Innovations in Trade Finance – Report by MEDICI

Trade finance has always been about global risk mitigation and funding availability for global transactions and vice versa. The basis of trade finance is trust, and hence trusted third-parties such as banks were necessary to maintain trust among the parties involved. However, ongoing geopolitical and macroeconomic headwinds are making trade finance a tough business for banks due to costs, risks, and increased competition. This can be witnessed in the decrease in total merchandise exports, which has seen a dip of 2.7% between 2018 and 2019 (according to the WTO). What is the next logical move for the players in the trade finance business? What exactly does innovation mean for trade finance? In this article, we share some snippets from MEDICI's recently launched report on Innovations in Trade Finance.

MEDICI’s newest report Innovations in Trade Finance dives deep into key technologies, such as Robotic Process Automation, Optical Character Recognition, and Artificial Intelligence, that are part of the digital transformation roadmap and key innovations taking place in the trade finance ecosystem.

Snippets from Innovations in Trade Finance Report

The report analyzes key drivers of innovations in trade finance:

  • Trade finance’s growth has remained constant
  • Standardization is key to harmonization in trade finance
  • Operational efficiency and higher level of automation
  • Better connectivity will enable collaboration
  • Higher transparency and trust among stakeholders

You can find detailed commentary on these areas in the full report here.

Historically, trade finance has been a paper-intensive business based on traditional practices and jurisdiction-heavy practices. Banks & FIs are facing tough competition and embracing newer innovations for their practices. They are trying to digitize their trade finance solutions to enhance transparency, reduce risk, and provide quick credit at a lower cost to their clients. The report highlights that the impact of COVID-19 could be stressful to the supply chain and eventually increase the rate of non-payment of debts, which could increase the stress on the trade finance arms of banks and FIs.

The global pandemic and trade wars have been incentives for large banks and FIs to innovate and adopt technologies in their processes. Banks are collaborating with FinTechs to accelerate their innovations and product rollouts to provide their customers with more value-added services and improve the digital infrastructure to enrich the frictionless trade flows through automation.

MEDICI’s report on ‘Innovations in Trade Finance’ dives deep into this very subject. Access the full report here!

About the Report

Apart from a discussion on key technologies and drivers for innovation in trade finance, this crisp (18-page) report on ‘Innovations in Trade Finance’ covers:

  • Multi-Tier Supply Chain Finance
  • Blockchain in Trade Finance
  • Securitization, Factoring & Invoice Discounting
  • E-Marketplace in Trade Finance
  • Legal Entity Identifiers (LEIs) System