Contents

01 | Executive Summary 17 | Systemic Issues

01 | Cash Management 20 | Conclusion

07 | Working Capital 21 | References

12 | Trade Finance 27 | Appendix

Insights into the Challenges Faced in Corporate Banking

1.0 Executive Summary
As a vital and multi-faceted segment within banking,
corporate banking is one of the most crucial components of
any financial institution. Tasked with facilitating clients’
business operations by offering services such as credit
facilities and Treasury management, as well as optimizing
financial strategies, corporate banking helps clients tailor
innovative solutions to navigate the challenges of the
business financial landscape.
As we delve into the complexities of corporate banking, we
explore 3 critical areas: cash management, working capital,
and trade finance. In each of these realms, banks grapple
with obstacles such as manual processes, supply chain
finance inefficiencies, security concerns, cumbersome
onboarding procedures and several other area-specific
barriers.
However, with the rise of technology, the adoption of
disruptive technologies like robotics, machine learning
(ML), artificial intelligence (AI) and blockchain may provide
banks and financial institutions with the blueprint to begin
targeting and eliminating these shortcomings. Overall, both
banks and clients are actively working to tackle these
challenges and enhance the efficiency of cash
management, working capital, and trade finance in the
corporate banking sector.
In this report, we will be investigating the various existing
challenges faced within corporate banking services, as well
as diving deeper into the potential solutions that allow
banks and clients to overcome these hurdles. Additionally,
we will evaluate the effectiveness and practical
actualization of these possible strategies.
2.0 Cash Management
2.1 Introduction
Cash management is at the core of financial and treasury
management. In the context of corporate banking, cash
management refers to a suite of services provided by banks
to help corporate clients manage money more efficiently.
The aim is to optimize the company's liquidity, control its
cash flows, and utilize any surplus funds profitably. Some
of the primary components and services that fall under cash
management in corporate banking include collection and
payment services, investment and borrowing services,
electronic banking, fraud prevention, and foreign exchange
services. The right mix of cash management services can
vary based on the specific needs and operational
complexities of a business. Corporate bankers work closely
with clients to understand financial operations and tailor a
cash management solution that aligns with the firm’s goals.
However, the nature of cash management systems poses
certain challenges, and these obstacles lie within the
internal and payment processes of corporate banks. These
hurdles can spell significant financial consequences for the
bank as they hinder security and efficiency. Disruptive
technologies are the key to targeting the following
Insights into the Challenges Faced in Corporate Banking
challenges as banks begin to adopt an “end-to-end
digitization” strategy. They will gradually undergo a
comprehensive and complete process of converting all the
steps and components of cash management into digital
formats, relying on technologies such as integrated
software, automated systems, and electronic data
handling.
2.2 Challenge: Prevalence of Manual and Time-
Consuming Processes
The internal processes within cash management are the
various tasks and activities that banks undertake within
their operations to manage and handle cash-related
activities. These processes typically involve a combination
of manual tasks, paper-based workflows, and digital
systems. Some internal processes in cash management
include:
● Cash Centralization: Cash concentration (also called
‘zero balancing’) is the consolidation of bank account
balances from several accounts into one account to
offset interest income against expense.
● Reconciliation: Reconciliation is the process of
comparing and matching financial records and
transactions to ensure they are accurate and in
balance. In cash management, reconciliation may
involve reconciling bank statements, tracking deposits
and withdrawals, and identifying discrepancies.
● Fraud Detection: Banks have internal processes for
detecting and preventing fraudulent activities, such as
unauthorized transactions, check fraud or account
breaches.
● Other Liquidity Management Processes: Other roles
include essential processes such as day-to-day cash
control, building an efficient bank account structure,
optimizing payments control and cash receipts, and
short-term investments and borrowing.
Diving deeper into the internal processes within cash
management, it has been found that a large portion of such
processes remain manual and therefore, time-consuming.
By subjecting the bank to substantial financial ramifications
and efficiency lags, it can lead to undesirable
consequences such as an increased risk of errors, delays
in multiple tasks and reduced responsiveness to clients in
an increasingly fast-paced financial environment.
Concurrently, the payment processes within cash
management focus on facilitating and managing the
outflow of funds for businesses. Efficient payment services
ensure that corporations can meet their financial
obligations promptly and optimize their cash flow. However,
the processes behind payments from clients and
corporations can be time-consuming and inefficient due to
several factors:
● Involvement of Multiple Parties: Payment processes
often involve multiple parties, including the payer,
payee, banks, and potentially intermediaries such as
correspondent banks. Coordinating and
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 communicating with all these parties can add management of in-house banking and financial operations.
complexity and time to the process. (Son, 2023).
● Manual Processes: Traditional payment processes
may involve manual steps, such as paper-based
documentation and manual data entry, resulting in
such processes being slow and error-prone.
● Regulatory Compliance: Banks must adhere to
various regulatory standards and requirements when
processing payments, such as the ISO 20022
standard. Ensuring compliance with these standards
may require additional time and effort.
Figure 1: TMS and its Applications
Based on our research, banks lose approximately 20 ‒ 30%
of their revenue every year due to inefficiencies caused by However, some banks remain adamant about using
manual and repetitive tasks (Solanki, 2023). For instance, manual processes or have lagged in the race for
according to a new study from client lifecycle management automation. Reasons for the continuous dependence on
company Fenergo in 2019, slow and manual onboarding manual and semi-manual processes can range from
processes could lead to banks losing US$4.5bn in revenue established counterparty and supply chain practices and
(Lee, 2023). Thus, these sources of inefficiencies remain a relationships to the functionality to connectivity of an
recurring issue that needs to be tackled to ensure workflow existing technology infrastructure (The Association of
efficiency and optimization of customer services, especially Corporate Treasurers, n.d.). For example, common
for banks that are expanding their global operations and interfaces and template requirements are some
increasing their product offerings. considerations for automation within internal processes.
However, interfaces between different systems must be
2.2.1 Solution: Automation of Manual Processes built from scratch. Hence, there is a need to find sufficient
In today's digital age, there's a continuous push towards talent in relevant areas and invest additional time spent on
automation in the banking sector, driven by technological designing these interfaces. Furthermore, most banks have
advancements, competitive pressures, and the evident been using older, legacy systems and processes that were
benefits of efficiency and error reduction. developed before the introduction of modern digital
technologies (Figure 2). Such infrastructure may lack
Robotic Process Automation (RPA) is a common way for
automation and integration capabilities, making tasks
companies such as banks to automate treasury processes
reliant on manual inputs and human intervention.
using software robots and/or AI agents. RPA offers a
plethora of different applications in the banking and
financial services sectors to free up the manpower to work
on more critical tasks, including customer service,
compliance, KYC processes, cash collection and deposits,
etc. Bank employees deal with significant volumes of data
from customers, and such manual and repetitive processes
are prone to errors. Therefore, simple validation of
customer information from RPA systems streamlines
process efficiency and significantly reduces processing
time without the need for manual processing, thus reducing
processing costs (introducing bots can reduce costs by Figure 2: Age of IT Applications across industries
30% to 70%) (AutomationEdge, 2023).
Taking the factors above into consideration, these may
Other software applications are also an attractive strategy result in certain concerns regarding the actualization of the
for banks to integrate into their process automation goals. above solutions into current manual processes. However,
For instance, a Treasury Management System (TMS) is an we believe that in the long run, there will be greater
enterprise software that streamlines and automates dependence on automated systems given the competitive
repetitive and manual treasury procedures, while also nature of the banking industry. Client lifecycle management
consolidating cash flow data associated with treasury company Fenergo found in a 2019 survey that 78% of the
activities (Figure 1). Since the COVID-19 pandemic, the banks stated they had lost customers to digital-first
idea of “cash excellence” has been crucial for banks, and competitors. Therefore, technological integration is a
the ability to retrieve real-time financial data and analyze necessary next step for banks to gain a competitive
information in one centralized system ensures the security advantage over their peers.
of financial data. Automation can enable banks to enhance
As mentioned earlier, the introduction of various systems
their insight into cash and liquidity, offering improved such as RPA and TMS offers several benefits to the bank,
control over bank accounts, compliance, and the and banks have already begun investing in this space,

Insights into the Challenges Faced in Corporate Banking

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driven by a strong technological demand since the COVID-
19 pandemic (Figure 3). Many banks globally are investing
in digital transformation to gradually reduce the manual,
repetitive and time-consuming nature of internal processes,
with IT expenditure taking up an average of ~20% of
operating costs in 2020 (CDOTrends, n.d.).
Figure 3: Substantial Investments by Banks into IT
To retain customers, every bank will integrate solutions
such as RPA and TMS into their systems to maximize
efficiency, minimise costs and offer better customer
experience. As such, the process automation market
continues to show promising and consistent growth in the
next decade (Figure 4).
Figure 4: Impressive Growth in Banking Process
Automation Market over the next decade
As banks globally have begun automating their respective
systems, we believe that Asia banks can gain a competitive
advantage by following them and replacing old legacy
systems. For instance, in March 2021, Deutsche Bank
announced the launch of GEM Connect, a component-
based solution designed to address workflow challenges
across collections, payments, funding and FX in APAC
markets with capital restrictions. The overall goal is to link
treasury practices into automated workflows, aiming to
simplify and streamline complex processes regarding cash
movement and reconciliation (Deutsche Bank, n.d.).
Generally, the ongoing process of digitizing and improving
cash management procedures is constantly changing, with
the main driving force being the need to align with
technological advancements and evolving business needs.
Thus, by keeping up with new opportunities in automation,
banks can further enhance the efficiency of their operations
and quality of decision-making.
Insights into the Challenges Faced in Corporate Banking
2.3 Challenge: Banking and Payment Fraud
Banking fraud is one of the most persistent and dangerous
issues financial institutions and their customers face
(Figure 5). The American Banking Journal states “for every
dollar lost to fraud for customers, banks see $4 in costs,
which does not factor in the damage fraud can do to a
bank’s reputation” (Wingard, 2023). Furthermore, the
global cost of fraud for banks and intermediaries is
estimated to hit US$40.62bn by 2027, which is 25% higher
than the fraud losses in 2020 (Martins, 2023).
Without a strong implementation of fraud detection or
payment security measures, banks may suffer significantly
as they become exposed to considerable costs and risks
relating to payment fraud. For instance, Danske Bank, a
Nordic universal bank, struggled with a low 40% fraud
detection rate. The bank was also managing up to 1,200
false positives per day, whereby 99.5% of all cases that the
bank was investigating were not fraud-related (Teradata,
n.d.). As a result, these false alarms had required a
substantial investment of people, time, and money for
investigation, thereby placing further pressure on the bank.
Figure 5: Significant Loss suffered from Financial
Institutions due to Fraud
Additionally, the Association of Certified Fraud Examiners
(ACFE) report highlights that fraud losses in Asia are
estimated to reach up to 5% of revenue in banks and
financial institutions, surpassing the global average of 4%
(Synpulse, n.d.). Thus, there is a growing sense of urgency
for strong cybersecurity and protection of cash and
payments within Asian banks, as “rapid digitization and an
influx of cash from pandemic relief scams have created the
perfect conditions for fraudsters to thrive” (Zaki, 2023).
2.3.1 Solution: Fraud Detection and Payment Security
Fraud detection is a common internal process for all banks.
However, given the complexity of banking frauds and the
limitations of current manual procedures in detecting such
activities, an integration of digitalization into fraud detection
becomes necessary. As such, a robust fraud detection
strategy is paramount to ensure the protection of customer
data and bank accounts. Furthermore, payment security is
another vital consideration for banks, and solutions such as
multi-factor authentication and real-time monitoring instill
customers with a higher level of confidence and trust when
conducting financial activities online, increasing the speed
of the life-cycle process.
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Implementation of such a strategy can include the adoption
of various digitalized fraud detection tools and techniques
(Cosive, n.d.):
● Behavioral Analytics / Biometrics: Deviations from
established patterns may indicate fraudulent or
malicious activity. Commonly tracked metrics include
geographic location, time of day and spending habits,
with more sophisticated behavioural biometrics
solutions building a full picture of the user.
● Device Fingerprinting: Identifying abnormalities in
typical device access patterns, may trigger alerts or
2FA challenges in response.
● Transaction Fraud Monitoring: These tools flag and
potentially block transactions that fall outside typical
patterns, such as transaction amount, frequency,
location, or the identity of the receiver.
● Machine Learning and Artificial Intelligence: ML
can be used to customize fraud detection algorithms
using aggregated training data from millions of
legitimate and fraudulent transactions. On the other
hand, AI can be used to boost the accuracy of
automated fraud response workflows, such as
determining whether to challenge, notify, alert, or block
a transaction or log-in attempt (Figure 6).
Figure 6: Reducing Payment Fraud as one of the Key
Reasons for the Use of AI
As part of digital transformations, banks are reinforcing
their cybersecurity infrastructure to ensure payment
security, limit fraud and maintain customer confidence.
However, there may be potential barriers which can hinder
the advancement of such schemes in banks. Firstly, banks
often have complex and interconnected financial systems,
making it challenging to implement and maintain effective
security measures consistently across all channels and
operations. Secondly, some banks still rely on outdated
legacy systems that may lack the necessary security
features and flexibility to adapt to evolving threats. Thirdly,
limited resources, including budgets and skilled
cybersecurity personnel, can constrain a bank's ability to
invest in advanced fraud detection technologies and
Insights into the Challenges Faced in Corporate Banking
maintain robust security measures. Lastly, with a lack of
real-time monitoring, delayed or batch-based transaction
monitoring can leave banks vulnerable to real-time fraud
attacks that require immediate detection and response.
However, similarly to the above, we foresee that in the
near-term, there will be practical actualization of such
solutions. The complexity of financial and payment fraud
has increased tremendously as online transactions grow,
thus, protecting the security and integrity of payment
procedures becomes increasingly important for banks
(Figure 7). A survey conducted in 2023 by The Motley Fool
found that security and fraud protection features were the
factors with the highest number of individuals’ votes, with
92% of consumers viewing them as an important factor in
choosing where to bank (Caporal, 2023).
Figure 7: Cybersecurity remains one of the Top Priorities
for Banks
Furthermore, with the help of AI and ML, banks can now
evaluate massive volumes of data in real-time, discovering
anomalies and detecting probable fraud with high
accuracy. AI systems can continuously learn from new
data, react to evolving threats, and improve their fraud
detection capabilities over time by employing ML
algorithms (Finance Magnates, 2023). In September 2023,
DBS announced new anti-scam security measures which
aim to enhance customer protection against scams and
frauds. These new measures add to existing safeguards
such as surveillance and monitoring systems, and they are
further complemented using AI and ML (DBS, 2023).
An alternative for banks would be to establish partnerships
and/or make strategic investments in cyber-security and
fintech firms. In 2017, HSBC Ventures invested $40m in
Menlo Security – a cybersecurity company – to add Menlo’s
capabilities and defend its business against cyber threats.
Additionally, in 2021, HSBC selected Mailock, Beyond
Encryption’s email security system, to assist the company
in building enhanced digital relationships with its customers
(Vara, 2023).
As such, the use of online channels exposes banks and
financial institutions to increased levels of cyber threats,
and therefore, it is paramount for one to prioritize innovation
and advancement of security infrastructure and services.
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2.4 Challenge: Liquidity Access and Limited Visibility
In corporate banking, liquidity access refers to the ability of
a company to easily convert its assets into cash or obtain
additional funding to meet short-term financial obligations.
Limited visibility refers to the real-time cash position of the
actual amount of cash a firm has at any given moment.
One key method to improve liquidity access and visibility is
through integration into corporates’ enterprise resource
planning (ERP). ERP refers to a software solution that
enables an organization to streamline and oversee its
business processes through a centralized relational
database (Ferguson, 2020). However, 91% of IT leaders
agree that connecting ERP to banks is a very complex
project. The biggest challenge would be handling different
global banking formats and the direct integration process
itself (Kyriba, 2020). The integration issues are primarily
caused by the lack of technological expertise. Although the
IT team is experienced in creating stagnant interfaces for
back-office systems, they are not well-versed in
coordinating real-time resources such as treasury,
accounts payables, and SWIFT. Often, a specification is
developed but fails the initial testing phase or proves
incompatible with the format used by the banks. Multiple
rounds of rebuilding and re-testing are required and this is
very time-consuming and costly (Kyriba, 2020). This results
in low adoption rate of ERP by corporations and hence,
limited liquidity access and visibility to real-time positioning.
2.4.1 Solution: Transactional Data Sharing by using API in
ERP through Open Banking
Transactional data sharing is one of the main pillars of open
banking initiatives which are emerging in financial services
(BIS, 2023) to drive real-time treasury which facilitates
client’s cash visibility and cash forecasting activities. Open
banking is a collaborative model in which banking data is
shared through Application Programming Interfaces (APIs)
between two or more unaffiliated parties to deliver
enhanced capabilities (BIS, 2022). This provides
centralization of services, which enables greater visibility
as various services are done under a single administration.
By integrating Open Banking APIs into corporates’ ERP
systems, treasurers can potentially streamline their
financial processes, reduce errors, and gain better visibility
into their financial data in real-time. This provides
treasurers the opportunity to access new, value-added
banking services. Hence, the ability to make more informed
decisions and drive growth with better access, visibility, and
forecasting of their cash positions (Deutsche Bank, n.d.).
An example would be SWIFT’s new global payments
innovation service (SWIFT gpi) for corporates pilot that
engages 10 corporate participants who have integrated
SWIFT gpi messages directly into their TMS/ERP systems.
Participating banks include Nordea Bank, DBS Bank,
Maybank, Deutsche Bank, ICBC, SCB and BOC. It allows
live tracking of payment and exchanging gpi payments
across 60 country corridors to enhance efficiency,
transparency, and traceability for cross-border payment
Insights into the Challenges Faced in Corporate Banking
services. Thus, corporate treasurers would have a more
real-time, end-to-end view of their payment status,
including confirmation when payments have been credited
into beneficiaries’ accounts. Currently, SWIFT gpi is
venturing into the next phase to include additional digital
services and further enhance the cross-border payment
experience (Major Transaction bank are live with Swift,
n.d.). Additionally, transactional data sharing through open
banking has the potential to grant smaller treasury teams
and SMEs access to technological advantages that were
previously primarily accessible to larger, well-funded
corporate organizations.
However, there are some barriers to adopting transactional
data sharing. Firstly, in addition to a lack of familiarity,
corporate clients exhibit reluctance when it comes to
sharing their data due to data privacy concerns (Chakray,
n.d.). Open banking APIs involve sharing sensitive and
personal information such as account details, balance,
transaction, and identity with multiple third-party providers.
This increases the exposure and vulnerability of data to
potential breaches, fraud or even misuse. This leads to a
lack of credibility and non-adoption by corporations.
Secondly, a lack of standardization is a challenge as
corporations with multiple banking relationships often
encounter APIs in different formats. In some cases, both
clients and banks need to modify their existing systems to
facilitate data sharing, which can be time-consuming and
may require substantial investments (Sanders, n.d.).
Despite the challenges, our team believes that transaction
data sharing through open banking can improve liquidity
access and visibility to real-time cash position and cash
forecasting (McKinsey, 2017). Overtime, we have seen
significant development in open banking regions such as
the US, EU UK, China, and Southeast Asia (Figure 8).
Figure 8: Global Open-Banking Development
The primary driver for the adoption of open banking is
regulatory pressure (Deutsche Bank, n.d.). While banks
have traditionally regarded the custody and protection of
client data as their responsibility, data sharing can be made
to work effectively when it follows a risk-based and
permission-oriented approach, complemented by the
necessary audit trails. Effective regulation and risk
management are crucial to enhance security. Furthermore,
increased security measures offer additional advantages,
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including improved know-your-customer capabilities,
enhanced identity validation, and more robust fraud
detection. An example of a supporting regulation is the
second Payments Services Directive (PSD2) in the EU and
UK which sets rules for access to payment accounts for
third-party payment providers. Customer transparency and
control must remain at the centre of product design
decisions. As such, when executed properly, we believe
the benefits for corporate clients can outweigh the
drawbacks.
Furthermore, standardization issues may also be tackled
through regulatory pressure. An example would be the full
implementation of ISO 20022 which creates a new
standard for financial information, providing consistent,
rich, and structured data that can be used for every kind of
financial transaction (Swift, n.d). As global businesses
become increasingly familiar with technology and real-time
processes, it becomes more straightforward to design and
implement new business models. As the value proposition
becomes increasingly evident to corporate clients,
businesses may become more open to developing and
resolving the challenges associated with real-time
operations (McKinsey, 2017).
2.5 Challenge: Decentralization of Cash Management
solutions Limiting Concentration of Subsidiaries’ Position
Decentralization is the most common cash management
structure for MNCs, especially for those operating in
emerging markets in Asia (Riggins, 2019). This means that
each subsidiary handles its treasury operations in complete
autonomy from its headquarters, allowing vast local
knowledge and on-the-spot decisions. Although a
decentralized cash management structure is ideal for
MNCs with a diverse set of businesses or for businesses
that require strong geographic needs in complex markets,
the downside of such solutions is the limited access and
visibility to real-time cash positioning as it limits global
concentration of subsidiary position.
Some disadvantages of decentralized cash structures
include (Bosch, 2014):
• Lack of consolidation leads to limited cash
visibility: With a fragmented liquidity pool across
platforms, executing large trading transactions
becomes less efficient as it requires consolidation
effort.
• Lack of standardization hinders economies of
scale: As different treasury pools in each subsidiary
adopt different protocols, and platforms may adopt
varying standards, rules and interfaces, it makes it
more challenging for corporations to scale.
These issues become more prominent with the recent
slowdown in global economies where real-time cash
positioning and forecasting are key to optimising
operational efficiency, M&A and strategic planning, capital
expenditure planning, debt management and investment
decisions.
Insights into the Challenges Faced in Corporate Banking
2.5.1 Solution: Artificial Intelligence and Machine Learning
with ERP-Integrated Dashboard Solutions
Integrating ERP and AI technologies such as ML
algorithms, natural language processing, generative AI,
and predictive analysis opens the door to the next
generation of intelligent ERP solutions (Morrison, 2023).
As large corporations with subsidiaries across different
geographical areas face consolidation and standardization
issues, using integrated ERP dashboard solutions can
produce actionable insights from processing extensive data
sets, streamlining operations, anticipating potential
challenges, and improving decision-making (Morrison,
2023). Additionally, key benefits for AI-enabled ERP that
specifically target improved cash management are:
• Automated Financial Reporting: Ability to
automatically extract data from various sources such
as invoices, receipts, and bank statements, and
populate financial reports (StrategicERP, 2023).
• Simplifying Immense Data: Helps to feed vast data to
AI algorithms, enabling the company to identify
patterns in workflow and operations and improving
cash visibility of the corporation (StrategicERP, 2023).
• Department Integration within an Organization: AI
plays a crucial role in centralizing multiple resources,
such as payroll processing, human resources, and
manufacturing, which need to collaborate seamlessly
to ensure efficient operations. This aids in streamlining
the integration of information from various departments
and maintaining robust data flow (Marsh, 2021).
Thus, this can be utilized for automated quality control and
inspection with an AI-enabled ERP system. This boosts the
accuracy of cash forecasting through virtual assistants to
help improve bottom-line performance and improve
reconciliation to manage global concentration at a
subsidiary level.
However, there are some challenges to AI-related ERP
systems. Firstly, not all ERP vendors are ready to develop
AI-related ERP solutions. While numerous ERP vendors
are actively striving to introduce new AI capabilities, some
are falling behind in meeting the demands of corporate
customers. These slower adopters frequently turn to
strategic acquisitions to expedite the incorporation of AI
features into their ERP solutions. An illustrative example is
IFS's acquisition of Falkonry to advance the development
of an AI-based time-series data analytics tool (Morrison,
2023). Secondly, it is costly and time-consuming. The
implementation of new management information systems
and redesign of existing management protocols and
procedures require heavy investments. For example, if a
manager is familiar with SAP ERP systems and moves to
the Oracle ERP system, large training and redesigning are
required before full utilization (Haider, 2021). Lastly, there
is a lack of AI experts. With the complexity of AI-enabled
ERP, a highly skilled team including a data engineer, data
scientist, and ML engineer is required and yet there is an
insufficient talent pool in the market (McKinsey, 2023).
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With the AI industry expected to continuously grow to
USD190 billion by 2025 (Marsh, 2021), we believe that
there is high potential for AI and ML in ERP-integrated
dashboard solutions. We have already witnessed multiple
leading ERP software providers such as SAP, Oracle, and
Microsoft Dynamics making various efforts and
investments to develop AI-enabled ERP systems. For
instance, Microsoft has invested US$13 billion in
partnership with OpenAI (Morrison, 2023). An example is
Oracle AI Apps for ERP which is a suite of cloud-based
applications, that enhance operational efficiency through
the automation of transactional processes, provision of
intelligent insights, and recommendation of actions. Among
the applications available are Supplier Recommendations,
Intelligent Payment Discounts, Automated Expense Audits,
Procure-to-Pay, and Order-to-Cash. These applications
are designed to enable businesses to operate in a smarter,
faster, and more efficient manner (Morrison, 2023).
Additionally, we believe that Cloud Acceleration will allow
more opportunities for Cloud-ERP which enables more
accessibility and lower upkeep costs for businesses.
Currently, ERP and business applications such as SAP,
Oracle, and Microsoft are focusing heavily on cloud
development. Furthermore, bulge brackets have also
tapped into AI and ML to provide better solutions for its
corporate client. An example would be JP Morgan Chase
which taps into AI, ML, and real-time to automate and add
a lot of intelligence to the concept and execution of cash
flow forecasting (Pymnts, 2022).
As for market readiness and adoption, we believe that there
is an increasing trend in businesses adopting AI assistants
to improve cash management structure, especially for
MNCs. In the wake of the pandemic's ripple effect, which
led to abrupt business closures, many corporations
recognized the significance of implementing an effective
cash management structure that provides comprehensive
visibility into the entire organization's cash position,
extending beyond the subsidiary level. This has sparked an
increased demand for advanced cloud-based solutions,
with the global cloud computing market projected to reach
US$832.1bn by 2025 (Collevecchio, 2020).
This solution has been proven feasible and effective in
liquidity and cash management. A case study would be
HSBC-Blackmore, where centralizing treasury operations
has helped Blackmore achieve a more effective liquidity
and cash management process to better support its growth
and expansion in Asia-Pacific. Blackmore has a presence
in 13 markets across the APAC region with multiple
banking relationships in different banks in the region. The
old, decentralized treasury model was proven to be hardly
optimal for an expansion plan in the long run as there was
a lack of real-time cash visibility within its Asia Subsidiaries.
Using different platform was also an administrative hassle
as there was too many protocols, systems, and interfaces
to manage. Therefore, Blackmore had onboarded
HSBCnet, to reconcile its accounts in the APAC region to
one primary banking partner. This allows for handling of
Insights into the Challenges Faced in Corporate Banking
large volumes of payments securely, daily total statements
consolidation across the markets, and better tracking of its
daily cash activities and needs of its subsidiaries.
Blackmore has then successfully enhanced its interest
yield and gained economies of scale while finding
opportunities to enter new markets (Lim, 2023).
We would like to mention that not all business is suitable
for AI-enabled ERP systems. Due to its scale and cost,
corporations should balance the cost-benefit of adoption.
Thus, corporations should also consider their geographical
presence, market exposure and business strategies and
whether there are any plans for international expansion.
3.0 Working Capital
3.1. Introduction
Working capital in corporate banking refers to the funds a
company uses for its daily operations and to meet short-
term liabilities. It measures the liquidity of the company, and
its ability to transform assets into cash. Examples of liquid
current assets include inventory, accounts receivables,
cash etc. In corporate banking, understanding a company’s
working capital is necessary for assessing creditworthiness
as well as financial stability when taking out loans and
credit extensions.
Access to working capital is an important and growing
challenge for businesses. This challenge is further
exacerbated by the impact of the pandemic on credit and
financing options, and this is expected to worsen,
especially with current macroeconomic conditions. Given
the increasing uncertainty in geopolitics and trade policies,
supply chains and distribution channels in today’s economy
are becoming more intricate. This developing complexity,
coupled with regulatory changes and pressure to operate
efficiently and use capital frugally to remain competitive has
heightened the significance of effective supply chain and
working capital management (Oracle, 2020).
Working capital services in corporate banking primarily
revolve around providing financial solutions to help
businesses manage their short-term operational needs and
optimize their working capital position. The primary
components and services that fall under working capital in
corporate banking include:
• Working Capital Financing: Corporate banks offer
various types of loans (e.g. working capital loans,
revolving credit facilities) to help companies finance
short-term operational needs. These can be used to
cover working capital gaps, such as to buy inventory,
pay for accounts payable, or cover unexpected costs.
• Accounts Receivable Financing: Corporate banks
can offer factoring as a solution where banks purchase
the company’s accounts receivable at a discount while
providing immediate cash flow to aid with current
immediate working capital needs. Businesses can also
consider using accounts receivable as collateral to
secure accounts receivable loans.
7
• Supply Chain Finance: This is a buyer-led type of
financing where the buyer works with a third-party
financial institution that will pay suppliers quickly while
providing the purchaser extended terms. Alternatively,
companies can access financing to pay suppliers early
and negotiate favourable terms for themselves as well.
These are some of the many components and services that
collectively aid companies in managing their working
capital efficiently (Appendix 1). Especially in today’s world,
such solutions are necessary in helping companies ensure
that they have sufficient funds to operate smoothly and to
fund their short-term obligations. These solutions can also
help companies optimize their cash flow and profitability.
3.2 Challenge: Insufficient Analysis of Credit Risk
Given the complex network of supply chains involving
various stakeholders (suppliers, distributors, buyers),
financing the supply chain inherently carries significant risk
due to its exposure to a wide range of unpredictable factors.
Over the last few decades, lenders have developed tools
or systems to monitor the credit risk arising from their
business lines. This was driven by increasing pressures
from market conditions and regulators, especially after the
2008 Global Financial Crisis (GFC). With sufficient credit
risk analysis, it helps financial institutions assess the
likelihood of non-payment or default by clients or other
entities involved in the financial chain. However, banks face
several challenges including inefficient data management,
inadequate risk tools and data visualization capabilities and
outdated risk assessment models to reflect changing
market conditions.
For instance, as the financial industry often handles data
that is isolated in silos, this could lead to data duplication or
vital information being overlooked, thereby resulting in
inefficiencies throughout the lending lifecycle (GDS Link,
2018). Hence, effective credit risk management solutions
require streamlining the collection, storage, organization,
and retrievability of data based on various criteria.
Databases need to be updated in real-time to avoid
obsolete information and to optimize keyword searches to
facilitate easy retrieval of relevant information. Resultantly,
this would provide a clearer analysis of a client’s
creditworthiness and allow risk assessments to be made
with greater precision due to the availability of data for
analysis and modelling.
A direct consequence of the failure to deal with these
challenges and thus an insufficient credit risk analysis is a
higher probability of default. If the risk associated with a
client or a transaction is not accurately assessed, the
likelihood of non-payment or late payment increases. This
can have significant financial implications for banks,
including loss of revenue, increased costs associated with
debt recovery, and potential legal disputes.
Historically, credit activities account for a large majority of
corporate banks’ revenue (Dao & Pham, 2015), and supply
chain finance has been consistently growing since the 2008
Insights into the Challenges Faced in Corporate Banking
GFC reaching approximately $50 billion to $75 billion in
2019 (Dawuda, 2020). However, this source revenue
stream can cause significant harm to banks when
numerous loans turn non-performing, potentially increasing
the risk of insolvency of banks. Hence, credit risk has
emerged as a predominant banking-related challenge
globally, with 77% of financial institutions listing credit risk
as their primary concern (BankDirector, 2023). Thus, banks
have been investing to overhaul their approaches to credit
risk management, with 79% of them placing credit risk
transformation projects as a high priority (Salman, 2023).
3.2.1 Solution: Machine Learning & API
There has been a growing push for digitization efforts
towards credit risk workflows to help streamline and
improve the efficiency of activities. To combat the
abovementioned challenges, a range of promising
technologies are available.
Firstly, banks are starting to employ ML algorithms to build
predictive models that assess the likelihood of a borrower
defaulting on a loan. These models can analyze historical
and real-time data, and identify patterns through a wide
range of variables such as income, employment history,
credit score, and payment history to predict risk more
accurately. Over time, as more data becomes available,
these models can continuously adapt and improve from
new data to ensure that the bank’s credit risk models are
always updated and refined, thereby enhancing their
predictive accuracy. An example is JP Morgan Chase
(JPM) which leverages ML algorithms to analyze large
amounts of data such as credit history to assign credit
scores to potential borrowers (Medium, 2018). Additionally,
JPM utilizes ML algorithms to analyze historical data and
make predictions about future outlook, economic
conditions, and other factors that may affect a borrower’s
repayment ability.
While integrating ML models into existing banking systems
presents challenges including technological integration,
security, standardization, and regulatory compliance, we
believe there are still compelling reasons for banks to
incorporate ML into credit risk management. This is
primarily due to enhanced prediction accuracy and
customer credit risk profiling as previously mentioned. The
recent global supply chain disruptions due to the COVID-
19 outbreak further emphasized the importance of credit
risk management. The volatility in commodity prices as well
as the Russian-Ukraine war has disrupted the global supply
chain (S&P Global, 2022), which had a widespread impact
on borrowers across the world. Using ML algorithms would
allow banks to swiftly respond to the more immediate
market fluctuations and evaluate which industries have
undergone material changes to their default risk, allowing
banks to make more informed credit decisions.
Secondly, by integrating the processes using the
Application Programming Interface (API), banks can better
smoothen their transmission of information between ERP
systems and rating agencies by enabling automated real-
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time and relevant data sharing. For example,
CreditRiskMonitor's API provides real-time access to
bankruptcy prediction scores and other crucial data points
(e.g. bond agency rating reports, outstanding accounts
receivables, and credit limits), enabling users to engage
with counterparties. This provides automation for company
evaluations to improve credit review and minimize
receivable write-downs. Standardized communication
through APIs also provides a reliable and secure channel
for data transmission, ensuring enhanced security for
sensitive financial data.
Therefore, we believe API is beneficial for corporate banks
and is crucial in improving the accuracy and timeliness of
information for credit risk assessment as well as reporting
processes to all relevant stakeholders. By reducing manual
data handling and the associated errors or delays, it also
helps optimize the time of treasury, sales, fulfilment, and
service staff to focus on their core competencies such as
enhancing sales, refining operational processes, and
offering superior customer service. As it allows for more
streamlined and reliable receipt of information and
execution of actions from these platforms, it helps improve
workflow efficiency. For instance, Citi (n.d.) introduced
Credit Notification API for borrowers to track the upstream
and downstream payments, collections received, and the
release of goods to improve the overall inventory value
chain effectiveness. This allows for a reliable and secure
information flow for a massive distribution network supply
chain finance across all parties. Ultimately, API helps
banks reduce costs and complexity associated with IT
integration, with research that shows its benefits in
increasing available capacity by 30% (McKinsey, 2022).
3.3 Challenge: Need for Working Capital Financing
Products
Businesses require efficient financial products to manage
working capital and secure commercial debt financing. This
entails having access to funds to meet their short-term
operational needs such as inventory purchases, accounts
payable, and other operational expenses. Meanwhile,
commercial debt financing is crucial for businesses to cover
their capital expenditures and for operational sustainability.
It is a way to procure funds without diluting ownership.
The difficulties associated with managing working capital
are crucial to organizations' day-to-day operations,
emphasizing the importance of financial flexibility for
sustaining smooth operations. A substantial amount of
working capital is necessary for the aim of growth or
expansion; otherwise, firms may be unable to take
advantage of growth prospects such as the introduction of
new products, expansion into untapped markets, or an
increase in manufacturing capacity. Hence, the volatility in
cash flow, which is frequently made worse by seasonal
sales, delayed client payments, or unforeseen costs,
highlights the critical need for efficient cash flow
management. A financial buffer would be necessary to get
through difficult times and maintain operations when
Insights into the Challenges Faced in Corporate Banking
economic uncertainty or unforeseen occurrences put
additional strain on a company's finances.
With macroeconomic uncertainty in the near term, external
pressure on working capital will likely continue through
2023 as contractions in demand impact inventory turnover,
including potential delays in customer collections if credit
profiles deteriorate. Additionally, the carrying cost of money
trapped in working capital is significantly more expensive
than in past years in light of higher interest costs and by
extension, higher internal hurdle rates (J.P. Morgan, 2023).
Given the enhanced focus on operational efficiency,
treasurers and CFOs will likely need to take a more
proactive role in utilizing working capital financing products
to optimize working capital across the balance sheet.
3.3.1 Solution: Receivables Program and Liquidity
Management
Anticipation of Invoice Collection through the
Receivables Program:
To meet the demands associated with working capital
products, receivables programs are crucial. Utilizing a
receivables program to anticipate invoice collection is a
proactive approach to managing cash flow. This program
could leverage predictive analytics to estimate when
invoices will be paid, thereby providing a more accurate
picture of cash availability. By anticipating invoice
collections, corporations can plan their cash release and
expenditure schedules more effectively, thus avoiding
potential liquidity crunches. The insights gained from such
programs can also inform other financial management
decisions, contributing to more robust financial planning.
In October 2022, the Bank of America Intelligent
Receivables™ tool was upgraded to better assist in
anticipating invoice collections, a crucial aspect for cash
release purposes (BofA, 2022). Planning for cash release
is greatly aided by the tool's new forecasting capabilities,
which offer insights based on past trends and consumer
behavior. AI and sophisticated data capture technology are
used to accomplish this, aggregating payment information
from various channels, matching payments to unpaid
invoices, accelerating revenue posting, and lowering the
cost of manual processing. The tool's new dashboards
provide a thorough overview of total collections and unpaid
accounts, making it possible to understand how customers
make payments. In turn, this makes it possible to plan cash
release more effectively (Figure 9).
Figure 9: Bank of America Intelligent Receivables™ tool
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Providing Liquidity to Suppliers in Advance through
Supply Chain Finance Programs:
Supply chain finance programs offer a structured way to
provide liquidity to suppliers in advance of invoice due
dates. Through mechanisms like reverse factoring, buyers
can pay suppliers earlier, improving the suppliers' cash flow
while securing better terms or discounts for themselves. By
injecting liquidity into the supply chain earlier, corporations
can foster stronger, more resilient supplier relationships,
ensuring a steady and timely supply of goods and services
which is crucial for operational continuity.
With Sales Invoice Financing (SIF), DBS helps to unlock
cash from the company’s receivables by providing them
with an advance on unpaid invoices before their buyer pays
them (DBS, n.d.). Upon verification of the invoices and the
creditworthiness of the buyers, DBS provides an advance
payment, which is a percentage of the invoice, to the
business. This advance furnishes immediate cash to the
business, aiding in managing its working capital effectively.
DBS then collects the full invoice amount from the buyers
on the due date, and after deducting its fees, remits the
remaining balance to the business. Thus, SIF can aid in
bridging cash flow gaps and ensuring smooth operations
(Figure 10). This helps to free up cashflow for the
company’s other business requirements.
Figure 10: DBS Sales Invoice Financing
The actualization of receivables and supply chain finance
programs can encounter barriers including technology
adoption, where some businesses may lack the necessary
resources or expertise to implement new systems or may
face resistance to change. Integration challenges may
arise when attempting to blend new systems with existing
financial processes, requiring significant time, effort, and
investment.
However, the case studies of DBS and Bank of America's
receivables programs substantiate that despite potential
barriers, the actualization of solutions of receivables
program and liquidity management are indeed practical
and beneficial for businesses.
In the case of DBS, the Sales Invoice Financing (SIF)
service provides an advance payment against unpaid sales
invoices, thereby unlocking cash from receivables and
aiding in better working capital management. This practical
solution ensures that businesses have the requisite liquidity
to meet their short-term obligations, thus demonstrating the
efficacy and practicality of receivables programs in real-
world scenarios.
Insights into the Challenges Faced in Corporate Banking
Similarly, Bank of America's Intelligent Receivables™ tool
showcases the tangible benefits of employing advanced
technologies like artificial intelligence and data capture in
receivables management. The tool's enhanced forecasting
capabilities, comprehensive view of collections, and
increased processing capacity are indicative of its real-
world impact in aiding businesses to better anticipate
invoice collections, manage their liquidity, and improve
their working capital management.
Both these cases demonstrate how financial institutions are
leveraging technology to provide practical solutions that
address the challenges of receivables and liquidity
management. The continued evolution and adoption of
such solutions reaffirm their practicality and the tangible
benefits they offer to businesses in managing their
receivables and liquidity, thus ensuring smoother
operations and financial sustainability.
3.4 Challenge: Suboptimal Use of Cash Surplus
In modern times, businesses are exploring ways to
leverage banking infrastructure to finance their suppliers
using their excess cash. Economic uncertainty, stubborn
inflation, and elevated costs of capital will force many
corporations to focus on liquidity and working capital
management. In this new environment, cash becomes a
more valuable resource and treasurers will need
centralized visibility and control of enterprise liquidity to
ensure its optimized utilization (J.P. Morgan, 2023).
This reflects a broader trend towards more collaborative
and integrated financial solutions that can benefit all
stakeholders in a supply chain. Primarily, it aims at
enhancing supply chain stability and ensuring a steady
supply of essential materials and services. Companies
often accumulate cash surplus from their operations.
Instead of letting this surplus sit idle or investing it in low-
return instruments, they are keen on utilizing it in a way that
can enhance their supply chain stability and relationships.
Financing their suppliers is one way to achieve this, as it
can lead to better terms, reliability, and overall stronger
supplier relationships. It is also an alternative to
conventional credit facilities, which may be less accessible
for some suppliers, providing an avenue for faster, more
reliable financing.
The banking infrastructure, with its robust financial
frameworks, digital platforms, and regulatory compliance
mechanisms, provides an avenue through which
companies can channel their cash surplus to finance their
suppliers securely and efficiently. This proactive financial
management approach is seen to optimize working capital,
driving long-term cost savings and ensuring a smoother
operational flow amidst market uncertainties.
10
3.4.1 Solution: Optimizing Cash Surplus through Dynamic
Discounting
In light of the current macro-economic outlook, optimizing
cash surplus by financing suppliers can be a pivotal
strategy for corporations to ensure supply chain stability.
By developing structured and efficient solutions, banks can
meet the demands of their corporate clients, foster stronger
supplier relationships, and contribute to a more stable and
efficient supply chain financial ecosystem. Utilizing the
robust banking infrastructure, companies can implement a
solution that involves Dynamic Discounting to maximize the
benefits of their excess liquidity.
Dynamic discounting allows corporations to make optimal
use of their cash surplus by offering early payments to
suppliers in exchange for discounts. This financial solution
facilitates a win-win scenario where suppliers receive
payments sooner to enhance their cash flow, while
corporations earn a higher return on their cash surplus by
paying less than the full invoice amount, as compared to
the returns from low-yield investments. Some dynamic
discounting models use the sliding scale approach. With a
sliding scale or linear discount, cost savings are generated
by a fixed discount rate times the number of days paid
early, much like an annual percentage rate (APR) on
lending (Figure 11). This is especially beneficial for smaller
suppliers who might face liquidity constraints and rely more
on timely payments to meet their operational expenses.
Figure 11: Sliding Scale Discounts
In analyzing the practicality of the actualization of such
solutions, it is important to acknowledge that strong
technological infrastructure is pivotal for implementing
dynamic discounting. Additionally, for corporations with
global suppliers, managing dynamic discounting across
various regions presents a complex challenge due to
differing regulations, currencies, and banking systems.
These factors collectively pose potential barriers to the
practical actualization of dynamic discounting, emphasizing
the necessity of a well-adapted technological framework
and streamlined global operations to overcome these
challenges.
Insights into the Challenges Faced in Corporate Banking
A successful example of a company that has been offering
such solutions through its strong technological
infrastructure as well as its globality is Citi. Citi has
partnered with Cash Flow Optimization (C2FO), a third-
party provider, to offer the Citi Dynamic Discounting (CDD)
Program through C2FO's secure online marketplace (Citi,
n.d.). This partnership indicates a technological
infrastructure that facilitates dynamic discounting,
addressing potential integration challenges and ensuring a
secure and streamlined transaction process. Furthermore,
Citi prides itself as a global bank and has a proprietary
network encompassing 95 countries, which can be a
growth enabler for clients in this way, providing a
foundation to help launch treasury towards achieving its
goals (Wenzel & McNally, 2023).
Citi’s Dynamic Discounting ensures that clients achieve
maximum returns on their excess cash while building
resilience and supporting suppliers. As early payment is an
option for mid- to long-tail suppliers, Citi clients can use the
excess cash to reduce costs. In addition to strengthening
supplier cash flows, dynamic discounting also helps
strengthen long-term trading relationships. Citi clients and
their suppliers can benefit from the complimentary early
payment solution through a single platform and file-
transmission process for both Supply Chain Finance and
Citi’s Dynamic Discounting (Wright, 2023).
Therefore, it can be seen that Citi's approach to dynamic
discounting, through technological partnerships and its
global network, addresses the mentioned potential barriers
that could hinder the practical actualization of dynamic
discounting, making it a more viable solution for both
corporations and their suppliers.
3.5 Challenge: Lack of Visibility in Real-time Supply Chain
Finance Lifecycle Process
In an increasingly globalized world, supply chains have
become complex and dynamic networks that extend across
multiple geographies. The intricate interconnections of
global supply chains have led to the rise of Supply Chain
Finance (SCF), which aims to optimize financial flows
within the supply chain ecosystem. However, a major issue
plaguing the SCF ecosystem is the lack of real-time
visibility on the overall process flow, status, and execution
of financial transactions. The inability of all relevant
stakeholders to access, monitor, and analyze data in each
stage of the SCF life cycle in real-time, especially when it
involves multiple geographies, hampers the efficiency and
resilience of supply chains.
Both buyers and suppliers expect immediate access to
transaction data. Yet some of this information may be
unavailable, inaccurate, or incomprehensive, which makes
it challenging for parties to make immediate and informed
decisions. With orders placed across a range of systems, it
creates a disconnect in the flow of data which increases the
time required to find relevant information (Oracle, n.d.).
Furthermore, orders are placed across various
geographies with differing regulatory frameworks and time
11
zones. Suppliers and buyers who share information
selectively, inconsistently or via manual inputs can make
uniform processing challenging, and complicate real-time
coordination and visibility.
Therefore, the unavailability of real-time data regarding
payment statuses, schedules, and approvals can lead to
potential cashflow issues. Consequently, this lack of
immediate access to accurate and comprehensive data
could result in the inability to effectively assess, monitor,
and manage any potential financial risks for buyers and
suppliers. Ultimately, the absence of a coherent and
integrated visibility system hinders the ability of businesses
to respond adaptively to market fluctuations, demand
shifts, and supply chain disruptions.
3.5.1 Digital Platform Solution
To enhance the visibility and tracking of SCF processes,
businesses are increasingly turning to digital platform
solutions that offer real-time capabilities across various
geographical locations. These digital platforms act as
catalysts that fuel transparency, coordination, and
efficiency in managing financial flows within the supply
chain, mitigating the abovementioned issues that were
present in traditional mechanisms of SCF.
For instance, Dltledgers (2023) is a finance digitization
platform that utilizes blockchain technology to deliver multi-
enterprise supply chain business networks. Companies
that use this solution include TataMotors, Citibank and DBS
Bank. Dltledgers allows relevant stakeholders to track the
flow of capital throughout the supply chain, enhancing
transparency and preventing duplicate invoice financing.
This is made possible through the introduction of various
application features that enhance collaboration with
multiple parties in multiple geographies, improving the end-
user experience with multi-flow payments. For example,
they provide real-time reports, secure tracking of verified
documentation, accurate data and digital document
repositories, as well auto-matching and reconciliation
system to allow for peer-to-peer sharing in real-time. This
audibility and tracing capability on data/document flows
help to increase visibility and transparency across the
participants in various geographical locations.
Our team believes that such digital platform solutions will
help to tackle the challenges faced in SCF as they
transform centralised supply chain information, allowing
stakeholders like suppliers and buyers to have immediate
insight into transaction statuses and cash flow. This helps
to enhance visibility and allow for timely decision-making
for any issues that might arise. Furthermore, these
platforms also offer multi-geographical capabilities,
enabling seamless cross-border communication and data
sharing, ensuring that stakeholders, irrespective of their
location, can participate in the supply chain finance process
effectively. This fosters a unified approach to SCF,
reducing the likelihood of delays due to geographical or
time differences and improving the overall fluidity of
transactions. Additionally, they support end-to-end
Insights into the Challenges Faced in Corporate Banking
transaction tracking, facilitating real-time monitoring of
financial processes which fosters accountability, and
reduces the associated risks and uncertainties with
financial transactions.
While digital platforms are readily available and utilized,
there are potential barriers faced which may deter firms
from adopting the solutions. Besides the lack of financial
resources necessary for seamless integration into these
ecosystems, the multi-geographical capabilities of the
digital platform facing complexities relating to differing
regulatory frameworks is an additional factor. These digital
platform solutions must navigate the different regulations
and standards, ensuring compliance and adaptability to the
legal landscape across various geographies. Additionally,
data security and privacy on digital platform solutions
present concerns about the confidentiality, integrity and
security of sensitive financial and operational data. The
openness of digital platforms could potentially expose
businesses to vulnerabilities and threats, necessitating
robust cybersecurity frameworks to safeguard against
malicious intents and data breaches.
Overall, we believe that digital platform solutions will bring
enhanced visibility, real-time tracking and global
connectivity to the SCF process. As these challenges on
security considerations and regulatory complexities are
being continuously tackled over time, we will witness
increasing adoption of these digital platform solutions in the
SCF lifecycle in the future.
4.0 Trade Finance
4.1 Introduction
International trade is the cross-border exchange of goods
or services between two or more parties subject to a sales
contract. Trade financing is the financing of goods or
services in an international trade or transaction between a
supplier to the end buyer. The risks that apply to both the
banks and clients (either exporter or importer) involved in
international trade are mitigated and/or reduced due to the
existence of trade financing and banks as intermediaries.
These risks include counterparty risk (both financial and
commercial risks) and country and transfer risk (includes
changes in political, economic and government regulations
that impact any aspect of the trade transaction):
● Financial: Either the exporter or importer becomes
financially insolvent or bankrupt and thus unable to fulfil
their part of the transaction
● Commercial: Either the exporter or importer being
fraudulent or non-accepting of any aspect of the trade
transaction
● Political: Changes in political stability that impact the
trade transaction to continue
● Economic: Changes to foreign reserves and foreign
exchange rate fluctuations that impact the trade
transaction payments
● Government Regulations: Changes to import duties,
tariffs, import/export bans or exchange controls that
impact the trade transaction to be completed
12
Trade financing can be separated into Import Finance and
Export Finance, and banks facilitate trade by offering a
range of services to either the exporter or importer. Some
of these services include purchase order finance, stock
finance, structured commodity finance, invoice finance
(discount and factoring), supply chain finance, letter of
credit (LC) and bonds & guarantees.
These services allow both banks and clients to benefit.
Small business clients utilize trade finance to overcome
their cash flow challenges and allow all clients to extend the
scale of their operations. Both banks and clients gain from
building and strengthening their supply chain relations and
overall growth. However, there are several challenges
involved in aspects of the services and the services’
processes overall from both the bank's and client’s
perspectives.
4.2 Challenge: Issue on Duplication and Lack of Visibility
Duplication
Duplication is the practice of using the same documents
more than once (possibly multiple times) to secure
financing from several financiers (Chhina, 2022). It is a form
of double financing abuse as the client obtains credit from
numerous lenders, generally more than what is required
and may be used towards non-core assets acquisition. An
example of abuse will be the Hin Leong Trading in 2020
where Asia’s largest oil trader obtained financing from
various banks for cargoes of oil which did not exist
(Jaganathan & Khasawneh, 2020). It failed to repay its
US$3.85 billion debt to its lenders, resulting in the
liquidation of the company eventually (The Straits Times,
2021). As such, financiers have taken action to reduce loss
risk due to fraud by off-boarding clients or providing funding
at unfavourable terms, consequently impacting SMEs the
most (Chhina, 2022).
Furthermore, a legacy of traditional trade finance is that
most processes are still largely paper-based. According to
estimates from the International Chamber of Commerce, 4
billion documents are created to support global trade
annually. On average, each cross-border transaction
requires up to 36 documents and 240 copies. Therefore,
handling all the various trade finance documents might take
as long as 3 weeks (Global Trade Review, 2023). Because
of its high dependence on paper, it also means that
chances of tampering with these documents are high, thus
exposing it to financial crimes including fraud.
Factors that continue to contribute to the issue of
duplication include the lack of global standards, and
varying legal and regulatory frameworks, such as privacy
regulations and technological restrictions. Additionally, the
lack of collaboration and coordination within the banking
industry, including information silos between banks and
competition concerns continues to allow for fraud to go
undetected. A major obstacle in the identification of
financial crimes in international trade is poor identification
measures and the above challenges which consequently
limit the information required for effective due diligence of
Insights into the Challenges Faced in Corporate Banking
necessary parties shared amongst financial institutions
(Chhina, 2022). Thus, banks need to be innovative in
creating a solution that addresses and eliminates the issue
of duplication and overall financial crime.
Visibility
Currently, clients lack real-time visibility on their product
lifecycle and overall documentary trade processes, which
negatively impacts reconciliation due to a lack of
information thus reducing the efficiency of this activity
(Figure 12). Essentially, gaining visibility for clients can be
considered more than basic tracking; clients need a
seamless flow of information from end-to-end trade
processes (Heaney, 2013).
Figure 12: Current Lifecycle of Trade Finance
For clients, visibility of the documentary process is critical
for strategy and their ability to be responsive in their overall
supply chain approach, which requires extensive
information and information processing capabilities
(Williams et al., 2013). However, clients struggle to
synchronize and integrate data across various systems,
which is made more difficult by the lack of real-time visibility
of trade transactions and completion of documentary
processes (Heaney, 2013).
Higher levels of control and coordination with third parties
that clients are dependent on, such as banks in trade
processes, allow these clients to successfully achieve their
strategic goals. Professional planning and execution are
not possible without the ability to access the relevant
information that is collected by external stakeholders like
banks. Additionally, due to the integration of banks in trade
transactions, both the physical and financial flows enable
the bank to have the vital role of influencing the exchanges
between the exporter and importer (Pant & Mahapatra,
2018). Thus, highlighting the importance of visibility for
clients, which is an area banks are currently lacking.
4.2.1 Solution: Implementation of Digitalized Platform &
Blockchain
Digitalized Platform
Digitalizing trade finance is the solution to connect both
financial institutions and corporations of all sizes more
efficiently. The first step to going digital is to create an
easily accessible hub for all parties, which essentially helps
13
to convert trade finance processes to a paper-less system
(Eastwood, 2023).
Conducting trade finance on a digitalized platform has
several benefits. Firstly, a digital platform allows the
different parties involved in a transaction to communicate
on a single platform. Secondly, the automation and
simplification of processes, including real-time data
exchange helps to save costs and time for the different
parties. Thirdly, data stored in the digital platform are safe
and secured with the sharing of data between relevant
parties only. Lastly, digital platforms can authenticate
parties and record transactions to reduce the chance of
fraud (Trade Finance Global, n.d.).
For trade finance, going digital allows corporates to achieve
better control of their credit facilities, reduce fees and
accelerate the application process, which helps them to
grow transaction volumes without the need for additional
credit. For exporters, export LC, faster document
preparation and reduction of errors allow them to offer
better pricing to their buyers. For buyers, they can also
claim the goods earlier when their exporters send the
original paper documents directly to the issuing bank, while
at the same time, providing electronic copies to the
domestic bank (Golden, n.d.).
Between 2020 and 2021, when the pandemic was
prevalent at that time, HSBC saw a rise from 30% in pre-
pandemic times to 95% in digitally initiated transactions in
trade finance. Iain Morrison, country head of global trade
and receivables finance at HSBC mentioned how
digitalization in trade finance has become so important to
grow internationally despite lockdowns and closed borders
during COVID-19 (Lim, 2022). As seen, COVID-19 has
changed the traditional way of trade finance and seeing
how successful digitalization is in trade finance, the
industry is, therefore, more certain that going digital is the
new way of conducting trade finance moving forward.
Today, various digitalized platforms help financial
institutions with their trade finance services, such as
Networked Trade Platform (NTP), which helps clients
digitalize and simplify trade finance processes, providing
an end-to-end digitalized process for both financial
institutions and clients. NTP allows clients to upload their
documents once and store them in a safe and secure digital
environment. Clients can then reuse and share the data
quickly and securely with various partners such as financial
institutions to complete trade-related transactions
(Networked Trade Platform, n.d.).
For example, DBS completed its first trade financing
transaction with Audi Singapore (Audi) and its local
distributor, Premium Automobiles (Premium) on NTP in
2020, which involved a S$3.5 million LC. Through this
platform, both Audi and Premium can submit and exchange
documents digitally compared to the traditional way. As a
result, processing time was shortened from roughly a week
to less than one working day. Besides the reduction in
Insights into the Challenges Faced in Corporate Banking
processing time, both parties are also able to obtain real-
time updates on the progress of their transactions. Given
the success of the digital trade finance process, Audi,
Premium and DBS are working on the second trade on the
NTP, valued at S$2.8 million (DBS, 2020).
Besides the ability to provide visibility to the different
parties, the NTP also has a value-added service on its
platform called CamelONETM Trade Finance Portal. This
service has a duplicate invoice check feature that will help
prevent double financing of invoices, which essentially
reduces the risk of fraud (White, 2019). Also, as more
businesses go digital moving forward, more data will be
stored digitally, leading to a decrease in the chances for
duplication to occur. Therefore, an end-to-end digitalized
platform like NTP can solve duplication and visibility issues
for all parties in trade finance.
As trade finance is moving towards digitalization, more data
will be stored in the digital space, which increases the
chances of cyberattacks in the systems. An estimated
figure of 4,000 new cyberattacks occur every day and a
company becomes a victim of a ransomware attack every
14 seconds, which can result in huge financial losses
(James, 2023). In 2019, a hacker obtained data consisting
of more than 100 million Capital One customers’ accounts
and credit card applications (McLean, 2019). This shows
how common cyberattacks are in the banking industry and
with the increased data in cyberspace due to the high
volume of trade finance transactions annually (about $3
trillion), the parties involved will then be more vulnerable to
cyberattacks.
Blockchain
To tighten the security and storage of these transaction
data, blockchain is being integrated into these digitalized
platforms.
The blockchain industry stood at around 10 billion last year
according to a report by Grand View Research. (Balmer,
2023). The industry is currently in high growth with a
projected CAGR of 59.9% to 87.8% according to multiple
reports from Statista, Grand View Research and Fortune
insights and by 2030 it could be a trillion-dollar industry
(Figure 13).
Figure 13: Blockchain Market Size Growth
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According to the research, at least 50% of the public are
interested in blockchain technology which would help to
fuel the growth of the industry as more people adopt the
technology (Figure 14).
Figure 14: Percentage of People being Exposed to
Blockchain
Blockchains benefit banks, as blockchain technology
ledgers, are tamper-proof and would thus eliminate double
financing. The blockchain keeps the data confidential by
generating a unique key rather than raw data entered by
the banks. The different banks can then access the
blockchain to share their data. If another bank tries to
register an invoice with the same details, the system will be
alerted to potential fraud.
However, like all technology, there is a potential chance of
a cybersecurity attack on the blockchain as well.
Nevertheless, financial institutions would use their private
blockchain to prevent hackers from accessing their data
(Euromoney, 2020). Private blockchains used by banks
would make the blockchain more resistant to attacks which
can be mitigated by using VPN to access the blockchain.
This is because private blockchains use identity to confirm
membership and access privileges which typically only
permit known organizations to join. Together all the
members form a private business network. Since only
members with special access and permissions can
maintain the transaction ledger, this makes the network
more resistant to attacks due to additional identity and
access controls (IBM, n.d.). Thus, to ensure a higher form
of security, NTP can leverage blockchains to be much safer
and more efficient.
Another downside of a blockchain is that it is energy
intensive as electricity is wasted on computers trying to
solve complex mathematical calculations to update the
blockchain. Bitcoin alone is estimated to consume 127
terawatt-hours (TWh) a year — more than many countries,
including Norway (Schmidt, 2022). Now if we scale that up
to banks and financial institutions in the world using
blockchain technology, lots of electricity would be wasted
on purely solving math problems which also increases the
operating costs for the banks.
Insights into the Challenges Faced in Corporate Banking
Despite its shortcomings, Banks do see a future in
blockchains. A Singapore-launched feasibility study into
leveraging cross-border transactions using blockchains
has given rise to the Partior blockchain. Co-developed by
central banks of multiple countries and spearheaded by the
Monetary Authority Singapore (MAS) (DBS, n.d.), Partior’s
network has grown to accommodate over 70 banks with the
likes of DBS and JP Morgan. While the blockchain remains
under trial runs, the future of Banks running on DLT to
facilitate cross-border payments might be just around the
corner.
We feel that blockchains will be the backbone of the
financial world in the future. With its tampered-proof
technology and efficiency, the benefits of blockchains
outweigh the barriers. Furthermore, new models such as
Proof of Stake are being developed to address the issue of
energy consumption. Banks are also actively pursuing this
technology which can be seen from the case study where
Partior is supported by multiple countries and over 70
banks which validates the importance of a blockchain to
banks. It’s only a matter of time before blockchains get
integrated into our everyday life.
4.3 Challenge: Poor Invoice Matching Processes and
Inefficiency of Auditing Reports
A key challenge is the poor invoice matching process that
arises due to a lack of accurate, available information and
the sharing of documents with the relevant parties is not
done on time. Consequently, this causes reconciliation to
be inefficient. This is due to the numerous documents in a
trade transaction, including copies of original documents
that need to be transferred between different parties and
intermediates such as banks (Office of the Comptroller of
the Currency, 2013).
A trade transaction is based on the commercial invoice
which is a legally binding document stating the goods that
are being sold, the quantity of the goods and the payment
amount owed for those goods (Office of the Comptroller of
the Currency, 2013). For clients, trade finance
management is key to their operations. Consequently, the
relaying of information in the commercial invoice is
significantly important especially when reconciling this
information, such as confirming the quantity of the goods
when the shipment has arrived (Hofmann & Belin, 2011).
However, as previously highlighted the trade industry is
heavily reliant on paper documents thus making the flow of
information more difficult and delayed (Hofmann & Belin,
2011).
During the auditing process, determining an information
mismatch between the invoice and other trade documents
such as the shipping receipt causes the need for
investigations into finding the reasoning for the mismatch.
This would consume additional resources and time
(Hofmann & Belin, 2011). A client of the bank may have
numerous contracts with different importers, and vice
versa, thus numerous invoice documents, making it
challenging for both the bank and the client to streamline
15
their financial and informational flows. This is heightened
by delays in the movement of the documents between
different parties (Hofmann & Belin, 2011). Furthermore,
there are circumstances in which the invoice may lack the
necessary detailed information for banks to audit the
documents to confirm the genuineness of the documents
before continuing to transfer them to the necessary parties.
Thus, additional time and effort are required to determine
which details are missing and obtain these missing details
and consequently reconciliation is further delayed
(Hofmann & Belin, 2011). Banks need to find a solution that
addresses the issues of document reconciliation to best
support their clients during the trade transaction process.
4.3.1 Solution: Optical Character Recognition & AI
Algorithms
Optical Character Recognition (OCR)
OCR is a technology that allows for paper documents to be
scanned and converted into digital formats, thus eliminating
the issues with the usage of trade paper documents. The
digitized document can be electronically edited, searched
for and used in other digitized trade processes (Elsaid,
2023). OCR technology usage has numerous beneficial
features including the ability to character, text and selected
data recognition and selection within an OCR-processed
document.
The key benefit in trade transactions is increased efficiency
and accuracy, which addresses the invoice-matching
process issue (Elsaid, 2023). OCR technology can scan
large quantities of documents quickly and accurately, thus
the transferring of documents from banks to other
necessary parties can be faster, reducing delays in bank
processing of documents. Figure 15 demonstrates the
increased efficiency of processing and auditing the LC in
an LC transaction as the previous manual processes are
eliminated.
Figure 15: OCR in Processing an LC
OCR technology can be used for invoice document
processing, specifically extracting the necessary
information, such as invoice number, description of the
goods and the payment amount due (Elsaid, 2023). This
eliminates the human error and potential for fraud when
Insights into the Challenges Faced in Corporate Banking
inputting the information and by comparing the data on the
invoice with other documents that would have the same
information. Consequently, the delays due to inaccurate
information are reduced (Elsaid, 2023). Advanced OCR
technology, such as Nanonets can extract information from
a document and transfer it to another document, such as
statements into spreadsheet data as it recognizes the
specific data that would need to be stored in the new
document type (S, 2023). Additionally, OCR technology
can be utilized to ensure that all the necessary information
is on the document that requires it, thus eliminating the
delays caused by missing information or discrepant
documents.
However, there are challenges associated with
implementing OCR technology. As trade is conducted
internationally, there is an issue with language barriers,
which complicates the OCR technology’s ability to
accurately recognize and interpret different fonts,
characters and languages. Furthermore, due to the
technology's inability to be 100% accurate, with the highest
accuracy rate between 85-90%, human manual
intervention is required to correct and ensure precision in
the information being scanned (Vilda, n.d.).
Due to the nature of the technology focusing on scanning
physical documents, issues surrounding image quality
impact the OCR’s ability to read the information correctly.
Image quality issues include blurriness, distortion, lighting,
and handwriting, especially if it is cursive text. This would
be a challenge that the bank would need to address when
implementing OCR, especially when clients submit their
documents. Due to the aforementioned challenges, there
are limited examples of this solution being implemented in
the trade finance industry. Thus, before implementing this
solution, banks would need to consider the costs
associated with implementing and maintaining the
technology, especially as it would be used regularly.
AI Algorithms
AI-powered programs can analyze and understand data,
thus increasing the efficiency and effectiveness of the
invoice-matching process (Patel, n.d.). Due to trade
transactions currently using paper documents, AI
algorithms alone are unable to access the necessary
information from these documents to perform the matching
process (Patel, n.d.). AI algorithms would need to be used
with supporting technology, such as OCR and updates are
necessary to regulatory requirements to realize the full
potential of the AI. Updates in original trade document
regulations would allow for a paperless trading
environment, in which AI can be fully employed for the
matching processes (Patel, n.d.).
The Uniform Customs and Practice Documentary Credits
(UCP600) is a set of rules by the International Chamber of
Commerce governing trade finance that banks must follow
when issuing specific trade documents such as LCs (Patel,
n.d.-b). Currently, the UCP600 has no specific rules for or
against AI, consequently highlighting potential legal issues
16
when engaging in the usage of AI (Patel, n.d.). Thus, if this
solution is considered to be implemented in the invoice
matching process, banks need to consider the potential
legal repercussions (Patel, n.d.).
Currently, if AI were to be implemented, there would be an
issue with a lack of standardized trade document format
(Patel, n.d.) as the UCP600 does not have a standardized
format to follow (Patel, n.d.-b). Although OCR can scan
documents with different formats, AI algorithms have
higher recognition and accuracy in understanding the
information with documents following a standardized
format.
Although there are many considerations before engaging Figure 16: Smart Contracts Market
in AI usage, AI algorithms can be utilized to increase the
Efficiency
invoice matching process’ efficiency. Intelligent algorithms
From cash management to working capital to trade finance,
can be used to match documents based on various factors,
banks are required to do their due diligence on their
including invoice numbers, the goods’ details, quantities,
customers to ensure that they will not default or conduct
and prices (Pura, 2023), enabling accurate and quick
fraud. However, these processes are very time-consuming
matching of invoices with corresponding documents such
when done manually and many people need to be hired just
as receipts and purchase orders. Efficiency increases as it
to do these checks which can be costly and inefficient. This
is streamlined and more accurate as the potential for
is where smart contracts come in. Figure 17 shows a broad
human error of incorrectly inputting information or missing
overview of the application of smart contracts in finance.
data is eliminated (Pura, 2023) reducing the possibility of
Smart contracts are self-executing, compliance and control
documentary discrepancies or missed invoices.
happen within the system itself without the need for third-
The use of AI algorithms provides more organized and party intervention (Business of Apps, 2021). As for
easily accessible information as the documents would be compliance with bank policies, smart contracts can search
digitally recorded, thus reducing the issues of visibility and the web and external data sources to find out more about
transparency. As the documents are easily available, it their clients and help streamline the KYC process. Thus,
allows both the bank and client to quickly access and results in lower transaction costs and high efficiency as
retrieve necessary details when conducting business, smart contracts work round the clock and are cheaper than
making the overall trade transaction easier and smoother hiring people to do the job. Invoice approvals and discounts
(Pura, 2023). often take a long time to approve due to the bureaucratic
hurdles and outdated manual approval processes resulting
As highlighted above, the UCP600 has no guidelines for in the delay of working capital and discounts not being fully
the use of AI nor do many national policymakers have utilized. Thus, with smart contracts, these inefficiencies can
substantial regulations for the use of AI in the trade be resolved as these will be processed automatically
industry. As trade has a significant impact on sectors of the reducing the need for human intervention.
economy including employment, production, pricing, and
wages, there has been limited advancement of the
regulations in the industry considering new technologies
(Achar, 2019). This consequently inhibits the effectiveness
of implementing AI due to regulations involving privacy
concerns, data flow risks and Government trade barrier
interventions such as tariffs on ICT, which increase the
costs of obtaining AI hardware (Achar, 2019). Due to such
legal considerations, the practical actualization of utilizing
AI algorithms will be reduced as they must abide by
regulations that limit the value brought by this solution.
5.0 Systemic Issues Across Corporate Banking Areas
5.1 Smart Contracts
According to Valuates Report, the global Smart Contracts
market was valued at US$397.8 million in 2022 and is
anticipated to reach US$1460.3 million by 2029, witnessing
a CAGR of 24.2% (Figure 16) during the forecast period Figure 17: Smart Contracts and Finance
2023-2029. Therefore, there is a growing demand for smart
contracts.

Insights into the Challenges Faced in Corporate Banking

17
Transparency
Smart contracts have the same security as blockchains
making them tamper-proof and transparent for all parties.
This thus removes trust issues from all parties as they can
see everything about the contract on the blockchain and
reduces downtime as compared to traditional systems as
they can act immediately. With its transparency, smart
contracts prevent duplication financing as banks can cross-
check with the blockchain.
However, there lie certain barriers that question the
practical use of smart contracts.
Lack of Regulations on Smart Contracts
As banks are a heavily regulated industry following the
GFC in 2008, banks may be reluctant to try out new and
unregulated technologies for fear of stepping on the wrong
side of the regulators. This might be changing as the MAS
and Hong Kong Monetary Authority have begun trials of
smart contracts with their various national banks.
Scalability of the Blockchain
Right now, Banks are exploring smart contracts with a small
blockchain in their test labs. When scaled up, the
blockchain networks might become inefficient due to the
high computational requirements needed to validate the
transactions (Marr, 2023). As the number of users,
transactions and applications increases, the blockchain
networks might hit a processing bottleneck. While adding
more computers to the network might increase the
processing throughput, it also increases operating costs
and initial capital in buying the computers. One way to
mitigate this is to create off-chain channels from the
blockchain. It is unclear if that would affect the security of
the blockchain as further exploration in this area is still
ongoing.
Complexity of Setting up a Blockchain
Significant investment is needed to set up the blockchain.
This is due to the high complexity of the codes running on
the blockchain which might lead to errors and inefficiencies
during implementation (Marr, 2023). Thus, high technical
expertise is needed which raises the barrier of adopting the
technology.
Interoperability Between Different Blockchains
Currently, banks work with different firms to create their
blockchains. They are all using different codes and
standards which might incur problems when one
blockchain communicates with another for cross-border
transactions. Regulations might be needed to set a global
standard so that the blockchains can communicate with
each other efficiently for cross-border transactions
However, despite these barriers, the following case studies
depict the usefulness and potential uses of smart contracts
within different areas of corporate banking.
Insights into the Challenges Faced in Corporate Banking
Case Study 1 – Supply Chain (Deutsche Bank)
Deutsche Bank has collaborated with Roche to explore
using blockchain and smart contracts to leverage ERP
systems for procurement management. The blockchain
provides all the information needed to conduct the
transaction and all participants have access to this data,
which can then be integrated into their own ERP systems
(Roche, 2022). The smart contract via blockchain defines
all conditions including the account to which payments
would be made. Deutsche Bank would then receive a
payment API call to instruct payment after all conditions are
met or run a node and initiate the payment on behalf of
Roche. Smart contracts would give rise to a new model of
PO financing, where the bank can see the PO immediately
so financing can be accelerated more quickly. Refer to
Appendix 2 for the diagram of the overall system.
Case Study 2 – Prepayments (Bank of China Hong
Kong)
The BOCHK conducted a trial where employees of the
bank were given simulated Hong Kong dollars to spend at
10 participating merchants. When employees buy a
prepaid service contract from a participating merchant, the
customer’s prepaid funds are converted into digital Hong
Kong dollars (eHKD) under their name (Ledger Insights,
2023). Once the merchant provides the goods or service,
the smart contract executes automatically and the
merchant receives the payment immediately. Additionally,
the smart contract functionality was directly incorporated
into the Central Bank Digital Currency (CBDC) and eHKD
was integrated into the existing point-of-sale system. Thus,
merchants do not need to install any new software which
enhances the overall convenience of the payment system.
Smart contracts might be nearer to us than we think it is.
We feel that smart contracts would be the key to solving
today’s banking challenges by providing unparalleled
transparency and efficiency increasing the trust between
stakeholders and making it easier to conduct transactions.
As more regulators trail on the technology, it’s a matter of
time before regulations and standards are established
which helps address the issue of lack of regulations and
interoperability. The rise of regulations and standards
would drive up adoption rates as more people are using it.
Complexity would not be an issue for banks as they have
deep pockets and would be able to hire the best technicians
to do the job. While scalability might be an issue now,
banks are actively pursuing the technology and exploring
trials to further improve the system across all sectors of the
banks. From the case study we can see that for the supply
chain, ERP is integrated into the blockchain resulting in
greater efficiency. For the procurement case study, smart
contracts are undergoing trials with current technology
without the need to overhaul the payment system which no
doubt would drive up adoption rates for merchants.
As more banks jump onto the smart contracts bandwagon,
it’s a matter of time before smart contracts become an
everyday thing for firms and banks alike.
18
Therefore, we believe that the case studies validate the
applications and importance of smart contracts in the future
of finance.
5.2 Chatbots
Banking chatbots, also known as virtual assistants, use
natural language processing and AI to function. They are
available 24/7 and are integrated into digital platforms to
provide real-time and tailored customer support. There are
many benefits to using banking chatbots. Not only are they
available round the clock, but they are also able to handle
a high volume of enquiries, which significantly reduce
operating cost. Moreover, their responses are quick and
customized according to the customer’s past interactions
and experiences (Swain, 2023). Such personalized
interactions will improve the customer’s experience in using
chatbots which explains the high number of chatbots being
integrated into banks’ digital platforms.
5.2.1 Chatbots (Working Capital)
In the context of working capital and supply chain finance,
one of the challenges is ensuring effective and timely
communication with customers. Customers may have
queries, need assistance, or require real-time updates
regarding the status of their supply chain finance
processes. The traditional methods of communication can
be slow, prone to errors, and may not meet the customers'
expectations for immediate responses. This challenge is
magnified when considering the breadth and depth of
interactions in supply chain finance, which involves various
parties, processes, and financial products. Efficient
communication is crucial to ensure all parties are well-
informed, reducing the likelihood of misunderstandings,
delays, or financial mismanagement.
One example that has showcased the effectiveness of
chatbots comes from the retail sector, where Walmart used
a chatbot to automate supplier negotiations as part of its
procurement process. In 2021, Walmart piloted an AI-
powered chatbot to negotiate with suppliers to streamline
its purchasing procedure. With 68% of the suppliers
approached, the chatbot was able to negotiate and reach
agreements, reducing the turnaround time for negotiations
to an average of 11 days. This automation led to an
average saving of 1.5% on the spend negotiated and an
extension of payment terms to an average of 35 days
(Hoek, Dewitt, Lacity & Johnson, 2022). Walmart used the
chatbot solution to communicate with mid-tier suppliers and
expanded its use to other areas, such as route rate
discussions for transportation. The chatbot's multilingual
capabilities further enhanced communication with a
broader supplier base.
This example shows how chatbots may significantly speed
up communication and response times when dealing with
suppliers, who are key components of supply chain
management. Despite not being a direct example of supply
chain finance, it highlights the potential of chatbot
technology. Chatbots can help expedite interactions linked
Insights into the Challenges Faced in Corporate Banking
to the supply chain and improve communication, which
could be extrapolated to supply chain finance scenarios.
5.2.2 Chatbots (Trade Finance)
Communication is key in trade finance processes in
ensuring documents are handed over to the respective
parties promptly. The traditional way of paper-reliant in the
trade finance industry means that the exchange of
documents will take about 5-10 days to complete, if not
longer, and manual verification is required. As the different
parties involved in a transaction are from different countries
and operate on different platforms, miscommunication is
common (Ho, 2018). Furthermore, the complexity of
documents required in a trade finance process may pose a
challenge for financial institutions to communicate and
collaborate with their counterparties. This has resulted in a
vicious cycle where the trade documents move back and
forth to the same parties during certain processes such as
drafting (Oracle, 2021). Therefore, financial institutions
must find a solution to improve communication during
documentary trade processes.
Chatbot solutions are a good idea in helping to
communicate with the relevant parties when dealing with
document collection. In trade finance, buyers and suppliers
can upload their relevant documents online using chatbots.
Chatbots then verify these documents and provide real-
time updates. When all necessary documents are
approved, financial institutions will send confirmation to the
different parties (Nair, 2022).
Even so, chatbots have limited understanding, which
means they can only understand and handle pre-
programmed commands and scripts (Mutabazi, 2023). In
trade finance, documents such as LC require a range of
skills and expertise to examine to ensure they are accurate,
complete and free of errors (Myla, 2023). Therefore, a
chatbot that is limited by its script, may not be able to
identify potential dangers on the documents that will
ultimately put the financial institutions in a dangerous spot.
To mitigate the risks involved, financial institutions should
use an advanced chatbot with OCR built in, so that they
can read and extract data to check for inaccuracies,
inconsistencies, and missing fields (boost.ai, 2023).
Nonetheless, our team believes that chatbots are useful in
communicating and collecting non-complex documents
that are within its programming script. Beyond that,
chatbots cannot adapt and solve a problem when unusual
situations arise such as different country regulations (which
happen often in trade finance) unless financial institutions
engage an advanced chatbot that can deal with such
situations.
5.3 Digitizing the Onboarding Process
Digitization in the onboarding process is becoming
increasingly crucial in the corporate banking sector due to
a myriad of factors that drive efficiency, compliance, and
19
customer satisfaction. The traditional manual onboarding
processes can be time-consuming, error-prone, and may
not meet the evolving expectations of modern businesses.
As corporate banking deals with high-stake transactions
and complex financial services, the urgency for a
streamlined, accurate, and swift onboarding process is
paramount. Moreover, a digital platform enhances the
customer experience by offering a more convenient and
faster onboarding process, which is particularly important
in a competitive market where client satisfaction and
retention are key.
However, banks have historically struggled with
onboarding clients digitally. The main reasons why
onboarding clients digitally poses multiple challenges are
due to stringent regulatory compliance and due diligence
requirements like Anti-Money Laundering (AML) and KYC
laws. Therefore, this would require thorough
documentation verification and in-person checks to ensure
the authenticity and legality of the business operations. The
inherent complexity of working capital loans, tailored to
specific business needs, requires a more hands-on
approach to assess the financial health and associated
risks of a business, making manual onboarding a
preferable choice for many banks. Given the administrative
time in executions, excessive documentation required and
lack of solutions to extract data from reports, efficiency with
onboarding processes has always been a problem.
Moreover, manual onboarding fosters a personal
interaction that is crucial for building a trustworthy customer
relationship, understanding the client’s business better,
and allowing for customization and negotiation on both
trade finance and other solutions.
To tackle the issues, the digitizing of onboarding processes
has to be more sophisticated and should encompass
additional technological elements as well. Examples
include utilizing technologies like OCR and ML. Automated
fraud detection and centralized data management can
reduce risks while ensuring data privacy and security with
robust encryption. Moreover, a digital platform enhances
the customer experience by offering a more convenient and
faster onboarding process, which is particularly important
in a competitive market where client satisfaction and
retention are key. As such, digitization can address the
challenges associated with manual onboarding, providing
a more streamlined and user-friendly approach.
Financial institutions such as HSBC digitize their
onboarding processes in which 82% of its clients rated their
experiences as excellent. Onboarding domestic and global
clients now takes 3 days or less (HSBC, n.d.). Another
prominent example will be Citi (Figure 18). With less
information required, the digital onboarding process is
made simpler in a single window. Through CitiDirect,
clients can complete an entire account opening online,
track their status and provide information. Documents can
now be easily signed with electronic signatures, making it
Insights into the Challenges Faced in Corporate Banking
convenient for clients (Citi, n.d.). During COVID-19 global
lockdowns, Citi has helped clients open more than 1,000
accounts (Large, 2020). Finally, DBS has also successfully
digitized its KYC and onboarding process. DBS is
connected to various central repositories for KYC data,
which allows standardization and streamlining of data
during the onboarding process (DBS, 2020). By integrating
digital signatures and video capabilities in the customer
onboarding journey, there is no need for physical
documents, providing customers with the ease of doing
business.
Figure 18: Citi’s Digital Onboarding Process
Therefore, our team believes that these successful case
studies have highlighted how digital transformation can
effectively address the inherent drawbacks associated with
manual onboarding. The digital shift reduces operational
costs, minimizes errors, and cultivates a more robust
framework for fraud detection and data security. Clients
too, benefit from a more seamless, swift, and user-friendly
onboarding experience, which in turn, augments client
retention and satisfaction. Thus, the transition to digital
onboarding is not merely an ideal thought, but a practical
solution demonstrated by the case studies, with great
benefits that significantly outweigh the traditional manual
processes. With the continuous improvement of the
technological landscape, our team believes that digitizing
the onboarding processes of banks will be successful in its
progressive stride towards modernization and efficiency in
the corporate banking landscape.
6.0 Conclusion
The landscape of corporate banking is bound to undergo
significant change, and after exploring the various sides of
corporate banking, we understand that there is room for
growth and improvement. To retain clients, maximise
profits and expand into new markets, corporate banks face
a multitude of challenges and hurdles within cash
management, working capital and trade finance, some of
which may be more complicated and lack practical
solutions. However, a plethora of digital solutions are
available at the bank’s fingertips, and they become all the
more necessary with the emergence of ground-breaking
and industry-shifting technologies (and risks).
Regardless, corporate banking stands at the precipice of a
massive transformation, and all banks and financial
institutions need to be prepared to keep up as the industry
evolves into a digital one.
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7.0 References
Achar, S. (2019). Early Consequences Regarding the Impact of Artificial Intelligence on International Trade. American
Journal of Trade and Policy, 6(3), 119–126. Research Gate . https://doi.org/10.18034/ajtp.v6i3.634

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8.0 Appendix

Appendix 1: Working Capital Problems & Solutions

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 Appendix 2: Deutsche Bank Supply Chain System

Appendix 3: Complexity of ERP and Bank Integration

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