A third of global trade now comprises digital platforms and services.
But this shift means financial institutions face new pressure to change the way they do things. Vivek Ramachandran, leads Global Trade Solutions for HSBC, an institution with a long and rich trade history.
For the latest FF Virtual Arena, we caught up with him to get his perspective on what’s changing and, in advance of a Beijing hosted Sibos, what China and more broadly Southeast Asia’s role is in trade finance.
Watch the conversation to find out more.
A shifting landscapeIn this insightful interview, Ramachandran gives us a solid overview of the current and future trends that are transforming the world of trade. HSBC have been in the business for more than 155 years and they continue to play a crucial role in the global trade finance ecosystem.
Our Virtual Arenas are all about speaking to the experts and as Head of Global Trade Solutions, Ramachandran knows a thing or two about this space. Of the insights we’re given, none is more interesting than how much trade in services has grown compared to traditional goods trade. Historically, trade was predominantly about shipping physical goods, but according to Ramachandran now services such as cloud solutions and digital platforms constitute nearly 30% of global trade. And according to the WTO, digitally delivered services now equate to 54% of all services exports in general. It makes a big difference. For banks like HSBC it means adapting to new business models and getting tooled up to support companies operating in this new age.
Global supply chains are being fundamentally reshaped due to factors such as geopolitical pressures, cost considerations, sustainability goals, and the need for resilience. As a result, Ramachandran points out that they’re becoming more complex – some are getting shorter and others are expanding. As businesses shift their supply chain strategies, the need to manage risks, and consider sustainability and the impact of trade on the environment, has become paramount. Like many, he believes that being sustainable is no longer a “nice to have” but a “must have” and companies are now expected to address environmental and social concerns not just within their own operations, but throughout their supply chains.
For Ramachandran, sustainability now includes transparency on issues like emissions, forced labor, and supply chain safety. Financial institutions like HSBC want to help their clients solve these issues but also be seen as experts in the matter.
New business modelsWe also find out about new business models in trade, especially in the realm of digital commerce. Given more and more B2B trade is now taking place digitally (as well as concerning digital services), there are increased challenges in understanding and managing new types of counterparties. Data also plays a role. Ramachandran discusses the anonymity of digital transactions and the new data these transactions generate, which require new digital decision-making tools and customer onboarding processes.
He also provides a balanced view of the impact that cutting edge technologies could have. While early discussions about distributed ledger technologies and blockchain were promising, the path forward appears to be more government-driven initiatives like the UK Electronic Trade Documentation Act and the adoption of
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