HSBC has teamed up with Cainiao Network Technology, a logistics unit of Chinese e-commerce giant Alibaba Group Holding, to offer quick trade finance approvals to online merchants using the company’s Tmall platform in Hong Kong.
As part of the partnership, which was announced on Thursday, the bank will work with Cainiao to offer seven-day approvals for trade financing loans of up to US$500,000. About 1,800 Hong Kong online merchants that use Tmall, Alibaba’s e-commerce platform, are qualified to apply. These merchants will also enjoy a one percentage point interest rate discount before June 30.
The merchants will not be required to provide any collateral, or financial documents, to secure such loans. Instead, they must agree to let Cainiao pass on comprehensive information – customer background, real-time inventory and operation status – to HSBC for credit assessment.
This is the first time HSBC, which confirmed Noel Quinn as its chief executive on Wednesday, will use third-party data to approve trade finance loans. Analysts said the bank, Hong Kong’s largest, was also preparing to compete with the eight new virtual banks that will launch services in the city in the coming months. The lender will explore expanding this service to other e-commerce platforms as well, a spokeswoman said.
“We see big data and other emerging technologies as a huge opportunity to offer innovative solutions that make financing easier for our customers,” said Jeanny Ip, head of global trade and receivables finance, Hong Kong and Macau, HSBC. The partnership with Cainiao could support new economy enterprises by using big data to simplify the approvals process, she added.
Cainiao processed 1.3 billion orders involving a record 535 million packages on Alibaba’s “Singles' Day” shopping festival on November 11 last year. It is also, along with other parties, delivering masks, medical equipment and other necessities amid the Covid-19 outbreak.
“Through this digital financing solution, more merchants can easily obtain rapid loans,” said Zhao Wei, general manager of Cainiao Network Supply Chain Finance at the company. “As merchants go through a challenging period due to the Covid-19 outbreak, Cainiao Network is dedicated to driving the recovery of retail businesses and assisting businesses to resume normal operations by using our expertise in smart supply chain,” he said.
“HSBC is the first local lender to launch such a partnership with a technology company, to use big data to approve trade finance lending. It will have first-mover advantage,” said Louis Tse Ming-kwong, managing director of VC Asset Management. “Eight virtual banks are starting operations this year. The competition will be keen. HSBC and other traditional lenders will need to offer more digital banking products and services to compete for a tech-savvy younger generation of customers,” he added.
Quick loans could prove to be a lifeline for many retailers and trading companies as they navigate the current Covid-19 pandemic, which follows many months of anti-government protests last year and the 18-month long US-China trade war.
Trade finance, bread and butter for banks because of the stable income it generates, has fallen in six consequent quarters in Hong Kong, according to data provided by the Hong Kong Monetary Authority. The total amount of such lending stood at HK$452.98 billion (US$58.36 billion) in the fourth quarter last year, down 0.7 per cent from a year earlier.
The HKMA, the city’s de facto central bank, has been pushing lenders to use more financial technology to cut costs and enhance services. In October 2018, the authority launched a blockchain-based banking trade finance platform called “eTradeConnect”. The platform combines the services of 12 major banks, including HSBC and Standard Chartered bank, to enhance cross-border trade.
The Bank of East Asia is one of the lenders using this platform. “We will continue to explore new technologies and innovation to enhance efficiency and customer experience,” Thomas Tsui, the bank’s general manager and head of corporate banking, said on Thursday.