SFC-Licensed Trade Finance Platform in Hong Kong
Velotrade was the first trade finance platform in Hong Kong to obtain the SFC license in November, 2018. Despite the lack of regulatory pressure, Velotrade went ahead with a twenty-month application and approval process to receive the Type 1 SFC License.
Being a trade hub in Asia and one of the top three financial centres globally, Hong Kong is a highly suitable location to establish a platform serving the global trade finance market.
What Does the SFC License Mean for Velotrade?
Hong Kong’s Securities and Futures Commission (SFC) does not require trade finance providers to be directly monitored. Why did Velotrade go to the considerable effort of obtaining this SFC license when the company commenced operations in 2017?
The Type 1 SFC license is typically required by companies dealing in highly regulated capital markets such as buying and selling equities. By contrast, the platforms that provide trade finance to cost-sensitive Small and Medium sized Enterprises (SMEs) are more lightly regulated.
The rest of this article covers the benefits that Velotrade attains by being an SFC-Licensed entity.
Attracting More Institutional Investors to Trade Finance
Establishing a marketplace for a new alternative asset class like Trade Receivables requires significant credibility on the part of any business and SFC approval is a key stepping stone towards achieving this goal.
Velotrade’s SFC-approved status attracts a wide pool of investors to work with the company. Investors diversify their portfolios by including this non-correlated, short-term investment with a highly competitive rate of return.
These qualified professional investors include:
- Institutional Investors
- Private Equity Funds
- Asset Managers
- Hedge Funds
- Family Offices
- Individual Professional Investors.
As Velotrade is already regulated by the SFC, institutional investors can undertake an accelerated due diligence process compared to other platforms. This is a key factor in making Velotrade a more appealing platform for trade receivables.
Additionally, the SFC licence helps users to comply with internal risk management rules that have previously prevented many institutions from investing in Trade Finance.
Increasing Credibility of the Alternative Investment Sector in Asia
The value of regulation cannot be overestimated in helping to firmly establish a relatively new investment sector such as Trade Finance.
Having obtained SFC approval, Velotrade is advancing mainstream acceptance of invoice financing platforms as a whole and building its appeal as one of the many alternative assets available to investors. Those looking for better returns in the low-interest rate environment since the 2008 global financial crisis shall highly profit from investing in trade finance assets.
In addition to being reliable, providing strong yields with low correlation to equities, SFC recognition demonstrates that Velotrade can meet standards of transparency and managerial quality that professional investors of all sizes demand.
By seizing the initiative and obtaining an SFC license, Velotrade has set this new standard for the industry for others to follow.
The goal is to develop an industry that is better trusted and understood by the broader investor community to minimise the risk of future issues around unregulated activities such as money laundering between peers.
Increasing Market Efficiency
Rapid development of an active marketplace on the Velotrade platform has been supported by SFC regulatory status, helping to build confidence among invoice sellers that they can leverage it to obtain the best possible deal.
The Velotrade platform offers self-service access for both pre-approved invoice sellers and investors, where deal matching is efficiently handled to match individual requirements at the best price.
A broader cross-section of investors is available to sellers because Velotrade has attracted a wide spectrum of interested parties due to its focus on developing a better-regulated new asset class.
By growing the number of both invoice sellers and institutional investors, Velotrade is able to achieve a significantly higher level of market efficiency.
Addressing the Global Trade Finance Gap
According to the latest statistics by the Asian Development Bank, a massive trade finance gap of $USD 1.7 trillion exists. With the current inflationary and risk-averse environment, the gap has been estimated to increase to $USD 2 trillion in 2022.
Trade Finance was previously dominated by traditional banks. However rising regulatory compliance costs have failed to deliver a suitable level of service customisation, flexibility or speedy delivery to SME clients. Invoice-selling platforms like Velotrade are thus emerging to meet this growing market need.
Velotrade has developed a reputation as a reliable Fintech player using in-house technology that enables self-service transactions to be conducted efficiently via computer or mobile app.
Investors have the confidence instilled to invest in a wide selection of invoices from multiple business sectors, many of whom regularly deal with MNCs.
Velotrade is well-placed to help reduce this large-scale market shortfall while continuing to provide high-quality investment opportunities for institutional investors.
Find out the steps to join Velotrade as an investor to be part of this opportunistic market!
Brought to you by Velotrade, a marketplace for corporates to access financing.
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Trade receivables offer attractive yields during tough economic times due to their low market correlation.