GlobalVision Systems Solutions – Trade Master ™

Information technology has changed the traditional concepts of national borders. Trillions of dollars can be moved around the world at light speed. Distance appears to be shorter and schedules are busier. There is no doubt that we are facing an unprecedented challenge to compete in a complicated and dynamic global economy.

To succeed in global competition, the U.S. government has been aggressively signing trade agreements during the past 10 years, with more than 70 countries worldwide. The well-known North American Free Trade Agreement (NAFTA, 1992), Marrakesh Agreements Establishing the World Trade Organization (1994), Asia Pacific Economic Cooperation (APEC, 1998), and Joint Statement Concerning Semiconductors (1999) are just a few of the hundreds of trade agreements, which promote trading activities between the United States and other countries. In the year 2000, approximately 25% of the global trading activities were contributed by goods and services imported into the U.S. It is obvious that we are at the center of global trading activities.

As information technology has facilitated communications among companies all over the world, the costs and barriers for doing international business have been drastically reduced. As a result, new doors are opened to small companies. From California to New York, more and more companies are beginning to participate in import or export activities. To stay in business, even community banks have to expand their product offerings and assist their customers in the local community to conduct global business. International trade finance has become an important banking product for generating fee income, attracting business and securing total relationships with customers.

Most banks use independent service providers to meet their data processing needs. These service providers can handle the traditional banking products such as savings and loans, but have no solution for international trade finance. Consequently, many banks have to manually operate their trade finance business and depend on paper records, human memory, and employee cooperation to conduct their trade finance transactions. Not only does the cost of doing business become very high, but the risks involved also become alarming.

Trade Master™ (US patent pending) enables bankers to engage in international trade finance transactions through a well-structured workflow. It integrates trade finance activities with the accounting data stored inside the bank’s existing data processing system. Through a comprehensive portfolio analysis, bankers are able to effectively manage their customers and overall performance.

Description

Letters of credit are the primary means to finance international trading activities. Letters of credit are a form of commitment issued by banks for their customers, and do not require the issuing banks to transfer funds to the counter parties. When an exporter receives a letter of credit, he/she can use it to finance the production of the goods through his/her bank. When an importer receives the goods that are ordered through a letter of credit, he/she often borrows loans to pay off the exporter through bills financing. The loans will be eventually paid off when the goods are sold.

In practice, a letter of credit initiates a series of commercial activities. Until the goods are sold, banks play a major role in financing the ordering, production, shipment and inventory of the goods. Therefore, international trade finance can bring to a bank many profitable businesses in addition to fee income. Furthermore, since international trading activities are becoming common today and banks do not want to lose their customers, banks need to offer trade finance to stay competitive.

Nevertheless, many banks still hesitate to participate in trade finance business because their existing data processing systems simply do not support trade finance activities. In addition, many bankers may not have any prior experience or expertise to manually do it correctly.

Some banks conduct trade finance business by twisting their standard loan systems for trade finance purposes. Loans involve the exchange of funds and are listed on the balance sheet, whereas trade finance involves commitments, which belong to the off-the-balance-sheet activities. Due to these substantial differences, loan systems simply cannot handle the trade finance transactions correctly. As a result, many paper records, spreadsheets, human memory and manual operations are required to compensate for the weaknesses of the loan system. This sophisticated and labor-intensive business model creates tremendous overhead and risk to a bank as the business grows.

Trade Master™ empowers bankers to conduct trade finance business through a well-defined workflow. Bankers, who have no prior experience about trade finance, can quickly master their task confidently. To provide high quality service to customers, all the processes throughout the workflow are recorded with time stamps and audit trails. As a result, bank employees are accountable for their performance and customers can always know the status of their transactions. A user can access Trade Master™ through either the Internet or the Intranet.

To manage the overall risk exposure and profitability of a customer, Trade Master™ interfaces with the existing data processing system, which stores all of the on-the-balance-sheet activities of the bank. By analyzing all the outstanding balances and commitments, Trade Master™ enables bankers to make decisions based on a customer’s total portfolio.

Conclusion

In today’s global economy, international trade finance is an important product for banks to generate fee income, attract trade-related businesses, and secure the total relationships with a customer. Trade Master™ enhances the expertise of the bank employees, boosts efficiency of the bank, and improves the service quality to the customer. Trade Master™ is your best partner in this fast-paced, constantly evolving global competition.