Guest blog: Setting the new global standard in trade finance digitisation

Over the last decade, banks have become bigger, more profitable and better capitalised. Though with technological innovation all around us, financial institutions are still lagging behind, particularly in the area of trade finance, where in many cases transaction processing is still labour-intensive, paper-based, error-prone and time-consuming, significantly affecting bank profitability.

Why is this the case? Exploration of new technologies for financial institutions takes time and effort, so banks often find themselves playing catch-up, following the innovation trends rather than setting them. Heavy integration investment to core products results in long and expensive onboarding, which leads to slow adoption of new technologies.

However, as we are all now acutely aware, the impact of COVID-19 on global markets has, and will, change the picture indefinitely and awareness of the need for contactless, mobile-friendly trade finance processing has heightened.

Moving forward in a world of change

Perhaps finally the future of trade finance digitisation really is now; perhaps now presents an unprecedented opportunity for banks to set the new global standard? While consumers are adapting like never before to the new digital norm, so too will corporate customers, expecting their banking partners to keep pace and to deliver their services without delay or error.

But how can banks leverage this opportunity? Quite simply by implementing new technologies and adjusting their services and operations to provide end-to-end digital services with higher efficiency and lower costs. The scope of trade finance digitisation possibility is endless and contrary to some misconceptions, does not require a drastic change in operations.

Adding new automation tools without seamless interoperability to incumbent systems, however, will undoubtedly increase deployment costs and decrease return on investment (ROI). It is far better to streamline operations by eliminating multiple systems that address the same problem and then focus on technologies that connect and facilitate customer engagement. While individual platforms can contribute value to a business, it is far better to use integrated, complementary solutions for greater impact, reduced implementation time, increased ROI and faster results.

The technology enablers

Be wary of relatively new tech trends, such as distributed ledger technology or blockchain. While sparing the need for paper through the creation and exchange of digital assets, these technologies still rely on a large, pre-configured user base to operate well. Blockchain has generated a lot of interest in the banking sector, but again adoption has been slow and is not widespread due to high subscription and integration costs. In order to make it worthwhile, to make it time and cost-efficient, all ecosystem parties must be onboarded to the same solution, or at least to a similar solution using the same technology, so they can communicate.  However, with very few trade finance blockchain solutions out there, and without interoperability, adoption is sluggish and expensive.

So that brings us nicely to application programming interfaces (APIs). Now widely used to facilitate the consumption of web services in various industries like e-commerce — with the likes of tech giants, such as Google and Salesforce acquiring API management platforms, or with fintech companies like Plaid and Stripe in consumer banking and payments respectively — APIs provide real-time, seamless digital services to end users. Yet with data security vulnerabilities and strict compliance policies to uphold, banks again have experienced a slow acceptance of APIs.

However this is changing, and we are now finally starting to see an uptick in interest and adoption among financial institutions, with the more innovative, transformative banks taking the lead. Singapore-based DBS bank believes the digitisation of global trade is on the brink of explosive change and as a widely acknowledged pioneer of tech adoption, it is poised to be at the forefront of this innovation. The bank has been experimenting with various industry partners, embedding itself in the customer journey by linking to ecosystem providers for features such as optical character recognition (OCR) and other platforms through APIs to ensure real-time data exchange and a reduced paper trail.

The future is now

In short, there are many technologies out there to help financial institutions boost performance, none of them flawless but all of them generating value. The key to future-proofing customer loyalty, growth and profitability is not just tech adoption, but speed of tech adoption. Now, like never before, is the time for banks to leverage their relationships with technology providers; take advantage of vendor expertise in adding and integrating new technologies and aggregating data, as well as helping set a new standard in trade finance digitisation.

*Disclaimer: The content of this article does not reflect the official views of the International Chamber of Commerce. The opinions expressed are solely those of the authors and other contributors.