Electronic channels and bank agnostic platforms are transforming traditional trade finance functions across Asia Pacific
November 06, 2018 | Siddharth Chandani
- Corporates increasingly rely on electronic channels for conducting basic as well as advanced transactions
- Digitalisation in trade has gained momentum
- Understanding client pain points, constraints and objectives were the top best practices identified by banks.
In the latest Asian Banker annual survey of trade finance trends across Asia-Pacific, the results reflected a substantial degree of consolidation as cross-border activities, including trade transactions slowed. While factors such as a sharp deceleration in commodity prices and China’s slowdown have reversed, the recent trade tariff escalation between China and the US and divergence in exchange rates between US dollar and other emerging market currencies have quite challenged the global trade outlook.
However, this slowdown is offset by a pocket of opportunities, arising from the growing importance of open account transactions, the shift from bank intermediated trade products to host-to-host and electronic channels. Notably, banks are looking to reduce some of the risk they take on through technological innovations.
Corporates increasingly rely on electronic channels for conducting basic as well as advanced transactions. Reporting, forecasting and simulation for trade services and the need to integrate different transaction banking products have fundamentally changed the rules of the game. The need to offer innovative trade finance (TF) client offerings through blockchain, delivery of end-to-end, tailor-made solutions and external partnerships with emerging players were the key themes from the survey.
Digitalisation in trade has gained momentum
While still lacking the scale of innovation achieved in cash and payments, trade finance now reflects the shift from traditional or documentary letter of credit (LC) based transactions to open-account and decentralised distributed ledger technology (DLT) based transactions. Ba...
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