As global trade continues to recover from the drop in world merchandise trade occasioned by the COVID-19 pandemic, supply chains are becoming more international, drawing on many parties from around the world. This appears to be good news for banks providing Trade Finance services, however, as trade volumes are increasing, other forces are reducing banks’ margins. Transactions continue to shift away from documentary trade, typically involving letters of credit issued by banks with attendant high operating costs and slow transaction delivery time. 

This is partly a consequence of increased regulatory burdens, but it is also a result of failure to digitize and automate trade operations. Trade Finance remains a largely paper-based and laborious business. A single transaction could require the interaction of more than 20 entities and involves about 20 paper documents and 5,000 data field exchanges. 

This reality of high costs and failure to automate processes has led to opportunities for established practitioners and new entrants to fulfill the unmet demand of trade more efficiently with the digitalization of the trade finance market.

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