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DBS, OCBC pushing trade finance into the digital age

TWO Singapore banks have ramped up on efforts to boost efficiency in trade finance, an old trillion-dollar industry that until recently had been heavily based on paper documents.

DBS on Monday completed its first trade financing settlement through CamelONE's Trade Finance portal (TFP) - Singapore's first unified digital trade platform backed by several banks. The inaugural transaction relates to a S$4.8 million letter of credit transaction by homegrown steel wholesaler and supplier Super Steel, with two more transactions slated to close this week, DBS said in a statement.

DBS said it is the first bank to complete a transaction through the TFP. BT understands that TFP offers a standardised application process for trade finance products offered by DBS, UOB, OCBC, ANZ, BNP Paribas, HSBC, Industrial and Commercial Bank of China, MUFG and Standard Chartered. 

By providing a standardised application form, the TFP eliminates the hassle of having to navigate through different banks’ sites, resulting in quicker application times and reduced human errors. This, in turn, helps enhance efficiency and productivity for both large corporates and small and medium-sized enterprises (SMEs) seeking access to trade financing, and for banks to provide the service more efficiently, said DBS. 

Information and data submitted for other trade purposes such as permit declaration, freight booking, and cargo insurance can also be used to supplement corporates’ digital trade applications to banks to maximise digital data reuse.

Sriram Muthukrishnan, DBS group head of trade product management, said the TFP is "especially critical" now, as prolonged geopolitical tensions, trade friction and the Covid-19 situation continue to disrupt global and Asian supply chains. 

“Trade finance is the lifeblood of commerce but can sometimes be quite manual and complex. By digitalising trade financing services via a one-stop portal, we are able to provide swift, easy and contact-free financing solutions to help our customers enjoy greater peace of mind when it comes to managing their banking needs," said Mr Muthukrishnan. 

As part of industry-wide efforts to digitalise trade finance on all fronts, DBS and OCBC on Monday both issued their first electronic banker's guarantee on the Singapore Customs Electronic Bank Guarantee Programme (eBG programme).

DBS's eBG relates to a S$49,000 transaction by automotive group Komoco Holdings, while OCBC's eBG was issued on behalf of info-communication and technology service provider vCargo Cloud for an undisclosed sum. 

Launched today, the eBG programme was developed to shorten the banker’s guarantee issuance and submission process to the Singapore Customs, which tends to be manual and time intensive.

Banks are now able to transmit details of its customers' eBG to Singapore Customs online. DBS said the new initiative helps cut short the process from about four working days to less than 24 hours, while OCBC said its processing time has been reduced from seven working days to one working day. 

Businesses benefit from this more efficient process as it mitigates the risk and costs that result from delays and disruptions to their imports into Singapore, said OCBC in a statement. 

Over at OCBC, close to half of its trade transacting customers who were previously sending in paper trade applications are now doing so via the bank's internet banking portal.

“It has taken some time for trade finance to be digitalised, but the momentum has picked up over the last few years," said OCBC head of global transaction banking Melvyn Low. He added that the complete digitalisation of the banker’s guarantee process from start to end is a "milestone" for the trade industry’s digital transformation.