Opening the Doors to the Future of Inclusive Trade Finance

Trade finance is becoming more open and inclusive due to new technologies and globalisation, leading to efficiency, transparency, innovation, and economic development.

FREMONT, CA: Environmental, social, and governance (ESG) has become increasingly important in the financial services industry. While the environmental aspect has been the main focus, progress is being made in addressing the social aspect, including tackling the financial gap, one of the biggest societal challenges in global trade.

ESG has gained significant importance in financial services, with progress being made in addressing the social and governance aspects, along with the environment. A major social challenge in global trade is the increasing financial gap, which needs to be addressed.

Bridging the Gap with Tech and Integration

Achieving seamless trade finance processes across different jurisdictions is highly complex, especially for SMEs, and requires alignment of both technology and policy. It is essential to address the challenges to tackle the trade finance gap, which has been extensively documented. This gap is rapid, projected to grow from 1.5 trillion in 2018 to 2 trillion USD in 2022, and preventing many small and medium-sized enterprises from benefiting from global trade.

To solve the problem of the trade finance gap, technology must be integrated to revolutionise the industry and enable trade and working capital finance on a scale that was previously unattainable without digitisation. Technology plays a significant role in increasing access to data, which can help banks to modify conventional credit decisioning models. It can also assist small and medium-sized enterprises (SMEs) in passing KYC or anti-money laundering checks through digital identities, particularly when they lack the necessary credentials required for business.

It is important to transition from paper to data, promote interoperability, and adopt global standards as prerequisites for digital trade. They highlighted the significance of digitising negotiable instruments like bills of exchange, promissory notes, and letters of credit, and mentioned the progress made in this area, including the digitalisation of letters of credit by the contour network.

The transformation journey can provide banks with a significant opportunity to generate new revenue streams by distributing their services through new channels. The future will be inclusive and open, with solutions that benefit all parties involved. The data insights will be at the heart of future supply chains, guiding decision-making, risk management, and sustainability efforts. This will require an interconnected and automated supply chain process.

The technologies like cloud, APIs, and AI/ML play a vital role in enabling integration on a horizontal level. The investment in the cloud is still strong, and it provides various benefits, such as on-demand capabilities, scalability, lower service costs, and reduced carbon footprint. As banks need to move towards digitalisation, they should fit from on-premises to the cloud to access a range of services that support the complete transaction lifecycle.

Technology and fintech companies play a significant role in the digital transformation of the banking industry by orchestrating entire ecosystems. The companies can create new and innovative solutions that help banks future-proof their models and make the industry more inclusive. The technology required for this transformation already exists, and with the help of these companies, banks can integrate and streamline their operations to achieve greater efficiency and effectiveness.

The advantage of the fintech ecosystems is that allow banks to use open APIs to install various value-added applications, such as AI tools to enhance KYC processes, document verification and associations with emerging distributed ledger networks. Banks guarantee conformity with regular demands, boost productivity, and decrease expenses.

Digital trade is a crucial part of the trade finance puzzle. Industry must work collaboratively to adopt technology and create a sustainable and inclusive trade environment. The transformation journey will only advance through joint efforts to overcome existing obstacles and achieve the ultimate goal of bridging the trade finance gap. The time has come for the industry to work together to achieve this critical objective.

The future of trade finance is indeed open and inclusive. With the advent of new technologies and the increasing trend towards globalisation, trade finance is becoming more accessible to businesses of all sizes and from all corners of the world. As a result, trade finance is becoming more inclusive, with more players participating in the market and more opportunities for collaboration and cooperation. This will ultimately lead to greater efficiency, transparency, and innovation in the trade finance industry, making it easier and more profitable for businesses to engage in international trade. Furthermore, as trade finance becomes more open and inclusive, it has the potential to promote greater economic development and reduce poverty in developing countries by providing greater access to credit and financing. The future of trade finance looks bright, with more opportunities for businesses of all sizes and from all over the world to participate and succeed in international trade.