How banks are going digital to manage COVID-19
ICC has issued a collection of rapid response measures by trade finance banks to keep trade finance and trade flowing in the face of COVID-19.
Trade and trade finance operations require significant back-office operations to process paper-based transactions. With shipping, in-person contact and travel all increasingly disrupted as a consequence of the COVID-19 pandemic, financial institutions have been putting in place measures to enable transactions and the continuity of trade.
Collating data from ICC, the International Trade and Forfaiting Association (ITFA) and the Bankers Association for Finance and Trade (BAFT), ICC’s Digitalisation Working Group has published a practical reference guide outlining ad hoc practices being implemented by financial institutions in response to the COVID-19 pandemic. Responding institutions span Asia, Europe, the Americas, the Middle East and Africa. They include the top 10 global trade banks as well as other banks actively engaged in trade and trade finance globally.
The ad hoc practices being implemented by financial institutions in response to COVID-19 are unique in that they target the singular problem of how to keep trade flowing when paper-based transactions are difficult or impossible due to reduces physical interactions. Given the rapidly changing environment, practices are continually being improved. The ICC paper therefore does not set out best practices but aims to be a practical reference document comprising trusted information about measures put in place to continue the flow of trade and trade finance when paper transfer has become difficult or impossible.
ICC Secretary General John W.H Denton AO said: “In this exceptional time of crisis, ICC efforts to expedite the shift from analogue to digital in the trading world are crucial to help maintain the flow of trade and trade finance, and safeguard lives and livelihoods worldwide. As a trusted partner for business and governments everywhere, ICC is shining a light on some ad hoc solutions that have been enacted by financial institutions, with a view to better understand how they are adopting digital solutions in the face of the pandemic.”
Looking beyond the crisis, the document underlines that many of the ‘rapid response’ quasi-digital solutions in place or being put in place currently will be re-examined and likely withdrawn post-crisis, the ICC document states:
“…if lessons are learned, this experience will positively change how banking and trade finance is originated, transacted and settled. The experience of rapid digitisation should not go to waste. Both [financial institutions] and corporates will need to re-engineer business processes following COVID-19. And we strongly believe that governments will be an enabler for this.”