NBP implements Finastra's Fusion Trade Innovation solution

InfoTech, a systems integrator and Finastra's exclusive authorised and certified reseller in Pakistan, led the deal and implemented the solution, which will enable NBP to lower transaction costs and provide corporate customers with a better user experience.

Finastra's end-to-end working capital solution, Fusion Trade Innovation, provides capabilities for frictionless trade and supply chain finance, including buyer and seller loans, letters of credit, collections, guarantees, and government support for export credit and small and medium enterprises (SME) loans. Fusion Trade Innovation gives banks control with a development toolkit that enables them to deliver change themselves, all within a solution that is maintained by Finastra.

Integrating this with the core, treasury and SWIFT not only gives NBP 360-degree visibility of its trade transactions but has also managed to reduce operational costs.

Finastra is a global provider of financial software applications and marketplaces, and launched an open platform for innovation, FusionFabric.cloud, in 2017. It serves institutions of all sizes, providing solutions and services across lending, payments, treasury & capital markets, and retail & digital banking for banks to support direct banking relationships and grow through indirect channels, such as embedded finance and Banking-as-a-Service (BaaS).

Trade finance innovation

Trade constitutes the backbone of every economy and 80-90% of global trade requires financing. SMEs account for around 90% of companies and more than half of the jobs worldwide according to the World Bank. It’s often those SMEs that are underserved and lack access to affordable trade finance.

Trade finance therefore has all the components that investors look for. It is a multi-trillion-dollar asset class based on the flow of physical goods and services, making it less susceptible to financial market volatility. Default rates for trade finance products are generally lower and the time to recovery in case of default tends to be shorter than for other credit products.

The lack of digitisation and automation so far made any distribution effort too costly for this low-risk and low yielding asset class. The opportunity, therefore, has largely been untapped because of high costs. Operational costs are particularly high because of the asset granularity and the short instrument tenors. Capital markets participation further has been limited due to the need for repackaging of portfolio risk and the extensive reporting requirements. Digitisation, workflow automation, and programmatic repackaging can now reduce those friction costs and provide efficient access to trade finance.

Digitalisation in Pakistan

Pakistan is an emerging economy at a critical stage of its economic modernisation. Annual GDP growth is sitting above 4%, though concerns over inflation have led to calls for additional reforms and initiatives that put economic growth at the heart of the agenda. It is partly the reason why the State Bank of Pakistan (SBP) is looking to digital challenger banks as part of a long-term economic strategy.

Pakistan’s digital financial services have witness growth in recent years as many switched over to 3G/4G services and adopted easy paisa, and online banking. The years 2020 and 2021 were pivotal years for Pakistan’s expanding fintech sector. Fintechs in Pakistan that provide e-wallets and peer-to-peer (P2P) gateways, that are determinants of financial inclusion.

Therefore, emerging markets like Pakistan are ideally positioned to benefit from fintech innovations – they must constantly ensure everything is being done across the private and public sectors to encourage fintech adoption. Doing so will digitally empower a new generation of consumers, investors, and businesses, who in turn, can fulfill their full potential.