Pressure on margins from increased competition and compliance requirements is forcing the industry to recalibrate its trade finance offerings. While institutions know that trade digitalisation is important for the future of the business, success relies heavily on deeper coordination and collaboration between the myriad participants in the trade finance ecosystem and technology enablers
June 03, 2019 | Siddharth ChandaniThe ongoing slowdown in global trade, exacerbated by the US-China trade tension, has reduced transaction volume, increased competition and eroded margins in the trade finance business. This may have inadvertently accelerated banks’ quest to reduce costs and improve profitability.
Moreover, customers’ growing demand for shorter processing time, greater visibility and automation in order to integrate with their internal processes, coupled with the need to mitigate the growing risk from trade-based fraud and anti-money laundering and sanction violations have driven financial institutions to explore and implement appropriate digital trade solutions.
However, the drive to digitalise trade transactions is neither new nor recent. Efforts to do so through the digitisation of trade documents and processes and the implementation of electronic document transmission and presentment systems have been around for at least the last couple of decades through solution providers such as Bolero and essDOCS. While they have had some success at the institutional level operating somewhat private and closed systems, wider industry level adoption has so far been elusive because of the lack of common and interoperable platforms that connect all the counterparties in a trade transaction.
The closest that the banking industry has so far come to an industry wide digital trade finance solution is SWIFT’s Trade Services Utility (TSU) based Bank Payment Obligation (BPO) which utilises its data matching platform. However, adoption has been slow because it is essentially a new payment and financing solution that sits between the traditional documentary credit and open account and would require corporate customers to substantially change the existing processes and systems they use for their trade transactions.
Despite in...
Categories:
Keywords:Correspondent Banking, Distributed Ledger Technology, Marco Polo, Networked Trade Platform, We.trade
Pressure on margins from increased competition and compliance requirements is forcing the industry to recalibrate its trade finance offerings. While institutions know that trade digitalisation is important for the future of the business, success relies heavily on deeper coordination and collaboration between the myriad participants in the trade finance ecosystem and technology enablers
June 03, 2019 | Siddharth ChandaniThe ongoing slowdown in global trade, exacerbated by the US-China trade tension, has reduced transaction volume, increased competition and eroded margins in the trade finance business. This may have inadvertently accelerated banks’ quest to reduce costs and improve profitability.
Moreover, customers’ growing demand for shorter processing time, greater visibility and automation in order to integrate with their internal processes, coupled with the need to mitigate the growing risk from trade-based fraud and anti-money laundering and sanction violations have driven financial institutions to explore and implement appropriate digital trade solutions.
However, the drive to digitalise trade transactions is neither new nor recent. Efforts to do so through the digitisation of trade documents and processes and the implementation of electronic document transmission and presentment systems have been around for at least the last couple of decades through solution providers such as Bolero and essDOCS. While they have had some success at the institutional level operating somewhat private and closed systems, wider industry level adoption has so far been elusive because of the lack of common and interoperable platforms that connect all the counterparties in a trade transaction.
The closest that the banking industry has so far come to an industry wide digital trade finance solution is SWIFT’s Trade Services Utility (TSU) based Bank Payment Obligation (BPO) which utilises its data matching platform. However, adoption has been slow because it is essentially a new payment and financing solution that sits between the traditional documentary credit and open account and would require corporate customers to substantially change the existing processes and systems they use for their trade transactions.
Despite in...
Categories:
Keywords:Correspondent Banking, Distributed Ledger Technology, Marco Polo, Networked Trade Platform, We.trade
