European trade finance at dawn of digitisation

Source: Greenwich Associates

Companies and banks in the Nordics and the Netherlands could be leading the way toward a new and increasingly digital future for the European trade finance industry.

“Digitization” is a trend that always seems to be just over the horizon for European trade finance. All sides of the market agree that, eventually, most aspects of the business will be electronic. That’s why it’s especially frustrating to see the slow pace of progress on digitization to date.

But there are signs of change. In the Nordics and the Netherlands, companies report declining usage of non-digital ways such as phone, fax, email or in-person, to initiate and manage their trade finance business, and increased use of digital platforms. Across Europe, the majority of trade finance business is conducted manually and only about 42% of trade finance business is initiated and managed electronically. In the Nordic countries, however, companies initiate and manage nearly two-thirds of their business on electronic platforms, with only about 11% conducted by phone, fax or in person and another 25% via email.

“In all these countries, growing numbers of companies are using electronic tools to address common trade finance pain points like the manual effort and paperwork required for contract creation, communication and processing errors, and delays caused by anti-money-laundering procedures,” says Greenwich Associates Managing Director Dr. Tobias Miarka. “We expect companies in the rest of Europe to follow suit—sooner rather than later.”

Competitive Dynamics

While U.S. banks have made major inroads in the European market in corporate banking and cash management, the 2019 list of Greenwich Share Leaders in European Trade Finance remains a strictly European affair, with BNP Paribas in the top spot, followed by UniCredit and then a tie between HSBC and Deutsche Bank. At the country/regional level, local and domestic providers dominate the lists of 2019 Share Leaders, with Commerzbank sharing the top spot with UniCredit in Germany, BBVA leading the field in Iberia, Intesa Sanpaolo securing top honors in Italy, and Nordea claiming the first place ranking in the Nordics.

The localized nature of the business also comes through in the 2019 Greenwich Quality Leaders. Across Europe, UniCredit captures the spotlight, while at the country level, domestic banks usually take top honors, such as BNP Paribas in France, SEB in the Nordics, and Credit Suisse and UBS in Switzerland.

“The continued strong performance of local competitors shows that—unlike the case in cash management—it’s possible for even smaller banks to deliver the types of high-quality international networks companies are demanding in trade finance,” says Dr. Tobias Miarka, “provided they stick mainly to the plain vanilla transactions that make up the bulk of this business.” 

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