The symbiotic relationship between technology and international trade is fast becoming the cornerstone for exporting explains Alison McGregor, CEO of HSBC in Scotland.
Not only does technology underpin innovations that make trade more efficient and safer for individual businesses but it is also used to tackle wider issues such as fraud and money laundering that can present a risk to would be exporters.
With international exports worth £29bn to the Scottish economy, growing beyond our borders is a key priority.
As one of the world’s largest international banking and financial services organisations, with a presence in more than 67 countries, it is our responsibility to enable small and medium-sized enterprises (SMEs) to export and grow globally. In doing so we’re also supporting the economies in which we are present. With this also comes a responsibility to tackle financial crime, reduce risks and make global trade less challenging.
In today’s sophisticated world, any business or individual is susceptible to financial crime.
As an international bank, it is incumbent on ourselves, with our international knowledge and financial expertise, to ensure there are safe passages to market for our export-fit domestic businesses. That includes tackling the global issue of financial crime while also developing innovative, world-leading technologies to make international business efficient, safer and easier.
The rise of online banking means companies are using a variety of digital platforms to do business, bringing international trade closer to home. However, the more digitally present a company is, the larger the risk for exposure.
Other risks can simply come in the form of understanding the country and landscape in which you are trading. Due diligence is critical to ensure your business is cooperating with possible sanctions and embargoes. This thorough knowledge of the trading landscape will increase vigilance of potential fraud; minimising the risk of inadvertent involvement in illegal activity optimises returns by avoiding unexpected costs and business disruption.
This is why, at our global centre of excellence for risk and compliance in Edinburgh, we’re investing in our best teams and expertise in developing the technology and skills to fight financial crime.
In fact, we delivered more than 3.1 million hours of targeted training on financial crime last year to our staff.
Edinburgh was an ideal location due to its: global reputation in banking and finance; unique pipeline of high-level data science, financial and technical expertise; and the city’s readily available connections to European, American and Far Eastern markets.
At the centre, a variety of activities are undertaken across financial crime compliance, regulatory compliance, wholesale credit and market risk, operational risk and risk analytics. The building is a hive of technological and human intelligence. Half of our employees here are directly involved in money laundering prevention.
We have a passion to tackle these issues, which is why earlier this year we held an event with Police Scotland and the Scottish Government, bringing together our senior leadership to better understand how we can work together. Specifically, we see three component parts to our role: the expertise of front line staff; the impact of technology on our capability to detect crime; and the influence of partnership working in delivering results.
However, we must remember the opportunity to export outweighs any perceived threats.
Streamlining the export process
Today, almost everything we do in banking and finance circles back to technology. Since 2015 HSBC has invested US$1bn to ensure we’re driving forward innovation in our sector and delivering better access to international markets for our domestic SMEs.
Scottish brewer WooHa, known for its award-winning and KeyKeg conditioned beer, is a prime example of how SMEs, no matter their size, can reap enormous reward from overseas trade. The brewer began trading in April 2015, and received HSBC finance to upgrade its facilities through the purchase of a new 6.2 acre farm in Moray and hire an additional four employees.
Today, the business is able to increase production five-fold and ramp up an ambitious export strategy. The business is forecasting that 80% of its revenue next year will be via exports, with its focus to be on dramatically increasing supply to the US market.
This year, Scotland’s food and drink exports grew by £421m in 2016, to a record £5.5bn. Exports to the EU countries alone were worth £2.3bn – up £133m on last year. The market for export is buoyant and we must ensure we navigate a clear journey to international opportunities for Scottish SMEs.
One way is to make some of the complex processes involved in exporting easier. Particularly pertinent for WooHa is the digitising of paper-based processes through innovative technologies. When businesses have an import or export focus, the level of paperwork involved can be enormous and complex – often becoming a drain on company resources.
HSBC’s global trade and receivables finance team facilitates more than US$500bn of documentary trade for customers every year, and in doing so must manually review and process up to 100 million pages of documents, ranging from invoices to packing lists and insurance certificates.
To make this easier, HSBC has developed a cognitive intelligence solution devised with IBM, which uses optical character recognition, advanced robotics, advanced analytics technology including intelligent segmentation and text analytics to identify, digitise and extract key data from all of this documentation.
By digitising this process we will make transactions quicker and safer for both buyers and suppliers, leading our industry forwards, and we will reduce compliance risks through an enhanced ability to manage this volume of data.
Another fast-emerging technology, increasingly synonymous with financial technology, is blockchain. Blockchain records transactions in blocks and then forms chains of permanent data. It is the technology behind cryptocurrency bitcoin and is set to revolutionise the financial industry.
The immutable nature of blockchain helps ensure banking is more secure and transparent and can be applied to a range of financial services.
When applied to the digitisation of paper-based processes, blockchain could not be a more important asset. Currently, more than US$2tn of global trade depends on the physical exchange of documents, such as letters of credit. These are issued by banks to be used by importers and exporters to reduce the risk of trading with each other and give suppliers certainty over payment.
Considering the rapid growth in Scotland’s food and drink sector alone, it is critical to our economy to get these processes right.
We understand that innovation is the lens through which we will truly understand what our customers want and need. And in this world, behind every innovation are the technologies and expertise to give businesses the global launch pad they need for international trade.