How can automation transform trade finance?

Trade finance supports the movement of goods around the world. It is underpinned by a parallel exchange and review of documents, from letters of credit to bills of lading. While some parts of the supply chain have embraced digitalisation, many stakeholders remain reliant on paper-based documentation.

 A recent International Chamber of Commerce (ICC) report shows that 45% of banks surveyed reported no progress with respect to reducing paper-based documentary transactions. End-to-end, the documentation can easily total over 100 pages, a barrier to the digitalisation of trade finance that is unlikely to disappear any time soon.

Banks must manually review these documents to approve finance, as well as regulatory and anti-fraud compliance. Yet, repetitive checks are time-consuming and vulnerable to human error, resulting – at best – in delays and – at worst – in punitive fines for potentially unconsciously transgressing the ever-tightening regulatory environment

In the journey towards trade finance digitalisation, banks will need to bridge the technological divide and devise solutions that access all stakeholders, especially those in less digitally-enabled localities. AI-powered automation could provide the answer.

Automation to the rescue

 Automation is both complementary to digitalisation and an alternative solution if paper-based documentation persists within the supply chain. Here, artificial intelligence (AI) is utilised to interpret scanned documents and check them against a set of pre-defined rules and regulations. This relieves operatives from the time-consuming and mundane burden of manually reading the documents, allowing them to instead focus on the anomalies highlighted by AI – an altogether more positive use of their time and one vastly increasing efficiency.

Beyond cost reduction and time-saving optimisation, the automation of document checking makes the review process more resilient. AI is complimented by machine learning (ML) that automatically keeps the software updated by recording and applying the resolutions enacted by the operatives. It can also keep pace with evolving compliance and legal standards.

Whether the bank receives documents digitally or as physical copies, the rote and repetitive work is all automated. As a result, fluctuations in workload can be more easily managed by operatives. Furthermore, digitalisation enables flexible working arrangements – such as working from home (a saviour during the pandemic) – while also freeing employees to take part in more engaging and skilful work.

The future

Yet, the optimisation of document checking is only the start of the data management benefits of AI-based automation. The data contained in each document is made available for any downstream processes within the bank and is a ready source of trade insights. AI applications can be used for other document-heavy processes such as onboarding new customers for know-your-client (KYC) purposes. Indeed, AI-based automation can streamline any paper-based processes that require authentication and due diligence, including loan syndications.

In this respect, far from being the laggard within banks, trade finance is showing the way.