Tradeshift and HSBC: Powering Embedded Financial Services

How this Global Partnership is Set to Revolutionize Financial Services Platforms

Tradeshift and HSBC created waves across the fintech market in August when they announced an agreement to launch a new, jointly-owned business focused on the development of embedded finance solutions and financial services apps. 

Mattias Nordlof, Director of Product within Tradeshift’s SMB Business Unit, has been heavily involved in the discussions that led up to the recent announcement. We spent time with Mattias to get more insight into the origins of the joint venture, the business challenges it will seek to address, and the combined value that Tradeshift and HSBC can deliver together. 

Watch highlights from our conversation with Mattias below, and read on for more details from our conversation with him.

In August, Tradeshift and HSBC announced their intention to form a joint venture. What more can you tell us?

The joint venture is about bringing two genuine powerhouses in trade together in one embedded finance solution. On one side of that equation, you have the Tradeshift network and the millions of trade relationships we connect through our platform, and on the other side, you have HSBC, the largest trade finance bank in the world. Together, we can bring inclusivity and scale to the kind of innovative supply chain financial services we know businesses are actively looking for.

We’re working towards early 2024 for the official launch of the joint venture. A lot of work is happening between now and then. Right now, we’re coming together as teams to organize ourselves and prioritize the value propositions and products we want to take to market. In the meantime, we’re not going to stop working on the products that we’ve already begun to collaborate on with HSBC in areas such as early payments.

What are the financial challenges we are looking to help businesses address through the joint venture?

A lot of businesses, particularly small to medium-sized enterprises, find it very hard to access the working capital they need to operate and grow effectively. Various factors are at play here, from fluctuations in the market to the size and type of business you are, how long you have been in business, and the type of organizations you sell to.

Even if you do manage to get a foot in the door, there’s often a huge burden on businesses to provide credit histories and paperwork so that banks can make a decision on whether or not to provide access to supply chain finance. And at the end of all that, the answer is often no. For an SME applying for a business loan at a traditional US lender, only about 40% of SME loans are approved.

With the data points that we now have together with HSBC, we can make this entire process much more intuitive and ultimately far more inclusive for a far broader set of businesses. Importantly, we can embed these decisions at the point of need.

Dive into that a little more for us. How are we able to streamline that process?

Tradeshift connects buyers and suppliers at a transactional level. That two-sided view of every transaction lifecycle means that we’re able to collect a huge number of data points. For example, when a supplier sends an invoice to a buyer, we have a good understanding of when that invoice typically gets paid.

We now have the possibility to layer further data points from HSBC over the top, such as general spending patterns for a particular business – not only on the Tradeshift platform but from a variety of sources.

For example, if we know that a certain business is about to come into a busy period at a time when inventory costs are rising, we can provide them with ready-made working capital options to finance that cost.

This is, by definition, a partnership in its truest sense. What complementary skills are HSBC and Tradeshift bringing to the table?

HSBC has been in business for over 160 years. They’re a regulated entity, and they have scale and a huge wealth of expertise in terms of making funds available and moving them. Being able to tap into that is hugely exciting for us.

For HSBC, they’re actively looking for ways to grow in a more digital fashion. They’re very interested in the fact that they now have access to a mature B2B e-commerce network with millions of digitally connected participants.

The announcement has generated a lot of media interest and industry buzz. Why do you think that was the case?

It’s not very often that you see this kind of joint venture being considered or announced, especially with a bank of HSBC’s stature. This is a big deal.

As a regulated entity with a comprehensive global footprint, HSBC has unrivaled infrastructure and scale. When you combine that with what we have at Tradeshift, there isn’t anything else like this in terms of the scope and reach of what we can build together.

We can now start to bring financial services to buyers and sellers on our platform in a unified experience. As a business using the Tradeshift platform today, the fact that I can access everything from payments to working capital inside one solution makes this an extremely compelling proposition. It’s a model that’s already been proven, but never on this kind of scale.

Finally, take us back to some of those initial conversations with HSBC. When did the scale of the opportunity really start to sink in?

The sheer scale of the opportunity really hits home when you start to talk numbers. It’s kind of mind-blowing. When we talk about trade happening on the Tradeshift platform, we’re already talking in billions from a volume and value perspective. HSBC takes those numbers to a whole new level.

We’ve met a variety of different teams from HSBC over the past year. Each of those teams is bringing a new opportunity. If anything, the issue we’ve had is containing those ideas and deciding on which areas we want to pursue first. It’s a great problem to have.