparency and started using it to forecast and mitigate risk across the entire ecosystem. 

However, the rapid increase in digitisation brought along new risks. Not only are banks more vulnerable to cybersecurity threats, rates of fraud and trade-based money laundering have also been increasing as a result of an increased reliance on digital transactions. 

With money laundering on the rise and an estimated 2-5% of global GDP being laundered every year, the complexity of international trade provides a perfect opportunity for criminals to exploit – especially when digital transactions are involved.  

Because of this complexity and the variety of regulations and agents involved in a trade, it is difficult to spot instances of money laundering and effectively fight against them. Banks are investing in advanced technologies to improve transparency and detect frauds more accurately, but as fraudsters also turn to more sophisticated technology like AI, keeping up is becoming increasingly difficult.

Digitalisation is the cure for long delays

The difficulty is compounded by the fact that many banks still use manual checks and controls to approve guarantees – a method subject to human error which can often lead to long delays. Banks take as much as five days on average to issue guarantees, and longer if documents are incomplete or there is a high volume of applications. The issue is compounded by the fact that the compliance checks are often carried out by small teams using outdated systems which are inefficient and prone to errors. 

Guharoy said, “The massive delays in issuing guarantees by banks directly disrupts businesses, especially companies that rely heavily on these guarantees to secure contracts or to fulfil their trade agreements.” 

These companies see their cash flow disrupted and can experience significant reputational damage due to the delays; so long are the delays that companies are forced to break off a contractual obligation, and the bank must also pay a hefty fine. Banks are investing heavily in solving these issues, using digitisation and enhanced communication to reduce delays. 

This ensuing digitalisation can do more than just reduce delays: digitisation and automation of the process make for a more streamlined experience for the business applying for a guarantee and increase efficiency on the bank’s side. Replacing paper-based communication with online real-time collaboration significantly reduces bureaucracy and simplifies the process – while also positively impacting the environment. 

AI: changing the game in communication and data 

AI’s impact on almost every industry is lauded for improving efficiency – but in international financing, its benefits go far beyond that. 

Just as criminals use AI to try to evade anti-money laundering regulations, banks have started using the tool to enforce them. Institutions are using AI to analyse a much broader range of data than was ever possible to identify fraudulent or high-risk transactions, flagging them more accurately than with traditional methods. 

The holistic view provided by AI helps mitigate risks related to fraud and money laundering and largely speeds up the evaluation of credit assessments, providing much more accurate results. 

AI also vastly improves communication, both supporting the customer during the application process and facilitating data sharing between every part of the trade finance ecosystem. With AI, data can be shared and analysed in seconds between every institution involved in a transaction, from banks to insurers to shipping companies. 

RIVO’s approach to the trade finance ecosystem

RIVO™, Surecomp’s flagship strategic platform, is using the benefits of AI and digitalisation to their full potential, revolutionising the way institutions handle their trade finance processing. The platform provides a full life-cycle management of a wide range of trade finance instruments, streamlining the user experience and making trade finance more accessible and efficient for all parties. 

“At the core of RIVO is the ability to foster real-time collaboration, and that’s crucial for all the parties and stakeholders in the trade finance process,” said Guharoy. RIVO’s mantra of ‘engage, connect, and enrich’ highlights its enormous potential as an enabler of secure trade finance transactions and more resilient supply chains. 

RIVO™, which has recently been selected by global commodities trading house EP Resources to handle the company’s trade finance operations, lets businesses share documents in real-time with banks and insurers, vastly reducing delays caused by paper documents and human error. 

By connecting organisations to the broader trade finance ecosystem, the process for companies is much faster and more intuitive. The use of AI to automate the guarantee issuance process is also crucial in both decreasing waiting time for guarantees and improving the detection of suspicious transactions. 

Environmental, sustainability, and governance (ESG) compliance can prove challenging for trade finance institutions. By automating the entire financing process, RIVO™ can make it easier for banks to implement ESG regulations and for companies to be transparent about their sustainability levels.

While digitisation has gained momentum in the trade finance world in recent years, there is still a long way to go. Banks and organisations need to implement automation and modernise their processes to keep up with the industry and comply with new regulations on e-documentation 

Guharoy said, “The industry will continue to shift towards an end-to-end digital trade finance solution: the world needs to come together to eliminate the delays and operational complexities that loom large amidst multiple stakeholders.”

Guharoy also predicts a strong focus on sustainability as banks increasingly focus on products that align with ESG principles, like green financing. The effect of innovation and automation in this, especially in the facilitated sharing of information for all trade finance institutions, will be invaluable and “allow everyone in the industry to thrive in the ever-evolving ecosystem of trade finance,” she said.

The post PODCAST | Digital lifelines: How AI is strengthening global supply chains appeared first on Trade Finance Global.

A company’s understanding of risk—across partnerships and operations—is becoming the primary defence in times of heightened uncertainty. For trade finance, this plays out most acutely in the supply chain. From Ukraine to the South China Sea, ongoing cyber and wartime security threats mean that the supply chain finance market feels the full weight of geopolitical unrest. 

“Trade finance is complex,” Surecomp’s Global Solution Consulting Director Suchi Guharoy summarised. “There are just so many disparate parties across the whole ecosystem, disparate geographies, differing regulations.”

Ahead of Sibos 2024 in Beijing, the capital city of the world’s largest exporter, Guharoy and Trade Finance Editorial Director Deepesh Patel got together to discuss how these contemporary challenges will shape the supply chain finance industry. 

This year’s Sibos theme is connecting the future of finance. Guharoy talks us through how her team is taking a diversification-led approach to modernising the supply chain finance (SCF) industry, as the market hopes to secure itself against a volatile macroeconomic outlook (though not unpromising).

Diversification

After over two decades in banking, through the ups and downs of the early noughties, Suchi Guharoy is chiefly focused on future-proofing the new generation of trade finance. 

Risk mitigation and effective compliance are at the centre of Surecomp’s ethos. It is forwardly focused on diversifying and supporting smaller stakeholders through the scaling up of deep-tier supply chains.

“There is a growing intent of bridging the SME gap… We want to help banks fund the small-medium enterprises in a way that is meaningful,” said Guharoy, who sees the contemporary challenges in logistics and regulation as a real opportunity for SMEs to use their strength in a locality to partner with key stakeholders and foster a growth-minded industry, one that is both resilient and compliant.

“[Larger buyers], they might know their Tier 1 suppliers, but they have absolutely no clue about their Tier 2, Tier 3 suppliers, leave alone which geographies, what regulations, etc.”

The power of these larger, traditional buyers lies in their financial health and their weight against a volatile market. The consequences, then, might be barriers to adaptability and gaps in local knowledge.

To adapt to such dynamic shifts, these smaller players (such as regional banks and local suppliers) need to bridge the financing gap. Working with banks, lenders, and trade stalwarts, there is an opportunity to leverage the credit of larger players, facilitating receivables financing. With access to the right information tools for these partnerships, Guharoy believes smaller suppliers can access previously inaccessible levels of working capital.

These relationships, with the potential for enhanced risk assessment and adaptable infrastructures, need next-generation support systems. 

While Surecomp works closely with the fintech industry leaders working hard to digitise as much of the SCF operation as possible, there is a long way to go.

“There is a great disparity in the interpretation of the information that flows through the ecosystem, in how it is consumed, understood and analysed by different parties. There’s a lot of information which is very relevant and meaningful but does not get captured because of disparate systems, applications and a lack of connectivity.”

Digitisation

Know Your Customer (KYC) procedures are a great example of the growing gap in digitisation in SCF. KYC best practice involves a series of processes to verify a customer’s identity and assess their risk. In its best form, it is the surest failsafe against the risk of financial service misuse; and even at its worst, it is an essential part of extensive due diligence (EDD).

KYC processes vary in rigour, regulation, and modernisation across the supply chain industry, but they all share one common challenge: cost.

Criticism of KYC can be broken into three parts:

1. Time: For some larger companies it can take months to fully onboard regional suppliers. This extended time frame can delay access to finance.
2. Price: Thorough, compliant KYC checks can cost you, often running into the millions, and steadily rising due to increasing regulatory demands such as Anti-Money Laundering (AML) directives.
3. System fragmentation: Many organisations still rely on manual processes or outdated systems. It’s an area of supply chain compliance that lags behind in automation.

Guharoy is keen on the prospect of standardising the onboarding process for new SCF businesses. Given the outsize costs, KYC procedures as they stand are a major challenge for smaller players, with similar levels of scrutiny and liabilities placed on SMEs to those accepted by banks and lenders. 

To address this, many in the industry wonder if there might be a need for some sort of standardised framework – for the benefit of regulators and financial institutions alike.

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As we look forward, and despite a heightened sense of risk, Guharoy and the Surecomp team are optimistic about the potential for a much more streamlined approach to supply chain finance. 

“We ultimately want to reach a zero-touch experience … bringing in artificial intelligence, intelligent automation to further enhance operational workflow, to help improve turnaround time and optimise customer satisfaction.”

For Surecomp this means partnering with leading fintech providers to introduce considerate, compliant automation to simplify those risk assessment processes like KYC and AML. Not without its challenges, the strategy will be welcome news for the next generation of trade finance industry, especially for those smaller and younger players, their challenges yet unknown.

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