The Innovators 2019: Corporate Finance

Banks tap into technology and social media to satisfy corporate clients, traders and retail customers.

More than a decade since the 2008 financial crisis, alternative sources of corporate finance are thriving, even as many smaller businesses complain that they encounter obstacles in accessing funding from banks. There is also an increasing emphasis on corporates to have robust environmental, social and governmental (ESG) policies as a prerequisite applied by lenders. This year’s Corporate Finance Innovators often use a mix of the latest technology and social media to offer their customers fresh avenues to funding. Government-owned Banco do Brasil, for example, Brazil’s oldest and largest bank by assets, has turned to WhatsApp to improve its relationship with increasingly tech-savvy clients. The bank’s digital financial assistance solution envelops 11 different types of transactions using the messaging tool, including balance inquiries for checking and savings accounts, money transfers, mobile phone top-ups and access to credit-card statements. The phased rollout, which added 500,000 customers each week over several months last year, represents the bank’s pioneering work in South America. Banco do Brasil’s use of emerging technologies follows its first use of artificial intelligence (AI) in 2017. While transactions are powered by AI, end-to-end encryption means that if human intervention is needed, the customer can be directed to an agent.

Bancolombia is Colombia’s largest commercial bank and the region’s pioneer in green bonds, in addition to financing sectors such as agribusiness. In line with the growing worldwide influence of ethical finance, the bank made its green bond debut in 2016 with a deal focusing on green buildings, which raised 350 billion Colombian pesos ($117 million). It more recently issued a second bond in the local market for COP300 billion that was oversubscribed 2.8 times and attracted 72 new investors. The award for Green Bond Issue for Non-Financial Institution recognizes the success of its investment banking arm, Banca de Inversión Bancolombia, in opening up an underdeveloped local market. The bank placed two green bond issuances for renewable energy on behalf of local power company Empresa de Energia del Pacifico (Epsa), overcoming obstacles such as lack of client awareness, which required one-on-one meetings to overcome.

Spanish multinational banking group Banco Bilbao Vizcaya Argentaria, or BBVA, made headlines in April 2018 when the bank, together with consulting and tech firm Indra, closed the world’s first global corporate loan using distributed ledger technology (DLT). It was a €75 million ($84.3 million), three-year bilateral term loan. Demonstrating that the much-hyped technology is finally being applied to real business transactions, BBVA receives the award for the in-house development of a platform using blockchain. The new platform provides all users with a single point of communication, reducing the need for phone calls and emails. It also speeds up the negotiation process, standardizes legal documentation, and provides greater transparency and integrity to negotiations. The deal demonstrates “how BBVA continues to incorporate innovative and disruptive technology into its customer solutions, including those products that, up to now, have seen limited digital innovation, as is the case with wholesale finance,” according to the bank statement. BBVA quickly followed up the breakthrough deal with a blockchain-based loan of €100 million with civil engineer ACS Group.

Brazil’s BTG Pactual Bank is a leading provider of investment banking services in Latin America. Its boostLAB empowerment program is an accelerator that aims to provide Brazilian startups at a more mature level with revenue and clients to maintain their growth. “We wanted to get connected to the startup environment,” says Frederico Pompeu, a partner with BTG Pactual who oversees the initiative. “We understood at that point that we did not have a lot of knowledge or connections.” The program has recently selected eight additional startups for its third edition.

Spain’s CaixaBank launched AgroBank to recognize the importance of agriculture, and the lack of proximity to banking facilities that many agro workers in remote areas face. The AgroBank App is “a technological solution that allows the user to enjoy a specialized service and is focused on his business needs,” according to the bank, and extends the AgroBank service, which was launched at the beginning of 2018. It took six months to ramp up and release on iOS and Android.

ING’s Katana is one of several impressive innovations developed by the Dutch multinational group. Named after the sharp Samurai sword, Katana has been designed to help bond traders make faster and smarter pricing decisions with augmented artificial intelligence. Using predictive analytics, traders can use Katana to determine the best price to quote when buying and selling bonds for clients, based on historic and real-time data. The Katana Lens tool, launched last October, was co-created with Dutch pension fund PGGM and is a web-based app for bond investors, to help them make informed decisions within minutes.

Nordea’s open banking solution for corporate clients, Instant Reporting, shows the Scandinavian bank proactively responding to the EU’s revised Payment Services Directive (PSD2). An application programming interface (API), it moves beyond instant reporting to let companies access their accounts, balances and transactions. Nordea’s initiative stands out, as many of Europe’s banks have responded hesitantly since open banking emerged with the introduction of PSD2 in January 2018. “We have been committed to open banking from the beginning because we could really see the potential for creating new products and services that bring value to our customers,” Gunnar Berger, head of Nordea Open Banking, commented in a press statement. “The exciting thing with [Instant Reporting] is that it gives corporates the chance to directly access their real-time data, which will have a big impact on the way they organize their businesses, freeing up valuable time and resources.”

Originally a joint venture between Citibank and German technology group SAP, and now a privately held company based in Connecticut, Orbian is a specialist in supply chain finance (SCF). It was one of the first companies to develop the possibilities of this working-capital solution when it was first devised in the late 1990s. Its e-card extends the benefits of SCF, frequently enjoyed only by the largest suppliers, to smaller companies in 180 countries. The card lets a corporate buyer offer SCF to all its suppliers, giving them the advantages of early liquidity. Since its launch in June 2018, the Orbian e-card has been used for more than $1.4 billion payments to vendors. “The playing field is leveled and the advantages of early liquidity, access to approved invoice information and supply-chain risk mitigation are available to every supplier that wishes,” according to the group.

Symbiont, the blockchain platform for the financial markets, has partnered with highly regarded financial firms such as Ipreo—jointly owned by Goldman Sachs and Blackstone—and The Vanguard Group during its first four years. However, the company’s public stance is that much of the innovation in fintech has focused on the front office, while back-office processes have been largely neglected. This means that many markets in some of the world’s most complex financial instruments remain overly reliant on phone calls, faxes and manual data verification. Symbiont Assembly, a proprietary blockchain platform, corrects that imbalance and is, as the company describes it, “designed and developed by expert engineers in cryptography, distributed systems, financial engineering and programming-language design with direction from experienced leaders in capital markets and enterprise finance.”

Yap Kredi Bank’s Financial Documents Corrective Analysis (FOCA) emerged from multiple feasibility studies and workshops run by the Turkish bank’s research and development teams over 18 months. The process included reviewing credit offers made to corporate and commercial customers over 12 months. FOCA was devised to help the bank’s risk managers, financial analysts and underwriters extract essential information as they process extensive and complicated documents.

Corporate Finance Innovators 2019

Banco do Brasil Digital Financial Assistance using WhatsApp
Bancolombia Green Bond Issue for Non-Financial Institution
BBVA BBVA In-house Platform using Blockchain
BTG Pactual Bank boostLAB
CaixaBank AgroBank App
ING Katana
Nordea Open Banking Instant Reporting
Orbian Orbian e-card
Symbiont Assembly
Yap Kredi Bank FOCA (Financial Documents Corrective Analysis)