The future of trade finance – views from Sibos

Trade digitization, driven by advances in technologies such as blockchain and AI, has been a topic of conversation at Sibos for the last several years. Yet challenges remain, contributing to the widening of the trade finance gap. Many transactions still rely on paper due to traditional practices and fragmented supply chains across jurisdictions. Modern trade and supply chain finance demands straight-through processing, but digitizing paper and manual processes remains a difficult journey. However, innovation in trade has never happened at the pace that it is happening right now. Technology has matured extensively and can be adopted and adapted at scale.

Three key drivers that are helping to accelerate the pace of change today include:

1.The potential of AI

When it comes to document digitization, artificial intelligence (AI) solves some of the challenges associated with Optical Character Recognition (OCR) as it can ‘read’ documents, extract the information required and offer actionable insights without requiring different document templates. Moreover, generative AI allows corporates to directly engage with banking systems using natural language to find the relevant information, such as sourcing working capital solutions suited to their needs. For mass adoption, a shift in bank and corporate culture is required, alongside preparation for future regulation around the use of AI.

 2. The value of collaboration

While in the early 2000s industry players wanted to build everything themselves to remain competitive, pre-packaged solutions today enable quicker and more seamless integrations. Collaborating with technology and fintech companies supports the integration of multiple solutions via a unified platform, enabling banks to decrease time to market and time to value when launching new offerings. Solutions for document digitization, compliance checking and fraud detection already exist – it’s a case of plugging them together in a truly integrated and interoperable solution. Consuming solutions ‘as a service’ also lowers barriers to entry for banks and provides them with the agility to keep pace with new demands.

3. Increased focus on ESG

With a growing emphasis on environmental, social and governance (ESG), banks must understand their own and their corporate clients’ supply chain logistics, including how goods are sourced and transported, and the impact of their emissions. Banks can then provide favorable financing offers to corporate customers to strengthen their progress. The lack of standard KPIs and fragmented data sources hinder effective ESG reporting, but banks cannot afford to stand still. ESG is becoming both a regulatory requirement and a necessary driver for better financial outcomes and business longevity.

To sum up, as the industry prepares to embrace a new era of truly digital trade, we have an opportunity to make end-to-end digitalization in trade and supply chain finance a reality. Increased collaboration and the right technology are key factors in overcoming the challenges of digital trade and in accelerating ESG initiatives. A platform approach that leverages AI, real-time data, increased transparency and eliminates manual processes can help financial institutions unlock greater value, digitize trade and strengthen their ESG credentials.