Earlier this year, Vivek Ramachandran was appointed head of HSBC’s global trade and receivables finance (GTRF) business.
Ramachandran first joined the bank in 2015 as global head of product and proposition for GTRF, later becoming global head of growth and innovation, before leaving in 2019 to set up Serai, an HSBC-backed online B2B platform that was shut down in mid-2022 for commercial reasons.
In this exclusive interview, GTR sat down with him to discuss some of the recent changes to the GTRF structure, key focus areas for the business in 2023 and lessons learned from the shuttering of Serai.
GTR: There’s been a rejig of HSBC’s GTRF business since you were appointed global head earlier this year. What’s your ultimate objective for the business, and what drove these changes?
Ramachandran: HSBC is the world’s biggest trade bank; trade is in our heart. What’s clear is that the world of trade is moving faster than the world of banking. This is in terms of the types of companies who are buying and selling internationally, who they’re selling to or buying from, and where these transactions are happening. Our big emphasis is on market expansion. We already serve our existing clients incredibly well, and the business is growing very nicely. We’re also being more innovative with solutions and starting to move into new spaces, such as platforms and embedded financing. Going forward, we want to do even more – and with more clients.
In terms of the organisational changes, some of it has been a natural transition, while some has been to focus on new areas of development. As part of this, we created a chief growth officer construct, which Vinay Mendonca has taken over. That’s very focused on building sector expertise, capturing structured solutions and making sure we serve global clients across multiple geographies more effectively. We’ve also created a chief operating officer (COO) role, and an announcement on that will be made very soon. If we want to scale up and serve tens, if not hundreds, of thousands of more customers, we need a very different model and we need to be able to automate transactions from start to finish. That fulfilment is going to be a big focus for the COO.
The people agenda is of great importance for us. We’ve got centuries of expertise within HSBC’s trade community, and people are proud of what they do. A lot of my emphasis as we go into what is undoubtedly going to be a difficult economic environment will be to make sure people are excited by the changes that are happening.
A big part of my role is to make sure that we’ve got clarity as to where we are going and that everyone’s pointed in the right direction, while building a culture and environment which keeps them energised.
GTR: Since returning to the business after having been away for two years, what have been the most notable changes in the evolution of the trade finance market?
Ramachandran: Internally, the biggest development has been the importance of tech in trade.
Within transaction banking, cash and payments have always emphasised tech as being an integral part of the business. I have previously described trade as the last analogue frontier in banking. It hasn’t had the same wave of disruption. But that’s now changing. I’m incredibly energised following a recent trip to India, where the Reserve Bank of India’s TReDS initiative is one example of this new wave of disruption disaggregating sources of funds and creating specialism.
The next five years are going to look very different in terms of the kind of capabilities that will come to bear to provide financing – such as parametric credit decisioning. We’ll also see changes around the exchange of data and how that happens, as well as around the financial inclusion of SMEs, which is the ultimate aim, in particular with things like deep-tier financing and probably one step beyond.
GTR: GTR covered your move to Serai, a number of its partnerships and solutions, as well as its closure earlier this year. What were some of the lessons learned?
Ramachandran: The advent of Serai was the notion that the world today is inefficient, and that a platform that facilitates the exchange of information can make it more efficient. We were lucky to have the backing of HSBC, as well as the latitude to go out and try new things. It was a very nonlinear journey to try solving that problem.
We started with two things, helping companies find new suppliers, and financing. The idea was that the two would come together: companies would find suppliers, connect with them, and then get financing.
We launched it in Hong Kong, which is where we had a licence to lend, but the market fell away due to the protests and Covid-19. So we took a call to shut that down.
That’s a call a startup can make. It didn’t take away from the reason why we did it.
We learnt two things. One is there were big companies who wanted to use us – not to find new partners but to identify existing ones; the transparency point. So we built that out as a vertical, which was supply chain transparency. Secondly, with the smaller companies, what we found was they were finding partners on the network, but then they were taking the transactions off the network. So we had over 30,000 users on the platform but a lot of the transactions were happening off the platform. To remedy that would have required us to build a whole transactions module.
We were pivoting a lot, but at every point in time there was a logical step towards the partnerships we formed and what we were doing. I give a lot of credit to HSBC for giving us the freedom to pivot, and to the board, which challenged us but gave us their backing.
We took the tough call to shut down the business – it was a commercial call. To really build the platform to fruition would have required a level of investment which in this economic environment didn’t make sense. And it was personally difficult – a group of us had put a lot into it.
Still, as a bank, we’ve come out a lot richer in terms of our understanding of trade and how it works in ecosystems. Personally, that experience has been invaluable. I think I can do what I’m doing now with a very different set of skills than I had four years ago.
GTR: What’s your take on the current state of bank-fintech collaboration in the trade finance space, and how has this evolved? What are we likely to see going forward?
Ramachandran: There will be a lot more partnership – and you’ll definitely see that from us. We have got a few things that younger, smaller, less established companies would never have, and those are relationships, network, balance sheet and expertise. What they’ve got is the ability to focus on very specific problems, and try to challenge the status quo completely. Small problems are big opportunities for startups.
The answer will look like a lot of what we have, partnered with a lot of their focus. Now, will some of them compete with us? Absolutely. Will a lot of them partner with us? Absolutely, too. As long as we approach it with the mindset of if there are inefficiencies in the market, we need to facilitate solving them, we will get to the right outcome. If we approach it by saying ‘this is the business I have, how do I defend it?’ then you end up in a very confrontational world where anyone trying to disrupt it is a competitor. I’m very clear about where we stand: our view is to facilitate more trade.
When I first joined the bank, a big part of my push was to make sure we looked externally. So we started the first blockchain pilots, we established partnerships, we took equity stakes in Tradeshift and Kyriba, as it’s now known. I’ve come back two years later to a very different organisation. I don’t have any of those battles to fight now – it’s all about commercialising and scaling things.
GTR: Is there a particular fintech focus area for GTRF in 2023?
Ramachandran: Credit decisioning is the big piece for us. What makes HSBC unique is our footprint and the fact that we can go earlier in the supply chain, we can do pre-shipment financing. But we need new ways of doing that. So whether it’s parametric decisioning, or algorithmic lending, credit decisioning on new data sources is a key space. We’ve already built a lot of the backbone of this with our API gateway to plug us into different systems. We’re going to be seeing much more information coming in. I think this is an area where the industry has a lot to build.
GTR: As the world’s biggest trade finance bank, how do you believe HSBC can shape the future of the industry?
Ramachandran: We have a role to play in various respects. One is by making sure we encourage progress rather than slow it down. Sometimes evolution will not be in the interest of incumbents, and we have to be comfortable with that, as opposed to trying to defend the status quo. Likewise, because the world is full of smart people, progress will also happen outside HSBC, and we need to facilitate that and encourage them, and to whatever extent play a part in making sure that happens.
Secondly, our role is to make sure we drive transformation ourselves. The last genuinely transformative change in global trade was the shipping container. If we want to do things like reinvent and digitise the letter of credit, which is one of the big questions the trade community needs to solve, we are going to need a lot more collaboration than we’ve seen. A big part of our emphasis is tackling some of these really difficult problems that startups would not have the ambition, the scale, or the access to go after. But in doing so not attempt to do it all by ourselves.
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