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Treasury & Capital Markets
Trade finance banks turn to fintechs in market shift
Deutsche Bank, following similar moves by global trade banks, announced on Tuesday its acquisition of a 12.5% stake in Hamburg-based TrustBills, a fintech that aims to build a marketplace for institutional investors to access trade receivables.
Sven Leichhardt 1 Apr 2017

Global trade banks are looking to back fintech start-ups in a bid to remain relevant as non-bank investors increase exposure to trade assets. Deutsche Bank, following similar moves by global trade banks, announced on Tuesday its acquisition of a 12.5% stake in Hamburg-based TrustBills, a fintech that aims to build a marketplace for institutional investors to access trade receivables.

“Advancements in technology will significantly change the trade finance market,” comments Michael Spiegel, head of trade finance and cash management corporates at Deutsche Bank, in light of the deal. “The digital solution offered by TrustBills is an excellent add-on to our value proposition in corporate banking.”

TrustBills touts itself as the first international marketplace for trade receivables, specifically targeting institutional investors. The company’s management includes former senior executives of UniCredit and Allianz Global Investors. A launch date of the platform has not yet been announced.

Trade receivables remain a niche asset class, but a growing number of institutional investors that previously eschewed such assets for their lacking liquidity find it difficult to ignore their higher returns. Receivables offer yields between 5-10% with duration usually shorter than one year, according to P2P Global Investments, a London-based fund specialised in less liquid assets.

The traditional bank-driven market for receivables finance, meanwhile, plateaued in 2016. Preliminary statistics from Factors Chain International last month indicated around a 1% decline in global factoring volumes.

If institutional investors pick up more of the slack, trade banks risk losing a piece of the low-risk, high-volume trade finance market that provides them with stable returns even during market volatility. Banks including HSBC, ABN-AMRO and Bank of America Merrill Lynch have therefore also taken equity stakes in fintechs that offer solutions in the segment.

HSBC last year invested an undisclosed sum in Tradeshift, a cloud-based business platform that manages procure-to-pay workflows between buyers and suppliers. Last week, the bank announced customers of the start-up will be able to finance receivables and payables through the platform, rather than approaching their banking partners separately. Tradeshift has also picked up financing from Santander and American Express.

Meanwhile, Deutsche Bank alongside Citi, RBS and MUFG have backed Swiss fintech Global Supply Chain Finance (GSCF), while Bank of America and ABN AMRO are founding partners of Finacity. Both companies manage securitization programmes of trade receivables.

But banks are not the only investors that have realised emerging trends in the trade finance market. One of the largest providers of support software for trade receivable securitization programmes, for example, is UK-based Aronova. It counts insurance giant AIG as a close partner.

Photo courtesy of Deutsche Bank Flickr.

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