In banks and other financial institutions, trade operations both facilitate and oversee daily transactions. They’re also responsible for executing trades and keeping customer records. Amidst these duties, trade operations teams are also tasked with navigating the modern trade and commerce environment which is becoming increasingly global.
According to the World Trade Organization, about 80% of global trade is supported by some sort of credit insurance or financing. Therefore, many banks are tasked with the responsibility of providing trade finance services that offer insurance, payment guarantees, and credit required to satisfy trading partners and keep international trade moving. With this, banks get to enjoy better relationships with corporate clients, new revenue streams, and lucrative opportunities for cross-selling as their clients, and ultimately the markets they serve, grow.
However, banks are usually faced with a major challenge: How to efficiently and cost-effectively manage all of the documents (i.e. letter of credit and invoices) involved in international trade, while still being able to keep up with the increasingly complex compliance demands and trade regulations. As a result, more banks’ trade operations and support departments are automating their trade finance services.
An example here is Illinois National bank, an 11-branch institution based in Springfield that deployed IBML Intelligent Document Capture Technology to help them compete against larger institutions in the U.S. Before deploying the IBML scanning and capture solution, they were getting choked processing full-page lockbox transactions on two standalone workstations that combined document scanning and mail extraction. However, since using the technology, they’ve reduced their full-page scanning and processing costs and grew their scanning and data capture revenues from existing customers.
Amidst globalization and automation, banks and financial institutions need to reflect on their own performance and what they can do as an organization to keep up with competitors and appease their customers. OKRs can help with this process because you can construct ambitious objectives based on what needs to be improved and then determine the metrics and outcomes you’d like to see in order to complete your goal.
The following metrics are useful for institutions to evaluate their trade operations and support:
- Total Volume of Trade Breaks: This is the total number of trade breaks as a result of factors such as wrong instructions, incorrect routing, missing data, or rejected transactions that happened during a particular timeframe.
- Commercial Bank Statement Error Rate: This can be calculated by dividing the total number of bank statements for commercial customers that have errors by the total number of commercial banking statements that were generated the same period of time multiplied by 100 (percentage).
- Commercial Statements Generated per Transaction Processing & Support Employee: This can be deduced by dividing the total number of bank statements that were generated for commercial customers by the number of back-office transaction processing and support staff members the company has over the same period of time.
Innovations For Improvement Of Trade Operations And Support
To develop the right OKRs, a bank must always be seeking innovative and creative ways to improve its operations. Below are some suggestions for the improvement of trade operations and support:
Distributed Ledger Technology (DLT)
Distributed Ledger Technology (DLT) has proven to be a promising design for trade operations due to its effectiveness in redesigning the entire trade operations processes. Other existing solutions offer significant improvement but DLT is a radical game-changer.
Since business processes in this department require numerous manual operations, with physical documents passing through many parties to settle a transaction, the use of DLT to digitize and distribute documents and remove the need for multiple intermediaries, streamline business processes, and enable faster settlement can dramatically improve efficiency. It offers top-notch transparency for all counterparties as well as instant access to information.
In banking, distributed ledger technology can make both internal operations and external transactions more efficient. This technology makes paperless processing possible from the very beginning. Therefore, both the set-up and definition of contractual terms and conditions can be processed and recorded without any issue. With DLT, a bank is able to eliminate manual tasks via the process of self-fulfilment of a deal as well as automation. This technology enables banks to cut down on costs by eliminating redundancy. When used in conjunction with existing bank infrastructure, it can improve operational efficiency in reconciliation and intraday liquidity management or matching of FX trades.
Intelligent Document Capture Technology
Intelligent Document Capture technology has features that enable it to boost the capability of banks to improve the margins on their trade operations. It gives banks the opportunity to better manage large volumes of documents that only continue to grow on a daily basis. This technology enables banks to carry out trade operations and supports them in a more convenient way. It is effective in trade operations due to the following features:
1. Document screening: This technology is enhanced by advanced intelligent document recognition capabilities that take automation to another level entirely. It helps banks to meet up with screening requirements that are part of the rigorous process of scrutinizing documents daily. Its accuracy ensures that any suspicious or fraudulent documentation can be identified and forwarded for further action. Therefore, this technology enhances the process of processing customer’s documents by optimizing the ability of back-office employees to screen documents.
2. Data validation: The place of accuracy when it comes to complying with governmental regulations cannot be overemphasized. Intelligent recognition technology guarantees accuracy in regulation compliance by providing database lookups. It does this with fuzzy comparisons while offering impressive cross-document validation of the product, amount, address, receiver, or other configurable data. Its ability to detect duplicate documents is also unparalleled which makes it a viable tool for fraud prevention.
3. Data extraction: The automation ability of the intelligent document recognition technology enables it to be able to classify Letters of Credit (LOC) as they are submitted to the bank automatically. This is particularly impressive and important due to how cumbersome this process can be normally when it has to be handled manually. This identification, sorting, and classification processes can be time-consuming. Thus, there is no doubt that this technology boosts the efficiency and productivity of trade operations and support.
With this information in mind, an OKR can be developed to “Improve Trade Operations”, using the suggested improvement methods.
- KR1: Decrease Commercial Bank Statement Error Rate from 4% to 2%
- KR2: Conduct at least 5 employee training sessions on DLT
- KR3: Complete testing of Digital Capture for invoices with the past 2 years manually processed invoices
Objective: Improve Trade Operations
DLT won’t connect simply and directly into existing banking platforms and systems. A bank’s most valuable commodity is its ledger. Distributing a ledger via emerging technology is a serious, long-term endeavor. A new level of connectivity would enable banks to deliver solutions for managing and optimizing cash and liquidity in a seamless way through the convergence of technologies. With a distributed ledger as the foundation, banks could use APIs and the cloud to efficiently connect to clients and distribute data.
Banks receive a huge number of documents per day which would benefit from an advanced capture process that automatically recognizes the document type (I.e. an invoice) and extracts the data related to the sender, purchasing order, taxes and prices to forward the necessary details to the originating department for validation/ accounting for payment. It is very important to test whether the digital capture technology is robust for banking operations. This testing can be done by comparing with the manual process for correctness.
By improving your trade operations, you’ll undoubtedly improve your documents handling activity. You could align this department-level OKR with a corporate OKR, such as “Improve revenue through improved trade operations.” Moving forward, you’ll then have a clear objective that will contribute to the overall betterment of the organization, which will improve the operations and support for trading services offered by the banks.
Growing Commercial Lending
Growing loans is the primary means by which bank executives improve revenue. However, if a bank’s process is inefficient, commercial... Read more
Improving Loan Servicing
The administrative process behind collecting interest, principal, and escrow payments can be hectic and counterproductive when it’s not handled properly.... Read more
Improving Loan Operations
Loan operations are an integral part of the revenue for a banking system. It’s imperative that organizations dedicate sufficient time... Read more
Re-inventing Business Banking
The demand for business banking services is on the rise in the U.S. Small and medium-sized businesses (SMBs) represent one-fifth... Read more