• AI will transform trade finance operations this year, but with growing digital demands comes growing cybersecurity concerns.
• Asset tokenisation will also grow more commonplace.
• For businesses, flexibility in face of changing demands is essential.

Digital trade finance has been top of mind for years, but most will agree that 2024 has seen a significant shift in mindset towards adoption. 

While the pandemic underscored the need for digital solutions, the trade finance sector has remained fragmented, burdened by paper-heavy processes, and hesitant to fully embrace change. However, 2024 saw substantial progress, with several key developments accelerating the widespread adoption of trade finance software.

A mindset shift

Many financial institutions and corporates are now understanding the value of digital trade finance, having previously regarded it as expensive, resource-intensive, and an unnecessary supplementary tool rather than a strategic imperative. 

Attitudes have softened, driven by clear business cases and competitive pressures, with resistance and uncertainty reserved for those held back by inertia and short-term perspective. As companies turn increasingly to digital solutions, it is becoming easier to cite return on investment (ROI), fast implementation, and ecosystem integration among digitalisation’s benefits. Companies leveraging digital solutions for document exchange and verification report significant reductions in processing times, transforming trade finance transaction completion from days and weeks into minutes and hours.

Automation of repetitive tasks like bank guarantee text checking using artificial intelligence (AI) and improved fraud detection have contributed to cost savings, making digital tools a more attractive proposition. Blockchain technology, once met with scepticism, has matured into a reliable tool for creating tamper-proof digital ledgers and fostering trust across global supply chains. 

Policymakers, particularly in regions like the EU and APAC, have continued to push for greater standardisation, transparency and digitisation in trade finance. With initiatives like the UNCITRAL Model Law on Electronic Transferable Records (MLETR), the Electronic Trade Documents Act (ETDA), and bodies like the ICC’s London-based Centre for Digital Trade and Innovation (C4DTI) playing a pivotal role in pushing alignment between regulatory incentives and digital transformation, the regulatory landscape has also now started to promote adoption.  

In terms of the vendor landscape, there has been a marked shift towards collaboration amongst the existing active handful of competitive platform providers. Surecomp’s RIVO™ solution is one such leading facilitator of fintech interoperability and has significantly expanded its network over the last year. 

Enabling banks and corporates to execute trade finance transactions faster and more efficiently and with greater data insights, buyers and suppliers are seeing huge value in efficiency gains, transaction costs and risk mitigation. A pattern has emerged across the trade finance ecosystem, with partnerships like the one between Swift and the ICC collaborating on a new application programming interface (API) standard for guarantees – a pilot that Surecomp participated in alongside customers BNP Paribas and Dutch logistics company Vanderlande – delivering tangible progress and proving that digitisation is accelerating. 

“This is the beginning of a new and very promising journey in digitalising bank guarantees,” commented Marie-Laurence Faure, Head of Digital Trade Channels at BNP Paribas. “It is a significant industry milestone, and we invite all other trade finance stakeholders to join this initiative to benefit the entire ecosystem.”

“Taking a collaborative and standardised approach with our trade finance partners is proving hugely valuable in helping us gain better control and visibility of our guarantees and expedite trade to enable more robust future growth,” said Eddy Veenstra, Customer Finance Director at Vanderlande. 

Despite these advancements, challenges do persist, with the journey towards fully digitised trade finance far from complete. Many banks still struggle with ageing IT systems that are ill-equipped to integrate with modern trade finance platforms. The cost and complexity of overhauling these systems remain a significant barrier; fragmented regional disparities and the absence of universally recognised legal and operational frameworks are still hampering cross-border adoption; and financial inclusion remains an issue. While large corporates have made great strides in adopting trade finance software, small and medium-sized enterprises (SMEs) often remain excluded due to cost and resource constraints. Bridging this gap with affordable SaaS solutions will be critical to reducing this adoption barrier and driving financial inclusion. 

Riding the wave in 2025

Looking ahead several trends are poised to define the digital trade finance landscape next year. AI will continue to revolutionise trade finance operations, offering more sophisticated tools for risk assessment, fraud detection, and process automation. Predictive analytics will enable banks and corporates to anticipate market shifts and optimise their trade finance strategies in real time. AI will also play a critical role in enhancing inclusivity, as it reduces the thresholds to the sophistication of the trade finance instruments.

Enno-Burghard Weitzel, Surecomp’s Chief Solutions Officer, highlighted how embedding AI into digital trade finance will be “instrumental” in empowering customers, as they “enable banks to automate a repetitive, time-consuming verification task which was previously causing massive delays in guarantee issuance.” 

The tokenisation of assets, including letters of credit and invoices, will become more mainstream, unlocking new avenues for liquidity in trade finance. Moreover, central bank digital currencies (CBDCs) are expected to play an increasingly significant role in cross-border trade, facilitating faster and more secure transactions.

Regulators worldwide are likely to adopt more comprehensive frameworks to support the digitisation of trade finance. Initiatives like the MLETR will gain traction in additional countries, creating a more consistent legal environment for digital trade documents. In parallel, environmental, social, and governance (ESG) considerations will gain prominence with ESG metrics being embedded into trade finance processes to ensure compliance with sustainability goals.

As digital ecosystems grow, cybersecurity will become paramount. In 2024, we saw some high-profile breaches highlighting the vulnerabilities inherent in interconnected networks, reinforcing the need for robust cybersecurity protocols. In 2025, we expect to see increased investment in technologies to protect trade finance networks from evolving threats.

Overall, the democratisation of trade finance will be a central theme in 2025. Governments, development banks, and fintechs will collaborate to create affordable, scalable digital solutions tailored to the needs of SMEs. Enhanced digital identities and simplified onboarding processes will further lower barriers to entry.
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The evolution of digital trade finance in 2024 underscores a profound shift in the industry’s mindset. Digitalisation has moved from a ‘nice-to-have’ to a ‘must-have’ feature. The momentum generated over the past year will undoubtedly propel the sector towards even greater transformation in 2025. Collaboration, innovation, and inclusion will be the cornerstones of digital trade finance in 2025. As technology, regulation, and market demand converge, global trade is poised to become digitalised by default, reshaping how businesses transact and unlocking new opportunities for growth.

In 2025, the question will no longer be whether to digitise but how quickly and effectively organisations can adapt to this rapidly changing landscape. The tide is turning, and the winners will be those who ride the wave and embrace the value of digital trade finance with agility and vision.

The post The tide is turning on digital trade finance: Ride the wave or be swept out to sea? appeared first on Trade Finance Global.

With the passing of the UK’s Electronic Trade Documents Act (ETDA), the digital trade world is changing. While this is welcomed news for the entire industry, it also means that new partnerships and innovations need to come to fruition.

The legal framework is now a reality, the burden is now on the industry to take advantage of the moment. 

That is precisely what Surecomp and Wave BL are doing with their collaboration. To learn more about this collaboration, and their efforts to further digital trade, Trade Finance Global’s Brian Canup (BC) sat down with Enno-Burghard Weitzel (EBW), Senior Vice-President of Strategy, Digitization and Business Development, Surecomp and Ofer Ein Bar (OEB), VP Business Development, Wave BL.

BC: Let’s jump right into things. Can you give an overview of the Surecomp and WaveBL collaboration?  

EBW: We both share the vision of the need for collaboration to effectively bring digitisation benefits to the trade community. As our solutions complement each other nicely, our shared customers benefit from an enriched user experience. 

While users on RIVO can manage the full Letter of Credit (LC) lifecycle, with the connection to WaveBL, they can enjoy greater value from the deep integration of their eBL into their LC flow. With a stronger value proposition, the solutions can jointly and individually provide better business cases to corporates and banks, enabling them to have faster ROI.

OEB: The WaveBL platform is used regularly for the issuance of electronic Bills of Lading, by several of the largest container ocean carriers, issuing thousands of electronic Bills of Lading every month. The majority of trade transactions are between an exporter and an importer and do not require banks to be involved in the trade documentation process. 

As the adoption of electronic documents by banks is very slow to say the least, partnering with Surecomp, with its expertise in the trade finance world, was only a matter of time. 

Surecomp is a leading trade finance expert with a clear advantage within the FI industries. The joint solution will allow banks and corporates to get access to the WaveBL Bills of Lading through the Surecomp Rivo platform. The Surecomp platform will integrate the WaveBL eBL into the trade finance LC flow, creating a fully streamlined end-to-end transaction for each party involved. Stay tuned, as the next stage will come soon!

BC: The big news of the year is the passage of the ETDA in the UK. How does this landmark legislation fit in with Surecomp and WaveBL’s partnership?  

EBW: It’s at the core of our partnership. We both want to foster the adoption of digital documents. All the while national law is still enforcing paper, both of our teams have to spend a lot of time convincing parties that going digital with dedicated solutions is an alternative. 

Now, everyone can rely on national law in more and more jurisdictions, namely the UK and Singapore. So any BL issued referencing Singapore or UK law, now can be issued as eBL, which sets the legal basis. 

WaveBL brings the technical expertise for reliable and scalable digital issuance, and the RIVO platform enables parties to manage the whole trade finance transaction with all counterparties. It seems like we’ve all just waited for the UK to be the digital booster.  

OEB: The ETDA gives electronic bills of lading and related trade documents the same legal status as their paper counterparts. The landmark legislation modernises and overhauls outdated laws surrounding the use of electronic trade documents in international trading. 

ETDA makes cross-border and international trade more efficient, cost-effective, and environmentally sustainable. ETDA is part of the global effort to harmonise and digitise global trade. Besides ETDA removing a huge barrier to trade digitalisation, it acts as a vote of confidence by the highest authority regarding the path we are on.

BC: What are the opportunities for trade digitalisation in the UK (and beyond), and how can businesses, both large and small, take advantage of them? 

EBW: We fully embrace the work of the UK team of experts, from the legislation, the ICC and the industry. Now enabling any trade contract and title document to be fully digital, is truly pivotal since a major share of all the trade contracts out there are based on the UK law already today. 

So no more rule books are needed to accept digital documents in a small club with high barriers to join. Now everyone has the option to adopt rapidly across the industry, and across countries. This will put some healthy competitive pressure on other countries to follow quickly. On RIVO, parties will be able to issue and manage any document as digital original, significantly reducing the barriers to trade and making trade finance available to everyone.

OEB: The UK is considered a major hub for global trade, leading the legislation worldwide. This has been the case with COGSA 1992, and now with the ETDA 2023, taking MLETR a further step.  

According to the UK Department for Science, Innovation and Technology, the UK economy is set to see over £1 billion boost over the next decade, with UK businesses enjoying huge cost savings. 

The UK ETDA also acts as the cornerstone for digitalising trade across the world. Global trade is facing new regulatory requirements and industry standards. Environmental, social, and governance (ESG) compliance issues are also playing a role. In these uncertain economic times, supply chain disruptions and changing customer demands are also leaving their mark. 

However, the adoption of electronic trade documents acts, such as the Electronic Trade Documents Act (ETDA), is expected to reduce friction and financing gaps, making it easier and cheaper for companies to engage in cross-border transactions. It is now the time to realise these spoken benefits.

BC: What are some of the challenges that come with digitalising trade documents, and what is Surecomp doing to address these issues? 

EBW: It seems that the key prerequisites for going digital are the legal foundation, the technical basis and the willingness of the parties to change. We’ve touched upon Singapore and the UK, the other G7 countries pledged to implement MLETR in their national laws by 2025.  Surecomp are actively involved in the working groups in Germany and France. 

So let’s consider this done. 

Going digital requires a technical platform, that is open, scalable and fit for purpose, i.e. trade finance specific. Openness is key because the trade community is so diverse, two trade transactions will almost never include identical parties. And with so many parties and specialist technical solutions around, the more open a solution, the greater the value it can provide to the community. 

Our successful partnership and technical syncing with WaveBL serve as an excellent demonstration of our strategy in action. Additionally, there are various other solutions for issuing electronic Bills of Lading (eBLs), and we plan to integrate with those that are open to collaboration in the next phase. 

This will create a generic ‘eBL value proposition’, providing a service without forcing the parties to limit their ability to conduct their own business. Lastly, we’re engaging with the experts and practitioners in the industry to showcase the level of maturity and functional coverage. Sharing success stories is a necessity to support the change journey. 

BC: Do you have a case study for the successful implementation and use of Surecomp’s RIVO platform?  

EBW: Being a digital collaboration platform, RIVO serves corporates, financial institutions and fintechs alike. Hence, any case study can only represent a small fraction of RIVO’s value proposition. 

But, let’s look at one corporate, with a centralised treasury function at the headquarters. Operating globally, they engage hundreds of trade finance experts spread across 50+ countries to support their sales teams in their product delivery. 

Their key criteria for choosing RIVO as their trade finance management solution were UX and reporting. With so many colleagues dealing with their guarantees, stand-bys and commercial LCs, they needed a solution that is easy to onboard, intuitive in use and provides strong, yet flexible workflows. 

Being a publicly listed company, they used to handle their quarterly financial reporting to their Group Finance manually. Now, they can automate this process using our built-in Business Intelligence (BI) reporting tools. These features alone made RIVO an attractive choice for them. Furthermore, as a Software-as-a-Service (SaaS) solution, RIVO keeps getting better each quarter with new features. For instance, we recently collaborated with ICC Germany on a proof of concept for electronic Bills of Lading (eBLs), adding even more value for the company. 

We provided evidence that all trade parties, exporters, importers, as well as the banks, can fully manage a WaveBL bill of lading through RIVO. In the next phase we’ll extend this to further eBL issuers, invite shipping companies and further participants. 

So, without having to lift a finger, the company we featured in our case study can now take advantage of electronic Bills of Lading (eBL) features and easily transition to digital workflows for their Letters of Credit (LC). This experience also offers valuable insights from a fintech perspective, making it a compelling case study in that regard as well.

BC: Trade digitalisation is gaining more mainstream acceptance now, with the UK codifying it, and numerous other jurisdictions working on similar laws. What are the next steps that will make tangible progress within the international trade industry?

EBW: Pivotal players actually pulling it into their day-to-day business. If digitisation is bringing an economic benefit, each party should share these benefits with its counterparts actually going digital. E.g. a shipping company charging higher fees for non-eBLs, a bank waiving the courier charges under eUCP LCs, and corporates giving better payment terms if all documents are sent digitally. The quicker people experience tangible benefits, the faster they’ll adopt the new technology.

OEB: To drive faster digitalisation and adoption of electronic documents in global trade, strong alliances are needed between leading companies in global trade are needed. The partnership of Surecomp and WaveBL is a prime example of how powerful and successful such an alliance can be, revolutionising the global trade industry for the greater good. 

Digital transformation of international trade reduces the costs of engaging in international trade, connecting more businesses and consumers globally. This requires policymakers to address the unstoppable digitisation of trade documentation. End-to-end trade digitalisation requires global access to reliable, affordable, and fast connections to close the digital divide as well as a legal framework enabling secure data transmission across borders. 

Data and process standards for the submission of shipping instructions and issuance of the bill of lading have already been established through DCSA and accepted by many container carriers, with more to follow. What is crucial to move ahead is the worldwide, across the board, adoption of eBLs and related trade documents using platforms such as RIVO and WaveBL.

The post The future of digital trade finance: An in-depth Q&A with Surecomp appeared first on Trade Finance Global.

The potential impact of the UK’s incoming Electronic Trade Documents Bill goes far beyond a boost to the country’s trade prospects. By enshrining in law that a digital document is equivalent to physical paper, the reform means that counterparties can issue and process documents electronically by default, – and with UK law acting as the basis for trade transactions across much of the world, the opportunity for transformation is unprecedented.

On paper, there is little remarkable about the Electronic Trade Documents Bill. At just seven pages long, its passage through parliament has so far been free of controversy or legal wrangling. When initially proposed, lawmakers expressed surprise at how little resistance they encountered from industry participants.

Its purpose is straightforward. Currently, English law gives special significance to “possession” of a trade-related document, such as a bill of lading (BL), but only applies that to tangible items. The bill makes electronic documents legally equivalent to physical ones, meaning “possession” can cover digital versions too, providing certain conditions are met.

Crucially, the bill explicitly states that “an electronic document has the same effect as an equivalent paper document,” and anything done in relation to the digital version carries the same legal weight as it would for physical paper.

The domestic impact of the new law is expected to be significant. The UK government estimates that globally, there are nearly 30 billion paper trade documents printed and circulated every day. According to the UK government, going digital will reduce processing times from hours or days to just 20 seconds while cutting carbon emissions by at least 10%.

A government impact assessment last year concluded that the reforms would increase trade volumes by removing barriers, lowering costs, decreasing transaction times and improving transparency. It also said the opportunity for increased participation could bring wider access to trade finance for SMEs.

But the significance of the bill goes far deeper than giving a boost to the UK’s trade prospects. A UK law facilitating electronic trade documents solves two long-standing problems at once, and has benefits far beyond the borders of the country.

Creating a global solution: Adopting trade digitisation  

First, the lack of legal footing for digitisation has been a major barrier to adoption. Although numerous initiatives and innovations have been implemented to facilitate the use of electronic BLs, the absence of legislative support for this process has resulted in parties having to establish contractual agreements to govern the handling of documents..

Second, UK law is widely used today as the basis for trade agreements and transactions around the world. Instantly, any contract where parties agree on using UK law can be digital by default, rather than the result of negotiations between parties. If something goes wrong, the digital trade documents can be presented in court.

Chris Southworth, Secretary-General of UK International Chamber of Commerce (ICC) said in an October 2022 article, “This is the breakthrough we have all been waiting for.” 

“It is a game-changing moment, with so much of world trade operating on English law, including 80% of all bills of lading,” he wrote. “It is also the missing piece of the jigsaw in the digitalisation of trade. The legal requirement to handle commercial trade documents is holding up the implementation of new digital trade corridors, the scaling up of technology solutions and the standardisation of trade platforms, processes and systems across both the public and private sectors.”

Even though the bill has yet to be enshrined in law, UK policymakers are already pushing for equivalent reforms in other markets. The Commonwealth group of nations is emerging as fertile ground for adoption; the 56-member bloc is aiming to boost overall trade to $2 trillion by 2030, and sees digitising trade documents as a crucial step in that journey.

The issue was top of the agenda at a London meeting of Commonwealth trade ministers in June, the first such summit since before the pandemic. Nigel Huddleston, the UK’s Minister of State for International Trade, told reporters at the meeting that “the legal backing of this is really important.”

“Digital will really help open up a lot, [not just] on basic costs relating to trading goods across borders, but it’ll help enable the opening up of services trade as well,” he said.

Ahead of the meeting, The ICC UK’s Southworth called on ministers to reach an agreement on adopting electronic trade documents, saying this is the “golden moment to reform laws and digitalise trade across the Commonwealth.”

Commonwealth Secretary-General Patricia Scotland confirmed the association is already looking at models for digitisation, including that of the UK as well as Singapore.

Real-life impact of the ETDB

In practice, there could be a few wrinkles to iron out. In its response to a government call for evidence on the bill, law firm Kennedy said clear definitions of “possession” and “exclusive control” still need to be established, and that lawmakers should consider how disruptive technologies could impact electronic trade documents in future.

But the bill should have an immediate impact. The reforms are broad, covering a full range of trade documents including BLs, promissory notes and bills of exchange, as well as various receipts and certificates.

It also requires that a “reliable system” is used to verify documents are originals rather than copies, cannot be altered by unauthorised parties, and cannot be controlled by more than one person at any given time. Thankfully, fintech providers are already offering platforms and solutions capable of meeting those requirements. 

Surecomp’s RIVO solution already issues electronic trade documents that will be fully compliant with the UK law, while bringing together corporates, financial institutions and other parties onto a single platform.

At the time of writing, the bill is already at an advanced stage. It has been through all stages in the House of Lords, as well as two readings in the House of Commons. It is currently under examination by a parliamentary committee; once that stage is complete, the bill will be read a third time, final amendments considered and royal assent granted.

The post Is the UK Electronic Trade Documents Bill the turning point for digital trade? appeared first on Trade Finance Global.

Today’s volatile market poses many challenges for trade finance banks and their corporate clients, including supply chain disruptions, rising costs, ongoing compliance demands, risk of fraud and growing ESG scrutiny. 

But removing the paper from trade finance comes with challenges, and financiers have to weigh whether to buy their solutions through a third party, or build their own capabilities in-house. 

Last week, Deepesh Patel, editor at Trade Finance Global, spoke to Enno-Burghard Weitzel, SVP Strategy, Digitization & Business Development at Surecomp, in a webinar entitled “Taking trade finance digital – buy vs build.” 

Adopting digital solutions 

In today’s digital era, banks and corporations face challenges in optimising trade finance processes. Surecomp conducted a survey to evaluate digital solution adoption and identify issues. 

Patel and Weitzel discussed the findings, examining options for banks to tackle these challenges by deciding whether to create digital trade finance solutions in-house or outsource them. 

Trade finance has long relied on traditional methods and relationships. As the global economy becomes more digital, it’s crucial for institutions to adapt their trade finance operations. 

Digitalisation offers a chance to streamline processes, increase efficiency, and improve customer satisfaction. Benefits include reduced costs, faster transactions, and better risk management. 

However, the journey toward digital transformation is challenging. Institutions must decide whether to invest in existing platforms from external providers or build custom digital solutions in-house. This “buy or build” dilemma holds significant implications for long-term success and competitiveness in a rapidly evolving trade landscape.

Surecomp’s survey findings: Discontent and desire for improvement 

To gain a better understanding of the current state of play, Surecomp conducted a survey of banks and corporates to assess their adoption of digital trade finance tools and identify struggles and growth opportunities. 

The results unveiled a significant level of dissatisfaction among banks and corporates with their current trade finance processes. 

A notable 41% of banks expressed discontent with the time taken to issue finance approval to their customers, with 35% of them being not happy “at all.” 

Similarly, 45% of corporates reported being unsatisfied with the time it takes to receive approvals from their financiers. 

Unsurprisingly, both banks and corporates shared a desire for improvements in their trade finance processes. The top responses in this regard were “more digital” (53% for banks, 52% for corporates), “more time-efficient” (53% for banks, 52% for corporates), and “more streamlined and simple” (41% for banks, 45% for corporates). 

Interestingly, despite this strong desire for improvement, the survey results revealed a noticeable gap when it comes to adoption.

While 71% of banks and 73% of corporates acknowledged that process automation is a top priority for internal stakeholders, a significant proportion have yet to implement digital trade finance solutions to automate their processes. 

A striking 59% of banks and 70% of corporates reported not using a digital trade finance solution for process automation. 

Furthermore, 93% of banks continue to rely on email as the primary mode of communication with their trade finance customers, highlighting the ongoing use of time-consuming and error-prone manual processes. 

“This gap presents a substantial opportunity for growth and transformation, and by overcoming it, banks and corporates can unlock the full potential of digitalisation, streamline their processes, and achieve enhanced efficiency,” said Weitzel. “The challenge, however, lies in determining the most suitable means of doing so.” 

To buy or to build, that is the question 

The trade finance industry has experienced a surge in technological innovation in recent years, with a plethora of solutions emerging to address various pain points and inefficiencies in the sector. 

However, the landscape is characterised by fragmentation, with numerous fintech solutions and blockchain platforms in various stages of development. 

Many solutions have yet to move beyond the proof-of-concept stage to live production, and the events of recent months, where several large-scale initiatives have closed down after failing to reach commercial viability, have yet to inspire confidence. 

Weitzel said, “Banks have invested enormous sums of money into digital transformation, but they’re making slow progress.”

“Whether it be building API connectivity for corporate clients into the backend, or spending money on integrations into platforms that don’t achieve scale, things aren’t moving as fast as they may have expected.” 

Meanwhile, the proliferation of new technologies creates new challenges. 

Not only do stakeholders face the risk of investing in technologies that may eventually fail, but the need for standardisation across various solutions creates significant integration hurdles, with banks and corporates finding themselves having to invest in multiple platforms to cater to different aspects of their operations. 

Given this backdrop, building a custom, in-house solution may appear attractive in terms of flexibility and control. 

By building their own services, banks can create unique features and capabilities that distinguish them from their competitors, creating a tailored offering that caters to the specific needs of their clients. 

This competitive differentiation can be a valuable asset in an increasingly crowded and competitive trade finance landscape, enabling institutions to stand out and capture a larger share of the market. 

However, only some financial institutions are able to roll out their own digital services: while larger banks may have access to specialised teams capable of designing and implementing digital trade finance systems, smaller institutions might need more resources and knowledge. 

What’s more, the risks and limitations inherent in this approach often outweigh the potential benefits. 

“Building a custom trade finance solution demands significant time and human resources,” said Weitzel. “By opting to buy, banks can allocate their resources more strategically, focusing on activities that drive competitive advantage and differentiation. We’ve seen this in the way that the relationship between banks and fintechs has transformed from one of competition to one of strategic collaboration, where banks can leverage fintechs’ specialised knowledge and technological experience.” 

Responses received by Surecomp from the market revealed a mixed picture as to which side of the buy or build debate the industry is settling on. 

Of the banks and corporates that said they were already using a digital trade finance solution, roughly half said this was a third-party platform, while the remainder said they either used host-to-host integration between their enterprise resource planning (ERP) software and their banks’ servers, or a proprietary solution developed by the bank. 

Given the trade-offs associated with building a custom solution versus procuring an existing platform, it may be tempting for industry players to hold off on making the leap for now, until the landscape matures somewhat. However, doing nothing is not an option. 

Patel said, “Despite the hurdles the industry is facing on the path towards trade digitalisation, the direction of travel is clear.”

“Changes underway in the regulatory, legislative and policy environment are set to catalyse the utilisation of digital processes, and huge progress is being made around the adoption of value-creating use cases. The potential benefits of making trade faster and easier for everyone are real, especially given the current tough macroeconomic situation.” 

Bridging the gap between buying and building 

To unlock significant economic and operational benefits, corporates and banks alike should start adopting digital trade strategies now – and this will mean bridging the gap between buying and building to leverage the advantages of both options while reducing the risks. 

“As stakeholders within the trade finance ecosystem look to navigate the complexities of the buy or build dilemma, finding a hybrid approach that can enable them to make tangible progress now and expand their capabilities over time is a compelling alternative,” said Patel. 

This alternative to the strict binary choice between buying and building combines the control and customisation capabilities of in-house solutions with the specialised expertise and scalability of external platforms, enabling banks and corporates to create a more adaptable and resilient digital trade finance infrastructure. 

Surecomp’s RIVO platform, a digital hub that provides open API access to importers, exporters, banks, insurers, shipping companies and solution providers, is one example of this concept in action. 

By integrating with RIVO, organisations can easily connect their existing in-house trade finance solutions with external platforms and services, enabling them to customise their offerings and adapt to evolving market needs without the need for significant in-house development or procurement efforts. 

Embracing the future of trade 

The world of trade is at a crossroads, with the relentless march of digitalisation forcing banks and corporates to re-evaluate their traditional processes and systems. 

The benefits of embracing digital transformation are clear, yet the challenges and decisions that institutions must navigate along this journey are complex and multifaceted. 

Ultimately, this will not be a one-size-fits-all endeavour. 

Each organisation must carefully assess its unique needs, resources, and objectives to determine the most suitable path forward. 

However, what is clear is that those who proactively embrace digital transformation, whether through buying, building or adopting a hybrid approach, will be best positioned to thrive in this rapidly evolving landscape and be instrumental in bringing forth a more efficient, transparent, and inclusive global trade ecosystem.

The post Buy or build? Accelerating digital transformation in trade finance appeared first on Trade Finance Global.

In 2022, the trade finance digitisation space saw a wave of consolidation, with many high-profile platforms shutting down or struggling to survive while others were absorbed by larger players. As we move into 2023, it will be crucial for solution providers to adapt and collaborate in order to seize the opportunities presented by digitisation for game-changing value creation.

Learning from 2022

Progress is often made through challenges and setbacks, and 2022 was no different. As we look ahead to 2023, it is now more vital than ever to focus on value-creating use cases that have the potential to drive tangible progress. 

This means developing tools that address the current reality of all participants in global trade, rather than those designed for the utopian, fully digitally ready future that remains some ways off.

That isn’t to say it isn’t important to look ahead and consider the potential of new technologies and approaches, but meeting the market where it is, and creating solutions that are grounded in the present can help drive the progress that the ecosystem needs today.

Enno-Burghard Weitzel, senior vice-president of strategy, digitisation and business development at Surecomp says, “As we’ve seen in the last 12 months, the big bang approach doesn’t work

Incremental steps forward through the building of minimum viable products (MVPs) that address specific pain points in the industry – and that can be adopted today – are the only way to achieve scale.” 

One perennial pain point in trade is the fact that many documents, such as bills of lading, are still paper-based, making it difficult for banks to trust the data they receive, as well as causing operational inefficiencies in the system.

While work is underway through legal reform to catalyse the use of electronic versions of these vital pieces of paper, adoption levels remain low.

“The MVP in this use case can be found in connecting the data from carriers directly to the banks through an open platform, thereby ensuring accuracy and generating trust. This type of value creation will be the cornerstone of progress in 2023 and beyond,” says Weitzel, adding that the same process can be used to validate environmental, social and governance (ESG) information, or perform sanctions compliance checks.

“This might look like connecting to the exporter’s Enterprise Resource Planning (ERP) systems to push invoice information through the chain,” says Weitzel. “What’s important to remember here though is the need for a hybrid approach, so that if a stakeholder in a certain jurisdiction needs to hit the print button at some point during the process, they can.” 

Solutions through interoperability 

Making this happen means moving beyond closed-loop systems that only work if everyone is on the same platform. It is imperative to  develop solutions that are open, flexible, and able to work with a variety of systems and technologies.

Surecomp’s RIVO platform, a digital hub that provides open Application Programming Interface (API) access to importers, exporters, banks, insurers, shipping companies, and solution providers is one example of this concept in action.

RIVO provides centralised connectivity to the entire fintech ecosystem in a collaborative way, focusing on creating utility and value for all parties involved to provide a more digitally enabled future that benefits everyone.

In order for the industry to drive meaningful progress through collaboration, there needs to be a wholesale shift away from a competitive mindset, to a more collective strategy.

This means thinking creatively about overcoming structural or logistical barriers that make it difficult for solution providers to work together, such as differences in technology or processes. It also means companies will need to negotiate to align their incentives and goals in order to achieve mutual benefit.

Enno-Burghard Weitzel says, “This isn’t a new concept: transaction banks have long co-operated to facilitate trade finance transactions while also competing for corporate business.

It’s time fintechs learned from this approach. Competition can drive innovation and progress, but no one fintech can win the world alone.”

According to estimates, there are approximately 25 million businesses in the European Union. While a significant portion of these are micro-SMEs, over 1 million of them have more than 20 full-time employees, making them a viable target for trade digitalisation platforms.

Considering that the EU represents approximately 12% of global GDP, it is reasonable to assume that approximately 8 million companies worldwide need to implement digital solutions in order to achieve critical mass – a huge addressable market for fintechs everywhere. 

“Realistically speaking, as solution providers, we are not competing against each other; we’re competing against paper, email and Microsoft Excel,” says Weitzel.

“Corporates are not interested in what the underlying technology is. They care about whether they can easily access different systems or whether they are being forced to manually log into guest portals with limited functionality.

There’s no pay-off for them to integrate several different digital trade platforms into their ERP systems, so they remain stuck in the status quo.”

Meeting the expectations of digital-first customers is also a significant challenge for banks. But there is no single widely accepted proposition that has gained enough traction to become the next generation platform that all corporates need to join – nor is there likely to be.

Additionally, there are no established standards in the trade finance industry from international bodies, and there is not yet an API standard for trade finance. 

Conclusion

This is why fintechs, as partners to the industry, need to come up with workable solutions at scale – together.

As we reflect on the challenges and opportunities of 2022 and look ahead to 2023, there’s real scope for optimism. The potential benefits of making trade faster and easier for everyone are real, especially at a time of macroeconomic upheaval.

By working collaboratively to overcome challenges and seize opportunities, fintechs now have a very real opportunity to deliver on the promise of digitisation and create a more efficient, effective, and transparent system for trade.

The post Surecomp looks to 2023: Delivering on the promises of trade digitisation appeared first on Trade Finance Global.

ESG may be front-of-mind, but how can the wider implications of sustainability help different areas of trade? 

While the environmental, social, and governance (ESG) agenda is clearly front-of-mind at the moment and a crucial element of sustainability, the topic is more nuanced than it might first appear. 

In order to be truly sustainable, trade needs to be accessible to not only the largest corporates but also mid-sized corporates, small- and medium-sized enterprises (SMEs), and even micro-SMEs. 

What’s more, it needs to be free of difficulties, disruption, and costs brought on by fraud.

That’s not to minimise the importance of ESG. Today’s trade finance technology needs to also provide ESG tracking of individual trade finance transactions. 

Surecomp has been involved in the International Chamber of Commerce (ICC) Sustainability Working Group’s recent sustainability positioning paper, which outlined the need for an ESG rating of the buyer, the seller, the goods, and the transport. 

Likewise, today’s trade finance users need to be able to incorporate ESG ratings into their trade finance transactions as quickly and easily as possible.

Combatting fraud

While ESG is important, we’re also thinking about sustainability much more broadly, particularly when it comes to minimising fraud in trade finance. 

Ultimately everyone pays for fraud because banks have to take higher margins as a buffer against any fraud-related losses. 

Trade finance, in particular, is still heavily paper-based, which leads to considerable vulnerability, as illustrated by a high-profile $284 million metals fraud case that was perpetrated by forging warehouse receipts. 

The reality is that in today’s world, we can’t trust paper—so Surecomp wants to enable everyone to use digital documents, taking paper out of the system. 

Surecomp is also advocating ways to combat fraud––for example, to prevent duplicate invoice financing while remaining fully compliant with bank secrecy regulations.

Opening trade finance to everyone

So, how can trade finance technology enable all participants to trade more effectively while supporting sustainability and fostering collaboration across the trade finance ecosystem?

Thinking big

In today’s market, trade finance technology vendors are largely all focusing on the same small group of potential customers. 

As a result, the number of companies currently served by trade finance technology in Europe may only be around 1,000. This represents an enormous unrealised opportunity: there are around 24 million corporations in the EU, 8 million of which could arguably benefit from trade finance solutions.

So, how can trade finance vendors add value to more of these potential customers? While there is much discussion about application programming interface (API) and MT798s, the reality is that most corporations aren’t concerned with the technicalities of how to connect to a trade finance ecosystem––they just want to use the service as easily as possible. 

That’s why Surecomp is focusing on solutions that have a mass market appeal that provides a seamless user experience alongside increased accessibility––users are able to simply download an app on their mobile phones.

For example, vendors that incorporate legal entity identifiers (LEIs) into trade finance software can enable users to validate the identity of their trading partners more easily, thereby enhancing data quality and trust within the system. 

Likewise, integrating data providers into trade finance technology can enable banks to carry out compliance checks on data such as container information and shipping information.

Expanded ecosystem

Surecomp believes that trade finance technology should be open to everyone; this includes a vast group of corporates, from small businesses to multinational corporations, as well as banks, non-bank financial institutions (FIs), insurance companies, investment funds and asset managers.

Insurance companies, for example, can act as providers of finance or security to trade finance transactions. 

Under Basel IV, banks will need to set aside more capital for their trade finance commitments––but insurance companies, which are managed under Solvency II, won’t be subject to the same requirements. 

By including insurance companies on the platform, vendors can provide support for smaller companies that might struggle to find a bank to finance their guarantees.

There’s also much to be gained by bringing together buyers and sellers of trade finance assets. 

Many investment funds and asset managers are looking to invest in trade finance assets––so why not include these funds in trade finance platforms? By doing so, trade finance vendors have an opportunity to reduce transaction costs for smaller banks that lack the balance sheets needed to fund trade finance assets and hold them to maturity.

Additionally, if trade finance technology is to be accessible to everyone, the cost must not be a barrier. One way to overcome this is by adopting ‘freemium’ business models so that any bank or corporate can take advantage of a free plan to access trade finance technology.

Collaboration

Last but not least, modern trade finance solutions need to enable parties to collaborate more effectively with each other. 

For example, guarantees are often held up by inaccurate data, not least because these are typically sent as PDF attachments by emails. 

The resulting inaccuracies lead to delays and extra work for the bank, particularly if guarantees have to be replaced or amended. 

But what if a platform could enable the applicant and beneficiary to collaborate on the details of a guarantee right at the beginning of the process? Those details could then be agreed upon before the bank even gets involved––making the process easier for everyone involved.

The way forward

In conclusion, we believe in enabling sustainable and seamless trade in any way we can. 

Next-generation trade finance technology needs to incorporate everything from ESG tracking and fraud prevention to collaboration tools and a freemium business model. Moreover, embracing software as a service (SaaS) delivery will mean that participants can access their platforms without needing to fulfill any technical requirements.

The post Driving sustainability in global trade with digital collaboration appeared first on Trade Finance Global.

After another tumultuous year for trade finance in 2021, the industry is set to face a number of challenges – both old and new – as we head into 2022.

Thanks to new remote working norms introduced by the pandemic, the pace of digitalisation in trade finance has quickened, and calls to reduce paper and streamline processes such as know your customer (KYC) and regulatory compliance have only grown louder.

But unlike in previous years, we enter into 2022 with more than just calls to action.

One software provider that is focused on delivering new digital solutions for trade finance is Canada-based Surecomp.  

Enno-Burghard Weitzel arrived at Surecomp in March 2021, after serving for eight years in senior trade finance roles at Germany’s Commerzbank.  

Weitzel is now the senior vice president of strategy, digitisation, and business development at Surecomp, tasked with strengthening Surecomp’s position as one of the world’s leading providers of trade finance software solutions. 

At present, Surecomp serves around 250 banks with software that automates the processing of trade and supply chain finance.

Additionally, Surecomp supports dozens of multinational corporates to boost the efficiency of their trade finance management processes.

The biggest challenges for banks in trade finance

One of the perks of Weitzel’s new role is that he is able to speak with the heads of trade finance teams at major global banks globally – an opportunity that would have been off-limits while working for Commerzbank. 

Based on these conversations, Weitzel said there are five recurring challenges that major banks are grappling with in trade finance.

The first of these is regulation, including topics such as Basel IV, know your customer’s customer (KYCC), and upcoming environmental, social, and governance (ESG) regulations.

The second is margin pressure, whether the result of paper-based processes that lead to errors, high handling costs, and high turnaround times, or the result of competition from non-bank rivals such as insurance brokers who fall outside of Basel IV. 

This allows those insurers to offer more attractive terms to banks and corporates, thus creating an uneven playing field.

The third biggest pain point is fraud, which Weitzel refers to as the “number one economic challenge” for banks in trade finance.

Not only a strain on margins, fraud can also pose an existential threat to a bank’s entire trade finance business, as Dutch bank ABN-AMRO discovered in 2020. 

The fourth biggest challenge for banks, as ranked by Weitzel, is adapting to digitalisation.

“We have a scattered environment with digital islands, multiple access channels, and different processes that banks have to manage,” he said.

“And there’s no proposition that has yet gained the traction to evolve as the next new platform that everyone needs to join.

“We also lack standards in the industry from international bodies, and no matter which bodies they are, there’s no API trade finance standard out there yet.”

And finally, meeting new digital-first customer expectations is a major challenge for banks, but it also represents a major opportunity for Surecomp.

Challenges for corporates

In addition to serving major banks, Surecomp also has a growing corporate customer base. 

For corporates, as Weitzel explains, their biggest pain point is the time-consuming nature of trade finance processes.

“It just takes ages to get an instrument up and running,” said Weitzel. “I was talking to a midsize energy trader, and they have four people in their trade finance department managing 10 letters of credit per month.

“Another corporate told me they were spending six weeks to get one guarantee applied for and actually issued. 

“This is just unbearable, and the banks and institutions are putting these processes on the corporates simply because they have no other choice.”

The second pain point for corporates is the delays, uncertainties, and difficulties that come with managing physical supply chains.

And this feeds into the third pain point: the scattered nature of communications in trade finance.

But the good news, according to Weitzel, is that both these issues can be solved through greater digitalisation and platformisation.

“Every midsize corporate would easily work with three-plus banks and financiers, some with 20- plus institutions,” said Weitzel.

“But they don’t just log in to 20 different portals of the banks: they simply do not. 

“I was talking to one commodity trader, a global active one, and he was sending back and forth communications via email, deliberately choosing a relatively insecure channel of communication because not all of his banks would offer multi-banking standard communications, and he simply refused to log into those bank-model corporates.

“So the trade finance industry is not offering appropriate solutions to these corporates, and we as partners to the industry need to come up with relevant solutions to these problems.”

Regulatory landscape – ISO 20022, MLETR, ESG

In terms of regulatory changes, Surecomp is preparing to deliver solutions for measures such as ISO 20022, ESG, and the Model Law on Electronic Transferable Records (MLETR). 

Weitzel said that more and more of Surecomp’s clients have been asking for its systems to be updated to ISO 20022, which is something that Surecomp can deliver.

He also added that the nature of the update will produce more structured data that Surecomp can then leverage for other applications, such as tracking solutions.

“Take the ESG example. With ESG, we want to come up with tracking information on every single transaction: so who is the supplier, who is the buyer, what is the good, and what is the shipping?”, said Weitzel.

“And who is going to process all these data points? Who is going to bring them together? And how are we going to consume them? 

“It is clear that we need to continue upgrading the level of data and detail that we are going to provide, so there will be new adoption needs in the industry. 

“So the question is not when are we there, but rather how can we reduce the cost of adjustment?”

Answering such questions will provide a trial run for the next big adjustment, MLETR, which Weitzel believes is “just around the corner”.

“MLETR will hopefully enable us to get rid of paper,” he said. 

“The UK is pressing ahead – there’s a lot of energy and movement over there – and hopefully Germany and Italy will come, and hopefully the G7 and eventually the G20 will follow.

“All participants will then need to be able to consume and manage, update and amend MLETR.

“So with real digital documents, there will be endless adjustment. 

“And for us, the key question is: how can we enable all the participants to easily, conveniently adjust to a new system to manage these new data points?”

Priorities for 2022

Asked about his priorities for 2022, Wetizel said his talks with clients during his first 10 months have given him some bold ambitions going forward.

“Number one is client focus,” he said. “Since joining Surecomp, I have talked to so many clients – super interesting, super insightful conversations – that will be guiding our thoughts for 2022.

“With the clients we’ve overcome SWIFT Release 21, which was a major blocker in terms of focusing on their customers’ business.

“They want to bring services and solutions to their customers, and I think that will mark 2022 – that banks are again focusing on bringing new features, new functionality to improve the business that they can offer.”

Weitzel said another focus for Surecomp will be on collaboration, which he believes is the key to successful solutions.

“No one out there will solve any of the trade finance problems on their own,” he said. 

“At Surecomp we have customers on the corporate side, on the banking side – we serve small, midsize, global leading parties, and that brings a variety of input, a variety of insights, and enables us to bring solutions that build on collaboration and can actually solve problems.”

As an example, Weitzel said that working towards a collaborative solution for paper-based guarantees will be a top priority.

Turning “propositions” into “solutions”

As Weitzel sees it, much of Surecomp’s work will be focused on turning “propositions” into “real solutions” for the pain points described above, by making its existing network more accessible and more efficient for both banks and corporates.

“Technically, we are pushing our solutions to the cloud, with an API application in both communication and integration,” he said.

“But the key thing is that we are technically lowering the barriers to actually use these solutions, and it’s a full-size solution that we’re now offering, so people can simply sign up.”

Weitzel’s aim is to ensure that both banks and corporates feel like they must have a “very strong reason” not to be on Surecomp.

“Economically, we are lowering the subscription fees to be really attractive. So ideally, you would have to ask the question: ‘Why not join? It’s ridiculously attractive’.

“We are pushing new features, and as it’s a SaaS, as it’s cloud, the speed at which features will be added to these solutions is much higher than before.

“We will maintain our existing on-premise solutions, but the focus is on our SaaS solutions, and that is what we think we have to do in order to do our bit to enable both corporates and banks to actually use technology to increase their business.”

The post VIDEO: Surecomp’s Enno-Burghard Weitzel on pioneering new digital solutions for banks, corporates in trade finance appeared first on Trade Finance Global.

MSMEs constitute the majority of business in every region across the world. Yet this industry sector faces the greatest hurdle in accessing finance, due in part to the unavailability of public information on their financial statements

Why is tech the key to facilitating trade growth?

EW: Trade finance is a means of financing that is designed to be self-liquidating, and, as such, is not directly linked to a company’s individual credit rating. Yet all too often, credit agencies’ references rely on financial statements and records.

Modern technological solutions can play a pivotal role in connecting banks and other financiers with these types of corporates, thus facilitating access to funding they might not otherwise be able to access. The efficiency gains from technology can accelerate and streamline the trade finance transaction process, which reduces transaction-related costs, and, in turn, boosts trade activity and fosters MSME growth.

Funding aside, why has tech historically been less accessible to the mid-market? 

EW: Trade finance software is very specialised. Until recently, banks across the globe were using software installed on-premise on their own hardware. Such deployment models provide a very high level of security, which is necessary in the banking industry. However, they also require a dedicated IT team to run both the software and the hardware; hence, the cost of implementing on-premise software solutions is relatively high.

This is the key reason why sophisticated trade finance software solutions are adopted predominantly by larger banks or dedicated trade finance banks. Mid-sized banks, and those that run trade finance as one of many business lines, have historically not had the financial and IT resources to use a specialist trade finance solution.

Is ‘laggy’ cloud adoption in emerging market mid-tier banks hindering trade growth?

EW: Not really. As cloud operations are maturing, more and more regulators are approving the use of public cloud services for banks. This frees up banks from having to run IT hardware and having to maintain aging IT systems on-premise. Now they can benefit from using Software-as-a-Service (SaaS) cloud-based solutions, which are paid for with a monthly subscription fee, which also reduces heavy upfront IT investment and reduces the total cost of ownership (TCO).

Cloud-based solutions also eliminate the technical reliance on internal IT teams, allowing banks to focus their attention and energy on providing better service to their customers. It can already be seen that banks who are adopting a cloud strategy fast do provide better customer service, win greater market share, and earn better financial results. As a result, every single bank that is adopting cloud services will be supporting the growth of trade for MSMEs. 

Are the banks’ corporate MSME customers pushing their banks hard enough?

EW: Well, that’s a good question. Experience shows that, in general, large customers are more effective at pushing banking partners to fulfil their requirements. MSMEs typically only have a limited voice – if they have access to bank financing at all. So it would require strong advocacy to amplify the voice of the MSMEs and push banks to cloud adoption in order to lower the entry hurdles for trade.

The tech industry is pushing, the regulators need to push, and industry associations are pushing as well. For example, the ICC is currently driving an international campaign – ‘Trade Now’ – which is specifically designed to push support for MSME trade. Every voice counts.

What is Surecomp doing to encourage mid-market cloud adoption?

EW: Last year we launched our Trade Finance-as-a-Service (TFaaS) offering, which provides the opportunity for holistic, cloud-based trade finance technology, as well as open, API-based access to our fintech partner, Marketplace. Since then, based on market feedback in light of the pandemic, and to help fuel the post-COVID-19 economic trade recovery, we’ve now revamped our TFaaS offering to specifically address the MSME market.

We are very proud to be able to offer our leading DOKA-NG™ trade finance solution as a cloud service to banks, deployed within 10 weeks and for a very competitive price. Starting at $50,000 per year, banks can now enjoy the benefits of the world’s most widely adopted back-office solution, which can help them to streamline internal workflows, accelerate transaction processing, and connect to the world of digital trade.

A 10-week deployment of back-office trade finance processing is game-changing for the mid-market. How can you guarantee success in such a short time frame?  

EW: We’re leveraging our experience of more than 35 years in the trade finance industry. Our solution is the most advanced in the market: we’ve honed our deployment skills over many years, and we can now provide it as a fully cloud-hosted service.

Instead of installing on-premise and going through a cumbersome implementation project, the team can on-board themselves, as with any consumer cloud service (think Gmail, WeTransfer, Spotify), and it’s ready in no time. We’re applying the same consumer rules to the trade finance arena, enabling banks to focus on using the solution to the benefit of themselves and their MSME customers.

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The post MSME access to finance in emerging markets appeared first on Trade Finance Global.

Based on the principles of open banking, many fintechs, mature IT vendors, as well as cash-rich super-scale banks, are furiously investing in the development of functions and services via APIs. However, unfortunately, many smaller and medium-sized banks – as well as the corporates – are unable to keep up with the development due to a lack of resources and specialist knowledge. 

“It’s not about what you do, it’s about why you do it.”

-Simon Sinek

It may be time to take a step back and not look at what is being developed and how, but why? A former trade finance IT company CEO recently summarized the problem of focusing on the technical benefits of open banking: “No one is interested in cloud and APIs. No one cares about technology.” 

It seems mindboggling at first, however, it opens up the discussion to look at what lies beneath. APIs are the “what and how” of connecting an ecosystem, but the “why” is much more important. Knowing why is the catalyst to engaging a wider audience, to allowing the smaller, mid-sized banks and corporates to buy into ideas and solutions. So why are we building a more connected world in trade finance? 

If you are responsible for the trade finance business in a bank or corporate, you continually need to generate value for your customers as well as to gain a competitive advantage. It is crucial to differentiate yourself from the competition by offering a more customer-centric, streamlined and efficient digital experience. You need to deliver new features with a fast time-to-market, better workflows and easier to use interfaces. 

The trade finance gap is a measure of how much trade is unfinanced versus the potential. Economically, it comes down to the transaction cost being too high in relation to the value of the transaction. There is a significant need to reduce the cost per transaction to intrinsically link trade finance services with existing supply chains and to include a broader spectrum of players in the unserved markets. 

Being focused on the ‘why’ makes space for the ‘how’ 

The promise of open banking is to empower the owners of accounts, funds and other assets, emancipating them from the stifling grip of proprietary banking environments. The technology of open APIs provides guidelines, a framework and standards; it provides real-time connectivity, transparency and speed; but it is entirely dependent on banks of different sizes using systems that are API-enabled. As open banking brings value for the masses, it should be inclusive and far-reaching and not just a luxury for the megabanks. 

So how can smaller and mid-sized banks benefit from a leading API-enabled back-office trade finance processing solution for example? Simple; the cost and time barriers to adoption need to be lowered:

Provided via cloud-based Software-as-a-Service (SaaS) as a fully vendor-managed service, the cost is shared between dozens of banks making it economically far more viable. Experience shows that the total cost of ownership of a SaaS deployment versus on-premise can be reduced by at least 30-50%.

Typically the time to integrate a back-office trade finance solution to internal risk, finance and other downstream systems can be reduced from several years to just a few months. By default, this also reduces any potential project, resourcing and operational risk.

When a cloud-based solution meets a trade finance system

The icing on the value generation cake, however, is when a cloud-based solution is also connected to the wider trade finance ecosystem (e.g., vessel tracking, fraud prevention, data insights solutions). This accessibility not only increases value for every user but also significantly reduces the cost, as each connection only needs to be built once. By contrast, the number of connections would grow exponentially according to the number of banks and third-party providers with an on-premise deployment. 

In summary, let’s forget about technology, about open banking, cloud and APIs and talk about generating value, enabling customers to drive growth, facilitating a more inclusive, efficient and enhanced service, to banks and in turn to bank’s corporate customers. Let’s use open banking as a means to open up trade finance, to make it more accessible to those smaller businesses who may not previously have had the means.

The post Open Banking: Forget about cloud and APIs – it’s all about value generation appeared first on Trade Finance Global.

Pain points for banks

Where trade finance is concerned, banks are focusing on a number of different pain points in today’s rapidly evolving market:

1. Regulatory scrutiny from banks around the globe. In a survey conducted by the ICC last year, six out of ten bankers said they are extremely concerned about compliance, with specific concerns including Anti-Money Laundering (AML), Know Your Customer (KYC), Counter-Terrorist Financing (CTF) and sanctions. The challenge here is that regulators do not take a uniform approach, meaning that banks have to address disparate regulations across major markets like the US, UK, Hong Kong and Singapore, as well as in local markets in which they have headquarters, subsidiaries or affiliates.

2. Rising cost of doing business. For banks engaged in trade finance, the economics are a considerable concern. For one thing, the cost of transactions is high, while fee income is low in an increasingly competitive marketplace. Compliance costs are rising due to the growing focus on KYC and AML – and while Basel IV is a regulatory consideration, it also has implications for the economics of trade finance, with the potential to increase the cost of doing business for banks by up to 50%.

3. Shift to digital trade documents. The G7 digital and technology ministers recently committed to the digitization of international trade transactions, adding considerable impetus to the shift towards electronic transferable records in trade. With data issued last year showing that only 0.1% of bills of lading are issued electronically, it’s clear that there is much room for improvement. As this shift continues, it will be increasingly important for banks to have solutions in place that enable them to receive and process electronic records so that clients can make use of these instruments.

4. Engaging with fintechs. While innovation is picking up speed, at this point of development it is also posing some additional challenges for banks. With fintechs developing myriad platforms to harness technologies like Distributed Ledger Technology (DLT), it’s essential for banks to be able to connect to the platforms used by their corporate customers. At this stage, however, there is no clarity about which of the systems currently being developed will eventually see widespread adoption.

5. Changes to customer behaviour. The people who work for corporations are also consumers who use their mobile phones outside of the office – and their experiences are being shaped by the convenience offered by consumer technology. For example, if people are able to order goods for same day delivery in their personal lives, they are less willing to accept waiting five days to receive physical documents. 

6. New competition from investment firms. With interest rates remaining low in Europe and the US, and rising levels of liquidity in the market, trade finance is becoming an increasingly interesting asset class. As such, investment firms are increasingly looking to invest in trade finance assets – indeed, S&P estimates that there are as many as 20 specialist trade finance investment funds. While this brings competitive pressure for banks, at this stage few have devised a strategic plan about how best to handle this competition.

Addressing the challenges

Fortunately, there is much that banks can do to navigate these issues successfully. In particular, technology has an important role to play in helping banks adapt – not least because a strong back-office solution is the foundation of any digitization strategy. 

In many cases, banks’ IT infrastructures have evolved over a number of years, with different systems and technology platforms in place to cover different countries of operation. These systems will each have their own licensing and support agreements – and as a result, the cost of maintaining the existing architecture can erode the profitability of the business.

Leveraging a comprehensive solution that covers the full remit of trade finance instruments, banks can rationalize their existing IT infrastructure. By moving all their operations onto a single platform, they can achieve significant cost savings and efficiencies. What’s more, the high levels of straight-through processing not only reduce the time involved in the manual rekeying of data between different systems but reduce operational and reputational risk.

Furthermore, enabling corporate clients to interact directly with their banks so they can manage their entire trade workflows – from application and issuance of an instrument to notification, settlement and electronic presentation of documents – means banks can better engage with their customers, provide great customer service, and help them achieve the first step to full digitization of the entire workflow.

Adding value through collaboration

When it comes to addressing market challenges, a key facilitator is collaboration. Surecomp for example – through our fintech Marketplace – is currently working with multiple trade finance-focused solution providers to add value through API connectivity. This means analyzing the solutions and capabilities offered by different providers and determining which APIs are needed to enable communication both with the external world, and with existing systems. 

Alongside our software solutions, we continuously work with both existing customers and potential partners on how best to solve specific market challenges – from the use of AI and machine learning in compliance checking to solutions that enable banks’ support teams to work more closely with customers through shared browsing and online chat capabilities.

Ultimately, trade transactions involve a number of different participants, and there is much to be gained by bringing all of these participants onto a single platform. Beyond solving specific pain points for corporations and for banks, the goal is to add value to every participant, and expand the portal concept to become a true collaboration space.

Trade Finance-as-a-Service

Last but not least, helping alleviate the cost of ownership banks face when deploying a trade finance solution is another key consideration. Building the business case for replacing a trade finance system can be difficult and may well involve competing internally within the bank for other business cases. 

Trade Finance-as-a-Service (TFaaS) is a scalable approach which enables Surecomp to handle infrastructure and application maintenance on behalf of banks, as well as incorporating regulatory updates. Instead of the high upfront costs associated with a traditional model, TFaaS enables banks to replace CapEx with OpEx, and align the cost of ownership of their trade finance solution directly to the revenue earned from the business.

What next?

Today’s trade finance landscape presents numerous challenges for banks, from regulatory scrutiny and the soaring cost of doing business to new competition in the market. With years of experience as a dedicated trade finance vendor, Surecomp is committed to helping banks compete effectively in this challenging landscape – not only by providing solutions that deliver cost savings and reduce operational risk, but also by harnessing collaboration to solve market challenges.

The post Next gen trade finance digitization: 6 pain points for banks and how to fix it appeared first on Trade Finance Global.