Lockdown accelerates push into digital workflows for professional services
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Small businesses that sell home appliances and electronics made by Chinese company Haier have been helped to stay afloat during the Covid-19 pandemic by a new, fully digital way to access finance.
Facial recognition and biometric technology helped 30 distributors in just a week to sign up to online financing. Once a company has signed up, accessing finance can be as quick as 30 minutes from making the request. The traditional process usually requires a visit to a bank and can take months.
The digital financing facility was launched in March by Chinese banks China Everbright, Bank of Shanghai, MyBank, and DBS Bank of Singapore. It means distributors can continue to buy goods from Haier against future payments from their customers, preserving cash flow.
The lockdown, combined with urgent business requirements following the coronavirus outbreak, led Chinese regulators to relax requirements for paper signatures for processes such as opening a bank account.
Sriram Muthukrishnan, head of trade product management at DBS Bank, says: “I tell my customers, this is a time of great stress, but since you are working to a different beat now, it is an opportunity to improve manual workflows and move along the digitisation path.”
Digitisation of commerce and business operations has been gathering pace in Asia, although progress was uneven across jurisdictions and areas of business.
Now, a combination of restrictions on movement, remote working and the need for business to operate at high speed has pushed professional services such as institutional banking and legal work to digitise at a greater pace. More supply chain financing, such as the facility created for Haier, will be needed to support small and medium businesses.
“If you are a large company with a supply or distribution chain, that chain is in deep trouble right now,” says Mr Muthukrishnan. “With shutdowns and a squeeze in liquidity they are probably in pain in a way they have never been.” Supply chain financing is back after a pause, “but this time with a twist. It has to be completely digital.”
Esignatures, which include signing by email, using electronic images of signatures or a third-party platform to verify the esignature, have been legal in much of Asia for more than a decade. However, transactions still often require a paper signature at some point.
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While further regulatory changes will be necessary to enable fully digital transactions in most jurisdictions, the move will also require new business processes, working habits and culture.
Takeshi Komatsu, a Singapore-based partner at Japanese law firm Mori Hamada & Matsumoto, says the city-state “is the easiest place to get things done electronically. Already, government authorities accept electronic signatures, so there are very few documents that we have to physically sign.”
In Japan, by comparison, “many documents still need to be processed in hard copy, like court documents or real estate conveyancing documents”.
The Japanese government has made changes to allow for more legal agreements and processes to be completed electronically.
Face-to-face meetings and the accompanying business ritual, which are important parts of Japanese business life and transactions, are also likely to change, says Mr Komatsu.
Greater familiarity with video conferencing may have a significant and lasting effect on Japanese business culture.
While transaction volumes are falling, disputes and investigations are expected to grow. Electronic documents for courts will facilitate more online hearings, which are already taking place across Asia. Between February 3 and March 20, Chinese courts filed nearly 550,000 cases online and held more than 110,000 court sessions online, according to the Supreme People’s Court.
Some of the most important changes for investors in Asia came into force just as the pandemic began to take hold. China’s foreign investment law took effect on January 1. It unifies three sets of laws and opens new areas for foreign investment alongside greater protection for foreign investors in areas such as trade secrets and intellectual property.
“The laws relaxed a lot of approvals and filing processes,” says Henry Shi, a partner at Chinese law firm JunHe.
Further changes are being considered to allow deals to go ahead without original paper copies of documents, or using paperless internet-based approving processes. Mr Shi says that in the long term, “it will facilitate the investment environment if we can keep this easy and more flexible way of working”.
For professional services businesses such as law firms, the health crisis may allow them to make other long-term improvements, such as in skills, knowledge management and legal technology.
“Law firms have not had enough resources to move things forward. The downtime may allow us to do that,” says Mr Komatsu.