Trade finance – digitise or die

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Author: Jacco de Jong, global head of sales at Bolero International

Almost every organisation in the physical and financial supply chain should by now appreciate the need to digitise trade processes.

Covid lockdowns prevented physical contact and halted the movement of cargoes and documents, making the advantages of removing paper from trade processes blindingly obvious.

However, many corporates involved in international trade continue to toil with manual methods even though they very seriously downgrade efficiency in a world of highly volatile geo-political risk that demands greater agility.

Outdated processes take up far too much of the time of highly trained and experienced employees, at a time when global trade faces increasing inflation, rising interest rates and the threats to normal supply lines from the conflict in Ukraine.

Many organisations are seeking clear communication and reliability with a diversity of suppliers to boost their resilience, especially after seeing similar effects during the pandemic. The same is true in trade finance, where corporates need fast accessibility and structured communications with their financial institutions.

Digitisation increases visibility and choice

With world trade operating in such highly unpredictable circumstances, it is not surprising that treasuries and other divisions at large corporations increasingly see how digitisation will give them more control in trade finance, more options and major efficiency gains in their dealings with banks.

There is, for example, huge advantage for corporates that achieve end-to-end visibility of all the elements in their many trade transactions from one pane of glass instead of multiple portals and methods of communication.

With banks so central to trade finance, they have a pivotal role to play in making life much easier for their corporate customers who still have to juggle between different bank portals and communicate by emails or other clunky formats that eat up time and lead to missed deadlines and opportunities.

Banks need to implement all-in-one trade portals

Banks can remove these problems by joining or even deploying Multi bank SaaS trade portal platforms themselves that digitise trade finance instruments and documents to give corporate customers that critical level of visibility they need from one end of a transaction to the other.

The added capacity to expand networks beyond a one-to-one connection, means banks can achieve providing customers with new capabilities that will win them over in a straightforward and cost-efficient way.

As things stand, however, the continued reliance on manual and fragmented processes places major burdens on corporates.

They may have to manage multiple complex workflows that involve various systems and many points of contact for the various financial organisations involved in each transaction.

With multiple banks involved, the management and optimisation of credit lines and important instruments such as bank guarantees, letters of credit (LCs) and standby letters of credit (SBLCs) all becomes a significant headache.

Having struggled so long with paper documents and emails, corporates should have the ability to conduct their business online, freeing them to focus on new opportunities and managing counterparty relationships more efficiently.

Centralised management of all transactions and trade documents

Banks should support or even provide portals that enable corporates to handle trade and trade finance digitally in one place.

That includes management over open account transactions, letters of credit, bank guarantees, and electronic presentations of trade documents such as bills of lading.

Although not an overnight change, having the base to incorporate all these functions allows banks to offer a consolidated view.

This is particularly important for large, multinational corporations with divisions distributed across the globe, for whom greater visibility across borders and organizational boundaries can provide economies of scale in their use of credit lines, working capital, and transaction management.

Vastly increased visibility of credit lines and guarantees should be consistent to organisations regardless of location, allowing for greater efficiency and cost savings.

A corporate should be able to view utilisation much earlier and get a decision faster, potentially benefiting the organisation by significant amounts of money.

The gains in customer loyalty for banks

Banks that actually provide such trade portals and focus on improving the customer experience stand to gain substantially.

By creating sophisticated interfaces with multiple options, banks will obtain detailed understanding of what customers want and will win more business by accelerating their decision-making.

With expanded knowledge of its customer, a bank can offer extra products and services that meet new requirements more precisely.

There is however, one important consideration in all this. Digitisation of trade finance requires connected and effective networks, founded on advanced technology that is already Industry proven.

Utilising established trade ecosystems

When Banks consider their portal, they should ensure it’s based on proven technology which already has networks of users among the global trade finance community and its customers.

More advanced trade portals already have their own networks with a further reach of organisations including other financial institutions, carriers, forwarders, and major corporate customers.

These platforms, usually cloud based, can be fully and securely integrated into the back-end systems of major global banks.

Where once this would have taken years, now banks can implement such advances in a matter of weeks without the months of hassles generated by in-house development and continuing maintenance.

Such platforms will, for example, take care of important updates, such as those applying to SWIFT messaging types and standards.

Streamlined efficiency and their ability to bring visibility to transactions, has given these advanced portals significant credibility in a demanding market.

And with multi-layered architecture and browser-agnostic functionality they offer high levels of scalability and flexibility.

Corporates can access all their transactions and the parties involved from any secure laptop or tablet.

Allowing fast access to multiple finance options and easily retaining a clear view of documents and financial instruments while managing relationships with multiple banks and finance providers.

Increased control and greater agility for corporates

At times of geo-political instability these platforms offer corporate customers much greater control and the ability to adapt quickly to sudden changes in requirements or demand.

Treasuries and other corporate divisions now expect well-designed interfaces to help them reduce overheads, economise on their time, optimise their trade finance requirements, and advance digitisation.

The benefits for everyone involved are significant even in a prolonged period of volatility in global trade.

Digital trade finance solutions have had increasing uptake as the need to digitise becomes ever closer.

Their use by banks across the globe as well as their improving interoperability and reach, mean corporates can communicate with all their banks far more easily and purposefully.

They can finally stop using antiquated paper processes and the need to maintain multiple communication channels. 

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