Daily Management Review

HSBC Closes Down Its Trade Start-Up Serai Based In Hong Kong


HSBC Closes Down Its Trade Start-Up Serai Based In Hong Kong
HSBC Holdings' Hong Kong-based trade platform, which was introduced with so much fanfare three years ago, has closed down after struggling to develop a commercially viable business.
HSBC's first investment in a non-banking software firm was Serai, a wholly-owned subsidiary of Europe's largest bank that connected small and medium-sized garment makers with component suppliers globally.
Two sources familiar with the case claimed that HSBC had spent roughly $70 million in the independently operating start-up over the last three years, and that Serai had begun to wind down its operations in recent weeks.
"The decision to wind down Serai follows a thorough business review and is a purely commercial decision," HSBC said in a statement to Reuters on Wednesday. It did not provide details about Serai's business or investment in the company.
Just months after Serai's introduction in June 2019, political upheaval in Hong Kong sparked protests that harmed businesses, followed by the COVID-19 epidemic, which wreaked havoc on global supply chains.
Serai also acknowledged its shutdown on its website, stating that its services would be unavailable beginning June 25.
"Despite a huge amount of progress made by the team, it has proven difficult to build a commercially viable business. As a result, we've made the difficult decision to close our doors," Serai said.
According to one of the individuals, despite signing up several firms in India, Bangladesh, Sri Lanka, Hong Kong, and elsewhere, the company was unable to attract enough paying consumers.
Serai employed over 100 people, the most of them were based in Hong Kong. According to the sources, some of the staff are joining HSBC while others were laid off with severance packages.
Serai's initial business plan included disbursing small loans to Hong Kong-based enterprises to finance their purchases, but this was damaged by the drop in Hong Kong commercial activity and later the global pandemic.
Its platform brought buyers and sellers together in the extremely fragmented textile and garments industry.
While there was need for such technology, Sheng Lu, an associate professor in the department of design and apparel studies at the University of Delaware, said it required "significant capital commitment and extensive technical understanding" about the business and laws.
Serai's CEO was veteran trade banker Vivek Ramachandran, who formerly worked in HSBC's commercial banking division. Ramachandran returned to HSBC last month to lead its Global Trade and Receivables Finance unit.