Challenger banking comes to trade finance with the launch of the Anglo-Gulf Trade Bank

via Tearsheet

• Creating a digital trade bank required rethinking what it could and should be.
• Joined by Microsoft and Publicis Sapient, AGTB services trade across the Middle East, Asia and the UK.

Challenger banks are making their mark mainly across consumer banking. But there’s one sector that hasn’t seen much digital impact and that’s trade financing.

The Anglo-Gulf Trade Bank wants to change that. AGTB aims to deliver a modern digital experience to trade finance and corporate banking, extending financing tools to the underserved midmarket.

Trade finance helps businesses find capital to make purchases of inventory and equipment. Small and medium businesses have had trouble accessing this type of financing — the trade finance gap is estimated to be $15 trillion, according to the Asian Development Bank’s 2017 Trade Finance Gaps, Growth, and Jobs Survey. 74 percent of rejected trade finance applications stem from micro, small and medium sized businesses.

“We are rethinking this broken business model from the ground up,” explains Daniel Gould, Deputy Chief Executive Officer at AGTB. “We want to deliver an industry-leading client experience, particularly to the underserved firms and seek to disrupt the conventional trade finance business model by bringing approaches from other banking segments and industry sectors,” he said.

AGTB is a collaborative venture between AGTB Holdings Limited, a Rowland family-controlled company, and Mubadala Investment Company.  It’s headquartered in Abu Dhabi in the United Arab Emirates and facilitates trade between the Middle East, Asia, and the UK.

Developing a digital trade bank requires more than just slapping on a modern UI for a better customer experience. “Building the worlds first digital trade bank meant that we had to reimagine traditional corporate trade banking, strip it down, and build it from the ground up,” said David Henry, chief of staff at Anglo-Gulf Trade Bank.

AGTB partnered with Publicis Sapient and Microsoft to design a digital trade bank. Microsoft provided the infrastructure and digital tools and Publicis Sapient provided the strategic digital transformation expertise and integration.

Trade finance frequently requires the input of various parties, including customs agencies and logistics firms. So, for AGTB, creating a collaborative platform was paramount. “Ultimately, the future of trade finance lies in collaboration between a variety of ecosystem participants – from software and technology providers, through to customs agencies and logistics firms,” said Henry. “We decided from the outset that collaboration, across everything we do, was the only way to build AGTB.”

Large, incumbent banks dominate the trade financing industry, with nearly 80 percent market share, according to Henry. And if large FIs have learned anything in servicing today’s customer, it likely hasn’t yet trickled down to their trade financing group. Processes are still heavily manual and require moving a lot of paper around. Systems are outdated and information still siloed.

Big banks have limited their exposure to SMB lending, as well. “So, the clients that are lucky enough to be offered trade financing are left with an experience that is restricted, slow, disconnected, and complicated,” said Henry.

There are fintech solutions that compete in the trade financing market. But many lack their own funding sources and struggle to onboard new clients. AGTB intends to bring together the flexibility of a more nimble fintech company with the deeper pockets of a larger financial institution.

Banks active in trade financing have typically cobbled together in-house solutions with physical IT infrastructure. “The AGTB value proposition is based on rethinking, simplifying, and supplying accessible trade banking through collaborative technology, data, and an ecosystem,” said Henry.

Technology wasn’t the only hurdle to creating a digital trade bank — mindset was as well. Reimagining what a digital trade finance bank could and should be like was the harder work. AGTB focused on three core value drivers to create its platform. Accessibility gives partners the ability to connect via API or direct ERP integration. The bank used a modular architecture to allow its clients and partners to use best-in-class tools and vendors. Lastly, the infrastructure was designed to be robust and scale.

Transformation isn’t easy for a firm and it’s degrees of magnitude harder to transform at an industry level. “This calls the sector to embrace technologies that combine intelligence and security, while maintaining trust at the center,” said Sayed Hashish, general manager of Microsoft UAE.