This approach enables factoring companies to implement solutions faster and with fewer resources, allowing them to begin offering factoring services to their clients, such as SMEs and corporates, more efficiently.

By providing pre-configured modules and features, ready-made factoring software simplifies implementation and streamlines key processes, such as handling receivables and invoices entered by entrepreneurs. 

The standardised nature of these solutions typically comes with pre-determined terms, fee structures, and documentation, making the software deployment relatively straightforward (compared to a fully customised offering). This is particularly valuable for banks and factoring institutions aiming to expand their services or transition from an older system without the delays associated with extensive IT development projects.

However, as is often the case, simplicity and speed can come with trade-offs. While good off-the-shelf software does not preclude requests for changes or new functionality over time, the standardised approach may limit the ability to tailor the system to fit specific operational requirements or market nuances, posing challenges for organisations with particularly complex or unique workflows. 

Karol Leszczyński, Product Development Manager at Comarch Factoring Platform, said, “When implementing off-the-shelf software, the process is mostly agile-oriented, allowing requirements to adapt to changing circumstances as the project progresses. 

“With a ready-made solution, clients receive a standardised version of the system early on, enabling them to gradually assess its features and determine the necessary customisations. The biggest advantage of this approach is that they can start generating revenue from the new system at an early stage and, if needed, tailor it further to their specific needs.”

What to consider when implementing a ready-made factoring system

Implementing ready-made factoring software can still be a long process, sometimes taking upwards of 3-6 months, depending on the scope of integration and the degree of customisation required. While these systems offer efficiency and ease of deployment, the process involves balancing standardisation with the specific demands of the business and its regulatory environment.

A key consideration is evaluating how well the off-the-shelf solution aligns with the existing processes and strategic goals of the factoring institution. Although ready-made systems are designed for broad applicability, they may not fully meet a company’s operational needs without some level of adaptation. Identifying essential features—particularly those tied to a company’s unique offerings—can help determine whether additional customisation is necessary.

Compatibility with local market conditions and regulations is equally important. Factoring companies operate in environments with varying tax laws, payment structures, and data privacy requirements. Ensuring that the software can adapt to these local nuances is crucial to a successful implementation.

The choice of implementation methodology also plays a significant role in determining outcomes. Traditional approaches like waterfall offer a clear, structured roadmap, while more iterative, agile models provide flexibility to address unforeseen challenges. Agile methodologies are particularly useful when extensive customisation or ongoing adjustments are anticipated.

Additionally, the transition to any new digital tool – ready-made factoring software included – often requires a cultural shift within the organisation. Employees used to legacy processes and systems will need training and support to fully embrace the new technology, making stakeholder engagement and change management essential parts of the process.

While the software itself may be ready-made, the implementation process is rarely one-size-fits-all.

Is ready-made factoring worth all the fuss?

This brings us to the question of whether ready-made factoring solutions are indeed worth all the fuss. “Before selecting a vendor for our new system, we first gathered all the requirements and customisations we wanted—there were around 600 items detailing what the software should include and how it should function. Initially, we planned to build the project scope around these specifications,” said Ewa Gawrońska-Micuń, Head of Strategic Marketing and Product for the CEE region, Country Manager Poland at Bibby Financial Services. 

“However, over time with the process of exploring the system, we realised that many of our needs can be met by the system’s features, without requiring customisation, in a different way that we designed.”

Proponents emphasise the speed and cost-effectiveness of these solutions, which allow banks and factoring companies to quickly begin offering factoring services without the high expenses of developing custom systems. The accessibility of pre-configured solutions can be especially beneficial for smaller financial institutions with limited IT resources. Moreover, the reliability of ready-made systems, combined with the ongoing updates and scalability provided by established vendors, ensures that the software can evolve alongside market needs.

“We approached the system with a clearly defined set of functionalities needed to meet the expectations of both our clients and our team,” Gawrońska-Micuń explained. 

“Exploring the out-of-the-box system and participating in functional workshops helped us identify potential gaps. Once we understood where those gaps were, we could easily decide whether customization was truly necessary or if it would be more effective to refine our existing processes to achieve the same result.”

However, critics point to the limitations of standardisation. Some ready-made systems may struggle to accommodate the unique processes or workflows of certain institutions, which can lead to costly customisations or workarounds. However, in the long term, as users become familiar with the out-of-the-box solution, many find that the pre-built processes are designed better than the ones they were used to before.

—

Further, if an implementation is not well planned in advance or a vendor lacks transparency, hidden expenses, such as fees for additional features or updates, can also erode the initial cost advantage. Furthermore, the one-size-fits-all nature of these solutions may hinder organisations that rely on tailored systems to maintain a competitive edge in complex or highly regulated markets.

“Allowing clients to thoroughly explore the system before implementation should be a standard practice in the deployment process,” Leszczyński explained. “During the functional workshop phase, they gain an in-depth understanding of the off-the-shelf solution. In our experience, clients often come in with a long list of customisations, but after familiarising themselves with the system, they frequently find that the existing features meet their needs.”

“A good vendor remains flexible, readily adapting to these changes and evolving the system together with the client based on their real needs,” he summarised. The value of ready-made factoring lies in its balance of speed, affordability, and reliability against compromises in flexibility and extensive customisation. Whether it is the right choice depends on the institution’s ability to adapt its processes to fit the system or justify the investment in customisation where needed.

The post Ready-made factoring: Fast-track finance or one-size-fits-none? appeared first on Trade Finance Global.

At the beginning of this year, we looked ahead and made a series of predictions for what we thought would be the biggest trends in trade, treasury, and payments throughout 2024. 

As the year winds to a close we’re revisiting our predictions to see how well they measured up to reality. Let’s dive in!

Prediction #1: Uncertainty will underpin the macroeconomic landscape (again)

We started our prediction list with a bit of a lob ball – but we sure hit it out of the park. Our prediction that uncertainty would dominate the global macroeconomic landscape in 2024 was spot on. 

The year was marked by slowing global growth, persistent inflationary pressures, and geopolitical disruptions. Central banks maintained cautious monetary policies, and China’s continued economic slowdown weighed heavily on global trade. Energy markets also faced volatility due to fluctuating oil prices amidst geopolitical tensions, including ongoing conflicts in Ukraine and the Middle East. Extreme weather and strike action around the world also disrupted global supply chains this year.

Adding to the complexity, elections in more than 60 countries helped to change the faces of leadership around the globe. Some of these, like Donald Trump’s re-election in the USA and the ensuing tariff threats and protectionist rhetoric, leave the world on edge leading into the new year.  

Overall, 2024 helped reaffirm that uncertainty is the only certainty in the world. 

Prediction #2: Supply chain finance expects lacklustre growth

Our prediction of sluggish growth in supply chain finance (SCF) during 2024 ended up being broadly accurate. The trade finance gap expanded and market conditions remained challenging, with tightened liquidity, cautious lending, and ongoing derisking by banks.

Geopolitical tensions, higher borrowing costs, and reduced risk appetite created a challenging environment for SCF in 2024, which strained access for some but created opportunities for non-traditional financiers to have an increasingly prominent role, with fintechs and alternative lenders stepping in to meet demand.

The broader SCF ecosystem saw slow but strategic innovation, with players focusing on simplifying processes and expanding coverage into underserved markets. While the sector didn’t experience transformative growth, it continued to evolve, positioning itself for a more robust recovery in the years ahead.

Prediction #3: Standards and frameworks will take centre stage

At the beginning of the year we predicted that developing standards and frameworks for digitalisation and ESG would be the emphasis in 2024. We got that one right. 

In November, COP29 opened with an agreement on standards for the creation of carbon credits, and tradeable permits tied to greenhouse gas emissions used by governments to measure and limit emissions. 

On the digitalisation side, the adoption of the UNCITRAL Model Law on Electronic Transferable Records (MLETR) gained momentum. Notably, France joined the cohort of countries recognising electronic transferable records, marking a significant step towards global digital trade harmonisation.

Work also continues at UNCITRAL on developing a comprehensive international convention to standardise negotiable cargo documents across multiple transportation modes. The group expects to complete this in late 2025.

These developments show an acceptance of the need for collaborative progress, focusing on establishing adaptable and technology-agnostic solutions to meet evolving digital and sustainability challenges.

Prediction #4: Increased demand will drive growth in trade credit insurance

Our prediction that demand for trade credit insurance (TCI) would grow in 2024 was well-supported by market developments. The ICISA industry report published this year (albeit reporting on FY 2023) showed that trade credit insurance has seen steady demand, bolstered by evolving global trade dynamics and rising counterparty risks.

According to the report, throughout the year insured exposure grew by 4.5%, totalling €3.2 trillion; premiums written increased by 5%, amounting to €8.2 billion; and claims paid rose by 11.4%, reaching €3.2 billion. Penetration rate also increased to 15.07% for 2023, up from 13.16% one year earlier, with currency exchange rates playing a role.

This increase was largely driven by the role that these products play in protecting businesses from the risk of non-payment, which became increasingly prevalent given the economic uncertainties in the market.

Prediction #5: Solving complex issues will be key to fintech survival

Our prediction that fintechs would face a make-or-break year in 2024 was well-founded. The reality of the fintech landscape this year has highlighted both the promise and perils of the sector, with advancements in artificial intelligence (AI), instant payment systems, and blockchain juxtaposed against the financial struggles of some once-promising companies.

Blockchain, once the trendy new technology that everyone hyped, is finally starting to become more mainstream. After what felt like endless white papers and Proofs of Concept (POC), the technology has started being applied to real-world problems to reduce costs, increase efficiency, and improve customer experience. 

Replacing Blockchain as the hot new tech in town is AI. AI is impacting trade finance and payments by promising to automate risk assessments, fraud detection, and personalisation, particularly in supply chain resilience and operational efficiency. The adoption of AI in the financial sector has surged, with global AI spending expected to exceed $300 billion by 2026, according to industry reports.

Unfortunately, the year ended with news on several bank and non-bank lenders collapsing, notably, ABN Amro’s receivables finance team, Stenn and Kimura Capital. This will likely have compounding effects on appetite to lend to SMEs in 2025.

Prediction #6: An infrastructure revolution for payments

Our prediction that 2024 would mark a transformative year for payments infrastructure was accurate in part, though the anticipated revolution was more evolutionary than revolutionary. 

The adoption of ISO 20022, while significant, has been slower than expected in transforming cross-border payments, and the promise of central bank digital currencies (CBDCs) and distributed ledger technology (DLT) for payments remains largely unrealised.

ISO 20022 adoption expanded globally, especially among larger banks, leveraging the data-rich messaging standard for competitive advantage. However, smaller institutions and developing markets have lagged behind. While some progress was made in using ISO 20022 to improve payment transparency and speed, its broader benefits have yet to be fully realised.

Despite these challenges, the payments industry did make strides in cloud integration and real-time solutions, fostering incremental improvements rather than wholesale transformation.

Prediction #7: Technology will aid decision-making in treasury

Our prediction that technology would transform treasury operations and decision-making in 2024 was largely accurate. Tools like APIs and AI are increasingly becoming mainstays for the contemporary treasury leader, though challenges such as privacy concerns and inconsistent liquidity management adoption remain. By identifying patterns, forecasting cash flow, and simulating liquidity scenarios, AI has begun to enable treasury teams to make faster, more informed decisions. 

However, widespread adoption of real-time liquidity management tools has been slower than anticipated. While these systems can be powerful tools amidst changing market conditions, smaller firms tend to struggle with the cost and complexity of their implementation. Additionally, privacy and data security concerns continue to stand in the way of a deeper integration, as companies weigh the risks of exposing sensitive financial data to digital platforms.

The treasury transformation is ongoing, with many organisations leveraging APIs and AI for operational efficiency, but broader challenges suggest that the evolution will continue well beyond 2024.

Prediction #8: ESG is here to stay

At the beginning of the year, we predicted that ESG would remain central to business strategies in 2024. While this has largely remained the case, the conversation around sustainability took an unexpected turn over the course of the year. While progress was made in areas like harmonised reporting standards and carbon credit frameworks, a quieter, more cautious tone has emerged in corporate ESG efforts.

The enthusiasm that once surrounded ESG has faded. Concerns about greenwashing have given rise to “green hushing,” where companies downplay or stay silent on their sustainability efforts, either as a defensive move or due to diminished prioritisation. This trend has seeped into treasury functions, making the integration of ESG into financial strategies more subdued.

Despite this dip, the outlook for ESG remains promising. The regulatory environment, especially in Europe, is forcing companies to rethink sustainability as a strategic imperative rather than a checkbox exercise. Treasurers, in particular, are realising the potential of ESG investments to drive long-term growth and resilience without compromising profitability.

COP29, branded the “Finance COP,” was a milestone event, resulting in a global framework for tradeable carbon credits and substantial commitments by developed economies to finance green transitions in developing nations. These advances reflect growing regulatory and financial pressure to align global trade with sustainability goals.

The hope is that 2025 will reignite corporate enthusiasm for ESG, with treasury teams leading the charge towards sustainable finance, influencing supply chain practices, and embedding ESG into core business operations.

So, how’d we do?

Looking back at our predictions from the start of the year and comparing them to how events across the trade, treasury, and payments industries played out, we’re pretty happy with our predictions!

Of course, we can’t take all the credit. To make these predictions to spoke with some pretty smart experts across the industry and, well… stole a lot of their ideas, because they are the experts after all!

These trends reaffirmed the importance of staying informed, collaborative, and flexible. As we prepare for 2025, our new year’s resolution is to remain committed to tracking these developments, engaging with industry experts, and sharing insights to help our readers stay informed.

Here’s to another year of making bold predictions – and seeing how they stack up!

The post 2024 predictions vs reality: 8 trends we predicted for 2024, and how reality measured up appeared first on Trade Finance Global.

Following an order from the London High Court of Justice, three managing directors from Interpath Advisory, a consulting and restructuring firm, will take over as administrators of Stenn and Stenn Assets UK, its funding vehicle. 

In a statement on the Stenn website, the administrators said their immediate focus would be to “engage with the companies’ key stakeholders in order to stabilise the companies’ operations”; debtors should continue to fulfil their payment obligations “in the usual way” in the meantime, but the company would not fulfil any additional lending requests.  

The application to put Stenn in administration was filed by HSBC Innovation Bank, which acted as a security agent on a revolving credit facility Stenn had initially signed with Silicon Valley Bank UK and was then taken over by HSBC. Companies are usually put in administration when they are close to financial collapse and need to avoid insolvency; however, a Stenn spokesperson attributed it to a “sudden action by an investor” and said it was “actively defending” against it. 

Stenn’s mission to increase access to trade finance by targeting smaller, underprovided firms had seen it deploy almost £8 billion to companies in 70 countries and expand in the US, Spain, and China. Since its founding in 2015, the company has featured in the Financial Times and CNBC as one of Europe’s fastest-growing fintechs and reached a valuation of £700 million in 2022, with past investments from Barclays, Natixis, and Crayhill Capital Management. 

Stenn’s fast rise and just as drastic fall could point to a trend of fintech floundering as venture capital investment dries up; similar start-ups Manigo, Bink, and Divido were all placed under administration in the past few months. 

Stenn’s goal of increasing access to trade finance played an important role in decreasing the trade finance gap and democratising access to trade; however, dealing with small and medium enterprises entails more uncertainty and risk, which compounded by the inherent complexity of trade finance can make it difficult for financing providers to flourish.

The post UK invoice financing startup Stenn put into administration after HSBC application appeared first on Trade Finance Global.

Instead, it will focus its efforts in Northwestern Europe and its finance and advisory services. 

This decision is expected to affect the bank’s invoice financing, factoring, and cross-border financing operations as well. 

After an internal review of the asset-based financing division’s activities, ABN AMRO said it will “materially reduce the [division’s] international footprint”, winding down non-strategic client portfolios in the UK and restructuring its operations in Germany. The bank will now refocus on its three strategic priorities: the new energy, digital, and mobility transitions. 

The move is hoped to strengthen ABN AMRO’s international position and ensure long-term profitability. The bank expects the reorganisation to benefit the CET1 capital ratio and the return on equity by the time it is completed. 

ABN AMRO is not the first bank to wind down its asset-based lending operations: Societe Generale sold its equipment finance division to Group BPCE in April of this year, and the Hampshire Trust Bank announced the closing of its asset finance division last month. 

As institutions face pressure to invest in sustainability and maintain a strong strategic position, many have shifted resources away from the sometimes unpredictable asset-based and trade finance operations to commercial operations and ESG themes like green energy and digital services. 

The post ABN AMRO to wind down asset-based financing in UK and Germany appeared first on Trade Finance Global.

Listen to this podcast on Spotify, Apple Podcasts, Podbean, Podtail, ListenNotes, TuneIn

The Mesopotamians were factoring in 1700 BC. But they didn’t have to contend with changing regulation, increased cybercrime, and geopolitical challenges – all which have made the recent period a particularly turbulent one for the industry. However, new technology and untapped markets in emerging economies provide exciting opportunities for growth.

Resilient but stagnant

Trade, factoring, and receivables have proven themselves resilient industries, growing by 3.1% in 2023 despite macroeconomic and political challenges that threw many other industries off course. Despite relatively slow growth, factoring is attractive to investors due to its countercyclical nature: in times of crisis, organisations want to secure their cash flow positions, and receivables are a safe way to do that. “We’re in an industry that actually grows when there is trouble happening around – organisations feel safer in moving into receivables finance during that time,” said Borgmeyer. 

However, there are signs of a slowdown: the German factoring market, which has seen years of constant growth and reached almost €400 billion in size, is forecasted to stop growing in 2024 for the first time ever. This might be a sign of a mature market, although Germany’s 9% factoring ratio sits well below its neighbours’ (21% in Belgium, 16% in France). Germany’s lacklustre GDP growth, the lowest in the EU at a forecasted 0.1% in 2024, could be another reason for the decline. 

This continues a pattern of modest growth in the factoring industry in the EU as a whole, with especially Western Europe experiencing low or negative growth in the last few years.  Developing economies might be the ticket to more impressive numbers: factoring companies are eyeing Africa, India, and the Middle East, whose small- and medium-sized enterprises (SMEs)  are in dire need of financing lifelines, as opportunities for expansion. 

Untapped emerging markets can benefit most from new technologies in the factoring and receivables sector, especially digital solutions that expand access to financing. These markets can be important drivers of growth when the European market is stagnant.

Digitisation for growth

The single biggest enabler of growth in the factoring and receivables business in the next few years will be digitisation, which will make producing the documents necessary for trade much easier and faster. Even though the underlying document is basically the same, moving from paper to digital trade documents will enable larger volumes of documents to be moved around the world at unprecedented speeds, representing the biggest change in the factoring industry since the shift from stone tablets to paper thousands of years ago. 

While the technology is there, and some countries have been proactive in passing legislation that promotes the use of digital trade documents, as the UK did with the Electronic Trade Documents Act (ETDA) in 2023, adoption has often been sluggish. As more countries adopt legal standards for electronic documents and more firms start using them, the factoring industry could see widespread growth and increased efficiency in the next few years.

Challenges ahead

While legislation can enable growth, like ETDA, there are fears it can also stifle it—as upcoming regulation on new technologies might. “AI regulation will most likely prevent the development of tools that are relevant and important to manage millions of receivables that are out there, to reduce risk and fraud,” said Borgmeyer. 

New regulation proposed by the EU intended to address the problem of late invoice payments would mandate payments within 30 days without any exceptions. If passed, this would significantly reduce the European market for trade and receivables financing. The EU has also been worrying the industry by imposing heavy tariffs on electric cars from China, sparking fears of a trade war that would further stifle the market; the upcoming US election and the Republican plan of increasing tariffs on many foreign goods have made the landscape even more uncertain. 

Some risks, on the other hand, are more theoretical than real for now, like cybercrime. Digital trade documents are seen as more vulnerable to cloning or manipulation than paper documents, leading many in the industry to cite cyber security as the biggest risk in the coming year. 

However, for now, this has not been a significant concern, said Borgmeyer. “Cybercrime is something that we have been registering, not because of attacks on our systems or on the systems of our clients, but rather because of the requirements that are being placed to us. It’s not that we’re seeing it happening, but we’re seeing that people are becoming more and more concerned.”

Cybercrime is bound to rise as the trade and factoring industry becomes more and more digital – but firms are prepared. A joint initiative by efcom and other tech firms in the industry being launched in 2025 will focus on fighting back against fraud and preventing cybersecurity risks to promote digital expansion without compromising security.

The factoring and receivables industry is looking strong despite regulatory, macroeconomic, and political challenges. New technologies and emerging economies are important opportunities for growth, especially as companies work together to mitigate the risks involved.  

The post PODCAST | Factoring and receivables: What’s in store for 2025? appeared first on Trade Finance Global.

• 2024 ICC Trade Register report reaffirms low risk nature of trade finance assets, despite a slowdown of global trade volumes in 2023.
• Receivables finance is outpacing traditional documentary trade products, marking a shift towards open account trade and flexible working capital solutions.
• The report highlights a notable shift towards trade in regional blocs, particularly growth in non-USD settlements.

The annual Trade Register from the International Chamber of Commerce (ICC) in collaboration with Boston Consulting Group (BCG) and Global Credit Data (GCD) has been released, analysing the landscape for trade, supply chain finance, credit risk, and proprietary trade finance risks for 2023. 

The report surveys partner banks of the ICC Banking Commission, representing 5% of global trade flows and 18% of financed trade flows. The conclusions are indicative of the industry’s trajectory and highlight opportunities down the road.

2023 was mired by ongoing geopolitical tension, stilted market demand, corporate deleveraging, and high interest rates, transforming the industry. Overall, though, indicators for 2024 are positive, while the low-risk nature of trade finance remains a pillar of stability.

Trade: 2023, 2024 forecast, beyond

Global goods trade saw a year-on-year decrease in both real terms (-0.7%) and nominal terms (-4.8%): a slowdown from growth post-pandemic in 2021 and 2022.

The variance of this by sector is interesting in defining the future of commodity demand. The energy sector fell by 19% in nominal terms (while demand remained steady, increasing by 1% in real terms). Modest downturns were seen in metals and mining (-7% and -9%), semifinished intermediate good such as chemicals (-10%), semiconductors (-10%), and agribusiness (-4%).

On the other hand, automotive trade increased by 12% in nominal terms while the aerospace sector saw a 16% increase. 

This was offset by an 8% increase in services trade, now making up one-third of all trade. In nominal terms, this constituted $7.9 trillion, with Middle-Eastern countries (Saudi Arabia, UAE, Qatar), India, and Ireland witnessing the fastest growth.

Sectorally within services, the travel industry rebounded strongly, returning to approximately 25% of the global services trade. Financial services and information and communications technology (ICT) also saw steady annual growth. Conversely, construction services reported slower growth.

Global inflation fell from 8.0% in 2022 to 6.5% in 2023. But despite the moderation of inflation, consumers continued to suffer expensive essentials like energy bills.

In terms of trade currency, while the US dollar is likely to retain its dominance in the short term, non-US dollar trade is on the rise. This is driven by increased use of Chinese currency in cross-border payments; and by US foreign policy affecting specific sectors, with around 20% of the global oil trade settled in non-USD currencies.

Having said this, the USD’s dominance is still decisive, with 55% of international payments and 83% of trade finance market payments made in the American currency.

Looking forward, as central banks have reduced interest rates in response to waning inflation, 2024 should theoretically be reviewed as a year of relative normalisation. Yet the year has been defined by shifting geopolitics, the result of elections for more than half the world’s population and conflict.

Supply chains have seen monumental rerouting. The drop in trade between the US and China has pushed both parties closer to their allies. Similarly, the EU has been seeking to diversify from Russia and China.

But surprisingly, the strongest growth has come from the ‘Global South’, which largely consists of emerging economies. India’s trade growth is expected only to accelerate, at 9% CAGR over the next decade. The benefits of campaigns like ‘Make in India’, as well as continued growth in projected trade with China, reinforce India as a rapidly emerging platform.

Trade and supply chain finance

Slowing trade volumes, compounded by higher interest rates, posed challenges for trade and supply chain finance. Banks reported the following as the greatest threats to their businesses:

• Disrupted trade flows from ongoing geopolitical conflict (40% responded this to be a high or severe threat)
• Margin erosion (36%)0
• New regulation on capital treatment (30%)
• Increased competition amongst financial institutions (25%)
• Increased fraud risk (21%)

Trade and SCF revenues declined overall, with the most notable contraction in the Asia-Pacific region. But the only modest reduction in the EU, which accounts for one-fifth of global trade finance revenues, lessened the severity of this decline.

While some expect receivables finance and payables finance to accelerate faster than the growth of documentary trade and trade loans, the proportions within overall trade and SCF revenue growth remain steady. 

In fact, documentary trade products are projected to have a below-average growth at 3.7% CAGR, and reduced demand for payables finance comes as a result of disclosure rules and Basel III capital treatment regulation.

Nonetheless, the wider picture is positive for trade finance. Much optimism comes from the modernisation of platforms, the result of the rapid evolution of technological solutions. As many as 90% of banks are investing in digital customer experience initiatives to meet client expectations.

Artificial intelligence (AI) and generative-AI have huge potential regarding data extraction, fraud prevention, document checking, and creating data model language universality. This technology can also improve accessibility for smaller, less technologically-literate parties by providing validation and assistance in contracts, and by using chatbots to simplify customer service.

In this regard, momentum picking up around digital trade and related regulation, such as the Model Law on Electronic Transferable Records (MLETR), is likely to have informed positive projections. However, 80% of survey respondents believe the digitalisation of trade is dependent on collaboration throughout the ecosystem – corporates, shipping companies, banks, insurance brokers, as well as regulatory bodies. 

Climate and sustainability remain important, with a notable change from banks. Over 90% of those already engaging in sustainable finance report positive growth. In Western Europe, regulations like the EU’s Carbon Border Adjustment Mechanism mandate this transition, but creating profit incentives around sustainability mean its significance will only grow.

Credit risk, proprietary trade finance risk

The report proposes that trade finance, SCF, and export finance have proven resilient from a credit risk perspective because they involve low-risk transactions, which constitute the bulk of global trade. 

These instruments represent a low-risk asset class, even during times of uncertainty: as elucidated by Figure 4. On an exposure-weighted basis:

• Global default rates for import letters of credit (LoCs) decreased from 2022 to 2023.
• Default rates for export LoCs are significantly lower than for other trade finance products, and defaults increased negligibly between 2022 and 2023.
• For loans for import/export, 2022 to 2023 saw a slight decrease.
• Default rates for performance guarantees decreased in 2023 (this was on an obligor-weighted basis too).

For export finance, most transactions are guaranteed by export credit agencies at up to 100% of their value. In the sample surveyed, the average was 94%. This grants banks the capacity to be indemnified by an export credit agency (ECA) up to the level specified, meaning export finance has a particularly low loss given default (LGD) levels.

—

The findings of the 2024 ICC Trade Register Report are consistent with commentary throughout the year, regarding the significant disruptions posed by geopolitical uncertainty as well as the opportunity provided by technology. It is in this opportunity that positive forecasts seem to stem.

Importantly, however, the findings in this year’s report align with previous reports: that trade finance, SCF, and export finance present a low risk for banks. These trade finance instruments appear, in their nature, to be insulated from inevitable disruptions.

The post 2024 ICC Trade Register report positively upbeat despite global trade goods slowdown appeared first on Trade Finance Global.

In recent years, e-invoicing has transformed from a behind-the-scenes process into a cornerstone of tax compliance and business operations worldwide. Originally introduced in the early 2000s as a method for automating Accounts Payable (AP) and Accounts Receivable (AR) processes, e-invoicing was purely a technical tool used within the financial supply chain. It operated outside the scope of regulatory interest and carried little significance for tax departments.

However, in the last decade, e-invoicing has evolved into a legally recognised form of invoicing in most jurisdictions, standing on equal footing with paper invoices. This shift has injected a new dimension into e-invoicing—one that prioritises tax compliance, government oversight, and increased transparency in business transactions.

What is e-invoicing?

Invoicing practices have evolved significantly with the rise of digital technology. Initially, the move to digital invoicing meant sending PDFs via email, but it has since grown into a fully integrated e-invoicing system. 

At its core, e-invoicing refers to the exchange of an electronic invoice document between a supplier and a buyer. Unlike a traditional invoice, an e-invoice is issued, transmitted, and received in a structured data format, enabling automatic processing by both parties’ systems: a definition outlined in the EU Directive 2014/55/EU on Electronic Invoicing in Public Procurement and the VAT in the Digital Age proposal. This structure ensures that the data from an e-invoice can be imported directly into an organisation’s system without manual intervention.

The legal recognition of e-invoices as official carriers of indirect taxes like VAT or GST has placed them firmly under the purview of tax codes, driving businesses to adopt standardised e-invoicing systems.

The adoption of e-invoicing has brought significant benefits for businesses, including:

• Efficiency: E-invoicing automates the invoicing process, reducing manual intervention and speeding up payment cycles. Invoices can be processed and archived faster, with fewer human errors.
• Cost savings: By eliminating paper, printing, and postage costs, businesses reduce overheads and realise long-term savings. 
• Accuracy: Structured formats minimise data entry errors, ensuring greater accuracy in financial records and transactions. Automatically processed invoices also reduce the potential for mistakes during manual data entry.
• Compliance: E-invoicing systems often include built-in regulatory compliance features, ensuring that businesses adhere to local tax laws and invoicing standards.
• Authenticity and integrity: E-invoices are inherently more secure than paper invoices, with electronic signatures and seals ensuring authenticity, integrity, and traceability. These features make e-invoices more resistant to manipulation and fraud.

Governments, recognising the potential for increased tax revenue and reduced fraud, have begun to mandate e-invoicing systems, driving digitalisation across both the public and private sectors.

Advancements in technology have allowed e-invoicing systems to integrate with accounting and ERP systems, adding features like electronic signatures for security and compliance. Beyond invoicing, digitalisation is driving broader business transformations. By automating and standardising invoicing, businesses can streamline procurement, supply chain management, and financial reporting, improving efficiency and transparency.

As digitalisation in invoicing continues to expand with technologies like AI, blockchain, and advanced analytic, new functions – such as automated tax reporting and real-time fraud detection – will be enabled.

From post-audit to real-time reporting: The evolution of tax compliance

Any governments have implemented regulations requiring businesses to submit invoices electronically to tax authorities in real-time or near real-time, recognising their efficiency and transparency benefits. This model first emerged in Latin America in the early 2000s, where tax authorities validated invoices before they became legally and fiscally valid. Countries like Turkey and Italy soon followed suit, requiring businesses to comply with similar measures. 

Today, many countries have moved towards Continuous Transaction Controls (CTC). CTC systems mandate real- or near-real-time transmission of invoice data to tax authorities for validation, making it easier for them to enforce VAT laws and combat tax evasion.

Historically, tax authorities relied on a post-audit approach to e-invoicing, wherein businesses would submit periodic reports for tax audits after transactions had taken place. This system placed the responsibility for ensuring the integrity and authenticity of e-invoices on the trading partners, often involving electronic signatures or alternative methods to verify legitimacy.

However, the success of CTC systems in enhancing revenue collection and economic transparency has prompted many governments to shift away from post-audit models toward real-time reporting. The European Union’s “VAT in the Digital Age” proposal illustrates this trend, pushing for real-time reporting of cross-border transactions. As more regions adopt these systems, businesses must adapt to the complexities of real-time compliance, which is crucial for staying competitive in a digitally transforming global economy.

The expanding role of e-invoicing

As businesses and governments continue to embrace e-invoicing, its applications are expanding beyond traditional invoicing processes. Several emerging trends are redefining the role of e-invoices:

• Pre-populated tax returns: E-invoices are increasingly being used to automate the preparation of VAT/GST returns, reducing the administrative burden on businesses and improving tax accuracy.
• Carrier of environmental, social, and governance-related (ESG) data: E-invoicing can also serve as a vehicle for reporting environmental, social, and governance (ESG) data, including compliance with taxes like the plastic tax.
• Enabler of digital transformation: Beyond compliance, e-invoicing is driving the digitalisation of other business processes, such as payments, invoice financing, and procurement. This integration is helping companies unlock further efficiencies and improve their cash flow management.

E-invoicing has rapidly evolved from a niche financial tool to a globally recognised method of streamlining business operations and enforcing tax compliance. As tax authorities worldwide adopt real-time reporting models, businesses are reaping the benefits of greater efficiency, accuracy, and cost savings. 

Moving forward, e-invoicing will inevitably play an increasingly central role in digitising business processes, driving compliance, and contributing to broader efforts toward transparency and economic modernisation.

The future of e-invoicing holds exciting possibilities, from facilitating automated tax reporting to embedding ESG data into routine financial transactions. As this trend continues, businesses and governments must work together to harness its full potential and unlock new opportunities for growth in the digital age.

The post E-invoicing: Automation, global tax compliance, digital transformation appeared first on Trade Finance Global.

Credit insurance and factoring work together to mitigate risks and enhance business liquidity, making them vital tools for navigating international trade. Factoring converts receivables into immediate cash, while credit insurance protects against buyer non-payment, providing businesses with the confidence to enter new markets. 

The mini magazine outlines some challenges with integrating credit insurance and factoring and posits as to how technology can be leveraged to streamline processes, enhance decision-making, and improve transparency in credit insurance and factoring. It also turns to the future, considering how regulatory changes – particularly Basel III and IV – will impact the factoring and credit insurance industry.

The panel consisted of Shan Aboo, Chief Commercial Officer for Asia Pacific, Allianz Trade; Neil Shonhard, Chief Executive Officer, MonetaGo; Dorota Szcześniak, Member of FCI Executive Committee and Supply Chain Finance Committee; and Karol Leszczynski, Product Manager, Comarch. The breadth and depth of their collective expertise ensures that the topic is done justice when translated into a magazine format.

Deepesh Patel, Editor-in-Chief at TFG, said, “This publication comes at a crucial time. Businesses worldwide are seeking ways to navigate uncertain markets, placing factoring and credit insurance at the forefront of the discussion. I had a fascinating discussion with the panel in Seoul, and I’m confident that this resource will prove invaluable for factors, insurers, businesses, and anyone interested in the future of trade.”

_

The post Whitepaper launch: Factoring and credit insurance: A partnership for financial resilience appeared first on Trade Finance Global.

• India introduced digital Trade Receivable Discounting System (TReDS) platforms in 2017 to help SMEs overcome late payment issues, with three licensed entities expected to reach $25 billion in throughput by FY 2024-25.
• TReDS platforms have proven commercially viable and contributed significantly to SME financing by offering innovative auction-based pricing, removing collateral requirements, and promoting factoring adoption.
• Building on TReDS success, India launched International Trade Financial Services (ITFS) platforms in GIFT City for cross-border trade finance, with potential for exponential growth due to wider geographical coverage and product offerings.

Nowadays, every conference, event, and forum across the globe seems to have some discussion on SMEs and how to resolve the challenges they face in global markets – and for good reason. SMEs contribute immensely to employment generation, manufacturing, capital formation, and trade, making them vital to any domestic economy.    

When it comes to trade, one of the major challenges that SMEs face is late payments from their suppliers, which increases the need for costly working capital. Around the world, countries are taking their own approaches to tackle this: often, legally binding buyers to a specific time within which payment must be made, for the goods supplied or services rendered.

But in actuality, these laws are difficult to implement, and many prove ineffective in practice.

India turns to digital platforms 

This was the case in India too – small businesses critical to the economy were struggling because they couldn’t get paid by their buyers on time, despite government legislation.

To resolve this issue, the Reserve Bank of India (RBI) proposed a digital trade receivable discounting marketplace for SMEs in March 2014: marking the beginning of the Trade Receivable Discounting System (TReDS) platforms in India. 

After an elaborate evaluation process and drafted guidelines, the RBI gave three entities licenses for building and operating the TReDS. The platforms went live in 2017 and were the first instance of a digital marketplace being regulated by the financial regulator of the country.

Both the RBI and the Indian government have taken various measures to support the platforms. Some of the significant steps taken by RBI are: 

• Creating a special clearing window dedicated to settling transactions that originated on the TReDS platforms.
• Ensuring that KYC and AML done by the TReDS platforms are accepted by the Banks and non-bank factors.
• Providing a transparent price discovery mechanism through a unique auction process. 
• Introducing the master agreement concept between participants and the TReDS platform (which eliminates the need for bilateral agreements between participants).
• Integrating TReDS entities with the central registry for the registration of factoring units. 
• Allowing TReDS platforms access to the central KYC (CKYC) registry.
• Ensuring that exposure through TReDS is considered part of priority sector lending by the banks.  

The Indian government has also supported the platforms by making registration on TReDS platforms compulsory for all central public sector enterprises, and for all business entities with turnover greater than $30 million. They have also implemented appropriate changes in the Factoring Regulation Act to align with workflows on TReDS platforms.

TReDS: seven years and growing

Over the last seven years, the three TReDS platforms have experienced consistent growth.  

Together, the three platforms are expected to reach a throughput (i.e. total amount discounted) of $25 billion in FY 2024-25, with around 90,000 SME sellers, 5,000 buyers, and 50 financiers. The combined short-term trade asset base is expected to exceed $6 billion.

The TReDS model has also proven to be commercially viable, with all three platforms being cash-positive. Based on market information, delinquencies sit at 0.2%. Making credit insurance available which is aligned with the TReDS workflow can more than double present volumes. This would increase liquidity and encourage financiers to invest more in short-term trade assets – ultimately benefiting SMEs.

The TReDS ecosystem has contributed significantly to the short-term working capital finance ecosystem for SMEs in India. Some of the contributions include:

• Proving how digital platforms can resolve complex financing challenges in the B2B space.
• Creating innovative auction-based price discovery, which reduces borrowing costs.
• Removing collateral and recourse to the seller to better align with the needs of SMEs. 
• Minimising costs for financiers to get a granular self-liquidating portfolio.
• Extending the usance period for buyers to align their working capital cycle.
• Promoting widespread adoption of factoring as a financing tool.
• Maximising security by allowing integration with the ERP systems of all participants.
• Eliminating geographical or time constraints by making the platform accessible from anywhere at any time.
• Removing scalability constraints in terms of liquidity and volume of business.   

IFSCA launches cross-border trade finance platform in GIFT City 

With TReDS’s successful implementation in the domestic market, a new digital cross-border platform is gaining traction under the watchful eyes of the International Financial Services Centres Authority (IFSCA). 

IFSCA – the unified financial regulator in Gujarat International Finance Tec-City (GIFT City) special economic zone in India – calls these new digital cross-border platforms ‘International Trade Financial Services (ITFS) Platforms’.  

GIFT City is being developed as a global financial and IT services hub – a first of its kind in India – and is designed to be at par with globally benchmarked financial centres worldwide. GIFT City’s master plan facilitates a multi-service special economic zone with International Financial Services Centre (IFSC) status, a domestic finance centre, and the associated social infrastructure. 

ITFS is the electronic platform that provides trade finance services at the IFSC. It facilitates cross-border trade financing through a bidding mechanism to global buyers and sellers; financial institutions in India and abroad are participating.

IFSCA issued four licenses to build and operate the ITFS Platforms. Three have been commercially live as of July 2023, and the fourth has completed the regulatory sandbox. 

The ITFS platforms gaining traction amongst buyers, sellers, and financial institutions: over 15 factors and banks are already transacting on the platforms. 

Opportunities and challenges for ITFS platforms

Compared to TReDS, ITFS platforms have more expansive geographical coverage and more product offerings. As such, their potential for exponential growth is immense.

Trade finance professionals anticipate that the ITFS platforms will grow more successful. Some of the reasons are: 

• The widespread adoption of platforms and marketplaces in all formats across the globe.
• Enabling laws passed in different countries aligning with the Model Law on Electronic Transferable Records (MLETR) to fully digitise vital trade documents (like bills of exchange, promissory notes, and bills of lading).
• Platforms and marketplaces that operate in multiple legal jurisdictions will help drive further adoption of MLETR in various countries. 
• More than 80% of cross-border trade today is on an open account basis. With the implementation of MLETR, these trade transactions will become much more fundable by financial institutions than they are today. 
• Platforms and marketplaces provide unparalleled convenience of access in terms of geography, timing, interoperability, and ease of operation.
• ITFS platforms are operated under strict monitoring by financial regulators, which enhances their credibility.
• Access to the central registry makes platforms safer for financiers. 

Despite the optimism, a few challenges persist for the ITFS platforms, including an absence of uniform stnadards and regulations for open account transactions. Since funds are settled outside the platform, high turnaround times also pose a problem; as does awareness creation, and concerns of data privacy.

Nonetheless, it is believed that ITFS platforms will benefit from network effects, leading to value creation for participants and expansion of the market. 

The adoption of MLETR, increased volumes for open account trade, interoperability, seamless integration capability, ensured liquidity, transparent regulations, the possibility of tokenisation and secondary market operations will all make platforms like ITFS the future of global trade finance. These developments will be exciting to watch in the coming years.

The post Growth of B2B marketplaces for factoring and invoice discounting: the Indian experience appeared first on Trade Finance Global.

According to the 2024 FCI Annual Review, the global factoring industry has a 8.4% 20 year- compound annual rate of growth. This is an impressive growth rate, but importantly, there is still a significant chance for the industry to grow further.

What needs to happen for this to take place?

Deepesh Patel, Editor, Trade Finance Global, spoke to Kevin Day, CEO, Lendscape, at FCI’s 56^th Annual Meeting in Seoul to discuss some of these key trends and ideas. 

Impacting the world of receivables finance and factoring 

Lending is never an easy business, especially when there are numerous macroeconomic challenges. 

To try to create a more seamless process, Lendscape supplies software and technology to banks and non-banks around the world in support of their factoring, business discounting, asset-based lending (ABL), and supply chain finance businesses with the goal of enabling smarter lending. 

This is done by reducing the cost of lending, making lenders themselves more efficient by driving a more digital agenda and enabling lenders to expand their markets and to deliver critical funding to small and medium-sized enterprises (SMEs) – the backbone of the economy. 

With significant changes taking place in the wider asset-backed finance landscape, market participants face several headwinds. Historically, financial products in the commercial finance sector have been excellent products, enabling businesses to unlock their balance sheets and generate working capital. 

However, Day said, “As a marketplace, I think we tend to overcomplicate things. And I think what we can see is opportunities to, by using digitalisation, offer a much more simplified lending solution.” Increasing simplicity expands the growth potential and enables lenders to support the market. 

Addressing key challenges and macro trends within the invoice finance industry 

Lendscape CONNECT seeks to connect the dots between the various technologies in the space, including data extraction technology to take data out of clients’ enterprise resource planning (ERP) and accounting software, for solutions for tracking and monitoring detailed shadow ledgers. 

Day said, “Essentially, we take that data from the accounting software, bring it into the lender’s environment to normalise it, effectively taking data and converting it into information.”

The new system automates borrowing-based calculations by using data to determine the amount of money that can be lent. This process happens without human intervention, providing SMEs with a hands-free experience.

For lenders, it maintains control over the assets while offering a more efficient and user-friendly service to borrowers.

This type of technology fits in directly with FCI’s focus of growing international trade by supporting new and innovative projects.

Day said, “When a client raises an invoice, and it is electronically sent to and received by the lender, it can be integrated into the FCI factoring system. The whole thing can become a big digital ecosystem.”

Linking technology and education: Adapting products to address the needs of emerging markets 

With the conference taking place in South Korea at the heart of ASEAN, the development and growth of factoring as an industry across different geographies was a key theme. 

One of the main challenges identified is the difference usage of factoring in the West versus its usage in emerging and developing markets.

In this respect, Lendscape is well positioned to either address the unique character of this slightly different segment and/or develop products that are better suited to the factoring industry in these fast-growing developing and emerging economies. 

One priority for Lendscape in this respect is sharing knowledge. With extensive amounts of knowledge and best practices established over many years in developed markets, Day said, “I think it is our duty to actually make that knowledge available to the developing markets. Why learn those hard lessons that have been learned previously?” 

As a strong advocate of training, Lendscape sponsors the education programme of FCI. Moreover, in terms of actually making technology available, there are important accompanying factors to share, such as the presentation of the built-in knowledge and expertise that develops around such utilities. 

Day said, “And so I think by making that technology available, best practice, training, and education, I think we can actually help all of these markets to develop and grow successfully.” 

This educational role through FCI Academy for a technology company such as Lendscape is important, as it provides a return on investment. Day said, “I think when you talk about education, you talk about investing in people. And by investing in people, effectively, you are building up your human capital, and that then actually supports your business as it grows. What we get out of it, really, is the fact that it makes our lives easier.” 

As the technology is built around best practices, the more organisations that adopt best practices, and more operations become more effective and streamlined. 

Day said, “So effectively, we are also helping ourselves. But of course, as well, we want to see this product grow. We believe in this financial product. We think it is really good for supporting SMEs, and we want to make sure that we are at the heart of actually driving forward and helping organisations push and encourage and nurture this business.” 

Key growth trends in the receivables and supply chain finance industry 

The landscape of global market growth is showing some impressive trends, particularly in emerging economies. Day said, “Obviously, it’s from a small base, but the growth is very dramatic, especially in Africa and other emerging markets.” This growth contrasts with the patterns observed in developed markets where many products have reached a saturation point in terms of adoption.

In developed economies, the dynamics are shifting as traditional financial institutions face increasing competition from fintech companies. This challenge has spurred innovation, prompting organisations to reassess and revitalise their offerings. 

Day said, “Organisations are looking at how they can repackage and reposition their offerings to make the borrowing experience much easier for the end user.”

Such strategic adjustments are essential for transitioning certain financial products from niche alternatives into mainstream lending solutions, which are poised to significantly support business development and economic growth.

The post VIDEO | Kevin Day on the launch of Lendscape CONNECT appeared first on Trade Finance Global.