InsightsPutting digital transformation at the heart of trade

11.08.2022| The innovator

Mitsuhiro (Mitchie) Kawamura is SMBC’s global and Americas head of Trade Innovation, a digital and commercial team that sits within the bank’s Global Trade Finance Department. Positioned at the helm of SMBC’s long-time engagement with Marco Polo Network, Kawamura provides an outline of the bank’s distinctive approach to digital transformation, and the reasons why innovation is integral to its trade strategy.

Q: SMBC’s Trade Innovation team, established in 2020, explores, develops and implements the digitalisation of the bank’s trade finance business: can you provide an overview of the team in terms of its structure and approach?

Kawamura: The SMBC Trade Innovation team, part of the Global Trade Finance Department, is responsible for the digitalisation of the trade finance business. Of course, efforts to digitalise trade finance within the bank pre-date the establishment of the team – but the initial approach was perhaps a bit disjointed. Now, with this dedicated unit, we’re able to centralise our approach and make digitalisation integral to the strategic focus of all aspects of the trade finance business. The Trade Innovation unit aligns perfectly with the wider bank’s strategy to digitalise, which means that we have had support from the top from the very beginning.

There are about 20 of us within the Trade Innovation team globally. I serve as the global head of Trade Innovation, as well as the head of the Americas, based in New York. We have regional heads based in our other two hubs in London – who covers the EMEA region, and Tokyo – who covers Asia, and the team is split across each of these three regions.

I think we’re unique compared to other banks in that the team responsible for digitalisation sits within the trade finance business and is not isolated from the day-to-day activities of the business. The team knows the trade finance market and is very aligned with our customers’ needs – and this drives our strategy. We identify the solutions we want to use, and then the same people adopt, implement and market these offerings.

“Given the global nature of Marco Polo Network, joining the platform was a really good fit for our business model. It helped us to compensate for what we were lacking.”

Q: SMBC has been involved with Marco Polo Network since the very beginning: what drove your decision to join the Network? What is the appeal of the Network?

Kawamura: It has been more than three years since SMBC joined the Network. At that time, I was based in Singapore.

The decision to partner with Marco Polo Network was driven by the fact that at that time – fortunately or unfortunately – we did not have a global supply chain finance platform. We only had our own platform, which was limited to certain regions. But SMBC’s trade business is truly international – we’ve been a global organisation since 2007 and continue to expand our reach. Given the global nature of Marco Polo Network, joining the platform was a really good fit for our business model. It helped us to compensate for what we were lacking.

We were also drawn to Marco Polo Network by its potential for scalability because it is a blockchain-enabled, distributed network. In that sense, it ticked a lot of boxes.

Q: Can you provide a brief outline of SMBC’s journey with Marco Polo Network to date?

Kawamura: Given that we’re a Japanese bank, we started our partnership with a focus on Asia. We approached our core, Japanese corporate customers, as well as companies in the wider Asian market, and there was good buy-in. We performed our first Marco Polo Network proof of concepts in 2019 with Mitsui & Co, and with a Thai company. In mid-2021 we executed our first accounts receivable discounting transaction on the platform with a Japanese corporate client.

Gradually, we have been expanding our coverage to the EMEA and Americas regions, which is in line with the bank’s strategy to grow the business globally. I moved to the US a year ago to try and replicate the progress we have made in Asia in the Americas. My colleagues in London are working towards a similar goal.

Earlier this year , we took the lead on Marco Polo Network’s first-ever transaction in the Americas, a Receivables Discount programme, we executed with our client Servilamina Summit Mexicana in Mexico. The company, which operates three steel service centres in Mexico and anticipates an increased demand for its steel solutions, is selling us its unpaid outstanding invoices via the Marco Polo Network platform to bolster its working capital. The use of Marco Polo Network means SMBC and our clients can mitigate the usual challenges and vulnerabilities around paper-based processes, lack of connectivity and high onboarding costs.

We have many other clients interested in this offering and will further expand our activities in 2022.

Q: What is the relevance of digital solutions, and Marco Polo Network specifically, to the bank’s overall trade growth ambitions?

Kawamura: SMBC’s trade finance portfolio encompasses all aspects of the business. Our coverage is broad, and includes supply chain finance, receivables finance, commodity finance, structured export finance – working with export credit agencies (ECAs) and multilaterals – as well as the financial institutions (FI) business, where our customers are FIs in emerging markets. All of these products fall within our definition of trade finance. In our view, digitalisation is critical to each of these business units in order to take out cost, eliminate risks, increase speed, and deliver a vastly improved experience for our customers and internal operations.

By putting supply chain digitalisation at the core of our strategy, our efforts can then filter down into all parts of the trade finance business, given that they are all related and interconnected.

Q: SMBC has adopted a proactive approach to supporting its customers in reducing their environmental impact. Can you provide an outline of your ESG strategy in the trade space, and how this could potentially align with the work that you’re doing with Marco Polo Network?

Kawamura: Like other banks, SMBC is committed to efforts around ESG and the UN’s Sustainable Development Goals. Naturally our trade finance business is aligned with that, and we are already engaging in ESG financing initiatives within the commodity finance business and the ECA space. Where we have yet to grow our ESG efforts is in supply chain finance – an area where we believe there is a lot of potential for supporting clients’ ESG performance. This is where we see Marco Polo Network playing a significant role: their advanced technology and solutions can enable the necessary connectivity and interoperability in the trade ecosystem to promote sustainability in supply chain finance.

Q: What can we expect from SMBC’s Trade Innovation unit in 2022?

Kawamura: For these first couple of years, we were in a sort of preparatory, exploratory stage, while also bringing internal stakeholders and clients up to speed with developments in the market. Over the last two years, the situation has changed dramatically because of Covid. Now digitalisation is top of mind for everyone, driven by necessity, and plans are a lot more concrete.

As a result, over the last few months, we’ve started to see an uptick globally in clients interested in testing and using Marco Polo Network. In 2022, I expect that we will be able to onboard more clients and that they will become more comfortable doing business digitally, and that we will be able to fully achieve the commercialisation stage while achieving the expected outcomes associated with digitisation.

“The use of Marco Polo Network means SMBC and our clients can mitigate the usual challenges and vulnerabilities around paper-based processes, lack of connectivity and high onboarding costs.”

Mitsuhiro (Mitchie) Kawamura is the Global Head of Trade Innovation, Global Trade Finance Department at Sumitomo Mitsui Banking Corporation.Based out of New York, he is responsible for all trade transformation and innovation initiatives, including digitalisation of SMBC’s global trade business.

Prior to joining SMBC, Kawamura spent 10 years at a leading Japanese trading house, acting as a project manager for their EPC business in emerging markets across Asia. 

Since joining SMBC in 2007, Kawamura has held leadership roles in marketing and product development in both APAC and the Americas and has been instrumental in the establishing SMBC, a Japanese mega-bank, as a global leader in trade finance.