New Delhi, Nov 23 : Battered by the Covid-19 crisis, large Indian companies are looking to their banks for digital solutions that can make their supply chains more resilient to pandemic-related disruptions.
These demands are speeding the transformation of trade finance — one of the banking industry’s last paper-based holdouts — into a digital business, a CRISIL Coalition Greenwich study has said.
The global pandemic hit global trade flows harder than the global financial crisis of 2008-2009.Now, a second wave of Covid cases in the US and Europe are dashing hopes of an early recovery.
For large Indian corporates, that could mean a continuation of troubles experienced in the first half of this year, including supply-chain disruptions due to lockdown measures, industrial shutdowns and the resulting delays in shipping and transport, the report said.
“Facing these challenges, Indian companies have changed their ‘ask’ to banking providers,” said Gaurav Arora, Head of APAC & Middle East at CRISIL Coalition Greenwich, which provides corporate, commercial and investment banks with analytical research on their competitors, institutional and corporate clients, and country markets, and also analyses client’s underlying performance drivers in areas including headcount, expenses and capital.
“In the crisis, operational agility and digital solutions are taking precedence over the traditional priorities of financing trades and meeting liquidity needs.”
Unlike most areas of banking and business, the vast and diverse world of international trade and finance still relies heavily on the physical exchange of paper documents to function seamlessly.However, the results of a new Coalition Greenwich study suggests that the business in India is changing.
In 2019, 88 per cent of respondents ranked “competitive pricing” as a key criterion for trade provider selection, while only 11 per cent considered quality of e-banking and digital platform a relevant metric.
However, in 2020, the study observed a sharp shift toward digital solutions, with 60 per cent of the respondents ranking digitisation as a critical metric for evaluating a trade provider.
Although it is companies’ need for operational agility in the face of Covid-19 disruptions that is driving this increased demand for new solutions, the emphasis on digital will outlast the pandemic.
Once the threat of the pandemic begins to dwindle, things like end-to-end supply chain visibility and digital interoperability will become much higher priorities for corporates that have now started down the digital path.This, in turn, will compel banks to evaluate their digitisation strategy and accelerate the digital transformation of trade finance, the study said.
“With corporates increasingly adopting digital solutions to interact with their customers and seamlessly deliver services, they will inevitably demand a similar level of digitisation from their banks and other service providers,” said Arora
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