InsightsThe future of trade: Recognising the “real change” of a network approach

02.11.2020| The innovator

As head of global trade and supply chain at Bank of America, Geoff Brady is at the forefront of trade in the digital age.

In the first episode of Marco Polo’s new series featuring the views of industry innovators, we speak to him about the principles guiding his approach to trade digitisation, and the value that he sees in a decentralised network.

Q: It’s been a little over a year since Bank of America signed up to Marco Polo; what are you hoping to get out of your membership of the network, and how does this align with your vision for the future of trade finance?

Brady: I first sat down with the guys from Marco Polo two years ago to talk about the vision: I had a couple of things in mind that I wanted it to be. First and foremost, when we think about our clients, what we don’t want is for them – or us, frankly – to have to ‘bet on a horse’. You’ve got all these consortiums and companies using very different technology to achieve different things. But you want something that can be scalable, and to create an ecosystem that everybody can plug into, with as little friction as possible, even if you’re using different modalities, so that we can advance from what we have today, which is this very binary bank-client relationship with its proprietary technology. 

We wanted to make sure that what we’re doing is ubiquitous, because the overriding principle is that this greater connectivity achieved through digitisation and new technology is only going to work when we’re all plugged into it. 

We want to be able to go on this path, this journey – which we know is going to take time and resources and lead to various discoveries – but, when we’re done, we want it to be able to plug in to the other paths and the other journeys that have been created in the industry. 

Q: Can you provide some insight as to what Bank of America has got planned off the back of its membership of the Marco Polo Network in the near term? 

Brady: We are looking at creating a pilot programme for Bank of America clients wherein we use the underlying technology and the network that is Marco Polo to create a blockchain-based supply chain finance solution that has less friction than a traditional bank platform, or an API-type solution. We’re moving pretty quickly and would love to get something rolled out in the next six months.

“When you’re taking a network approach you get the value of that combined learning, so it’s not just your client and resources, it’s everybody’s clients and resources that are driving things forward.”

Geoff Brady, Head of Global Trade and Supply Chain Bank of America

Q: You’re building your pilot around Marco Polo’s Supplier Pay solution, the network’s soon-to-be-launched next module: why choose this as your focus?

Brady: It’s no secret that over the last 15 years the fastest growing segment of trade finance has been supply chain finance or reverse factoring. It proved itself though the financial crisis 12 years ago and is proving itself now, during Covid. It’s a reliable source of financing: more and more corporates are adopting it, and more and more suppliers are finding it to be a vital source of liquidity. With that as the backdrop, we know that the growth is going to be there. The question is how can we do it in a way where we can create the most efficient model possible? That takes us to what we’re doing with Marco Polo. 

Most banks will tell you that the biggest challenge for the greater adoption of reverse factoring and supply chain finance has been the onboarding of suppliers, and how to get the broadest reach.

Using banks’ proprietary platforms and technology, onboarding has traditionally been a multi-faceted issue. It’s not just a technology question, it’s a due diligence and regulatory question. Solving that has been the hill for us all to climb, in order to get to this point where we have a much bigger, more scalable community that we can tap into for supply chain finance, as opposed to having it only be available where it’s a good fit from a resource, timing and value perspective. 

That’s where we think about the reach that you can get with a solution like Marco Polo, and what we’re trying to drive towards. That’s really the magic for us – to be able to provide a very scalable network and community where the banks, the buyer clients and the vast majority of SMEs can sign on relatively easily and quickly, and enjoy the benefits of supply chain finance or reverse factoring. That way banks can move away from what typically is not our core strength, which is technology and platforms, and to what is our core strength, which is the ability to finance, and the relationships we have with all of these clients, both on the buyer side and the seller side.

Q. What are some of the limitations of legacy banking software systems, and how can new technologies and new network approaches address these? 

Brady: The technology itself is a major change from the way that we used to do this and the way we may do it going forward. But the real change is going to be how the technology transforms itself, because when we use something that’s a little bit more open and ubiquitous, we also get the benefit of crowd learning.

The limitations of bank platforms are that, at the end of the day, you’re only as good as your technology budget, your own ideas and, quite frankly, the needs of your own clients. Often where us banks grow, learn, and become better is when we sign on new, different, and more diverse clients that do things in ways and places that we haven’t done them before. It forces you to think about the future. It’s not a philosophical discussion, it’s a tactical discussion: you’re going to have to do this because your client needs you to. But, when you’re taking a network approach, you get the value of that combined learning, so it’s not just your client and resources, it’s everybody’s clients and resources that are driving things forward. 

Q: Where do we want to get to? What does a trade ecosystem utopia look like?

Brady: You have to approach the question from the perspective of what it looks like for the client. Because, in many cases, the bank’s version of utopia may look different from the client’s. 

I think everyone would probably agree that the ideal scenario would be the path of least friction. As part of this, one of the areas where we’ve started to engage, and Marco Polo has also started engaging, is working with the enterprise resource planning (ERP) providers. The payables and receivables created by companies within their ERP systems may very well provide the information that enables the least friction for discounting decisions. If we are going to create this capability to pass information and data back and forth, it would probably make sense that we include the ERP process in that system, so that this very specific and detailed receivable, including its description and history, can be passed on to the primary bank, which can then figure out how to finance that capacity. 

That’s where banks can come in and do what they do best: use their efforts and resources to find ways of getting more financing for more of the supplier bases, rather than trying to dream up the new bell or whistle that’s going to give them a slight competitive advantage.

In the end this whole process will fit like a glove: new capacity is created, and banks can go in and provide financing for it, enabling access to funding for suppliers that have maybe been scrambling to find it. That’s where the vision for scalability becomes tangible. We need an elegant way to be able to get supply to where the demand is, and I think that’s the promise of Marco Polo.

Geoffrey P. Brady is the head of Global Trade and Supply Chain Finance, Global Transaction Services at Bank of America. In this role, he oversees management of the origination and delivery of supply chain, receivables and trade finance products that provide liquidity, risk mitigation and working capital optimisation for the bank’s corporate, commercial and business banking clients. He is based in New York. Brady has more than 20 years of experience in banking and has held management roles in a variety of businesses including portfolio management and payments in addition to trade finance.

About the author
Shannon Manders is an editorial consultant and award-winning international trade finance journalist with over a decade of experience reporting and producing print and online publications on the global trade and trade finance sector. She is also the editorial director of international trade finance publication GTR, where she has been working since 2008.