Now is the time to digitalise trade finance and restore confidence

From Business Times

Digitalisation and collaboration hold the key to combating fraud and injecting efficiency into an industry yoked to manual paper processes

IF INTERNATIONAL trade is the lifeblood of the global economy, trade finance is the beating heart that helps keep US$25 trillion worth of goods flowing.

Spanning a diverse set of solutions and instruments, including letters of credit, supply chain financing and trade loans, trade finance provides both financing and risk mitigation. This is invaluable in keeping international trade moving, by ensuring importers receive their goods while exporters receive payment. The World Trade Organization estimates some 80 per cent of global trade today is supported by trade finance, highlighting just how instrumental its role is.

Yet, many segments of this industry remain yoked to archaic paper-driven processes. For a single shipment by sea, traders track extensive paper trails that can involve as many as 36 original documents and 240 copies across 27 parties. This tedious, manual process is highly susceptible to fraud due to the ease in which paper documents can be doctored. This impacts how reliably businesses – especially smaller ones – can access trade financing, ultimately driving up costs for consumers and inhibiting global economic growth.

The industry is ripe for digitalisation to ensure it remains fit for purpose to meet the demands of modern global trade. Beyond the economic gains in efficiency and fraud mitigation, digitalisation also unlocks new capabilities in data sharing and supply chain transparency. Collectively, these enable trade financing programmes to be more inclusive and sustainable.

Continued at Business Times