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Digitalising Trade Finance: the time to act is now

While digitalisation of banking processes has been gathering pace in many areas – from Retail Banking to Payments processing – Trade Finance has been lagging in its digital journey. Recent research from the International Chamber of Commerce found that just 7% of respondents said digitalisation was “widespread”.

Trade Finance has always been paper-intensive, from letters of credit to bills of lading. Although slow moving, the system worked and the need to innovate was not there. Until now the technology solutions deployed by banks to handle the Trade Finance processes have generally been hardcoded – making it difficult to customise or react quickly and innovatively to changing market requirements.

But the world is changing. The impact of digital on all aspects of our lives is making its presence felt in the corporate world, and new technologies from artificial intelligence to the uptake of cloud, Internet of Things and blockchain are re-setting expectations for Trade Finance. Current ways of working will not stand up to today’s real-time, digital requirements. The size of the market has been shrinking – as smaller players are put off by the complexity of the process.

The time to innovate is now, but what does this mean for the sector?



Introducing new capabilities and preparing for the innovations of tomorrow can create a significant competitive advantage.

As more banks explore the implications and develop proof-of-concepts around blockchain across their services, they need to know that their Trade Finance function will be able to take advantage of distributed ledger technologies.

The number of blockchain initiatives underway across Trade Finance shows an appetite to drive and change the way the industry operates. But to capitalise on this opportunity it’s essential banks put in place Trade Finance systems that can keep up. Even in the blockchain world, banks still need systems to handle all the associated back office administrative tasks and it’s crucial those systems can operate in real time.


Return on investment

Digital must be applied to all stages of the Trade Finance processes – end to end. This includes digital solutions that enable paperless trade and support the electronic creation, approval and signing of Trade Finance documents. The digital exchange of documentation is key to reducing the costs associated with Trade Finance – giving banks the potential to offer trade finance at lower prices and to drastically reduce the time involved in processing transactions.

As a first step in the process, banks should be looking at moving physical Trade Finance archives containing Documentary Credits and Guarantees online. We know from first-hand experience this can deliver significant savings and return on investment. As well as allowing banks to recoup the costly office space set aside for storage of physical records it also delivers increased convenience for banks and customers alike. Rather than wait for documents to be transferred manually, corporates can retrieve relevant information when they like quickly and securely online.


Dealing with regulation

Digital doesn’t just aid in saving money; it can protect a bank against the constantly shifting regulatory landscape. To cope with this, banks need the flexibility to adapt to change easily and efficiently.

Due diligence has always been key in preventing banks from falling foul of legal requirements – especially regulation around anti-money laundering and anti-terrorist funding. It usually takes a great deal of manual input to ensure complete compliance.

Digital solutions can ease the maintenance pressures in this area. Incorporating automated compliance checking that can operate in real-time as part of the business processing is quickly becoming essential. Rather than having to individually check outgoing SWIFT measures, staff can be freed up to work on more strategic tasks, and the process is no longer prone to human error.


Building success

To retain and win new business, banks have to make it as easy as possible for corporates to engage with them. This is best achieved through digitalisation. It also includes supporting ISO 20022 standards for electronic data interchange to facilitate connectivity to external systems and networks, and for handling direct communication from corporates through the SWIFT network via MT 798 SCORE messaging.

Putting high-quality, flexible and efficient systems in place to support digital Trade Finance is no longer a nice to have, but essential to future success.



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