Banks ‘dragging heels on digitising trade finance’

June 15, 2018
Chris Wheal

Many banks are in no hurry to join the move to digitising trade finance and eliminating traditional paper-based processes, reports the International Chamber of Commerce (ICC).

The International Chamber of Commerce's Paris head office

The ICC interviewed 251 global banks on their trade finance plans: Shutterstock

Many banks are in no hurry to join the move to digitising trade finance and eliminating traditional paper-based processes, reports the International Chamber of Commerce (ICC).

A survey of 251 global banks conducted by the ICC for its 2018 Global Trade: Securing Future Growth report found that the top goal for trade finance banks over the next 12 months is to focus on traditional trade finance, with 72% of survey participants selecting that option.

Less than 30% see digital trade or emerging technology development as a key priority in the year ahead. Asked whether digital schemes might become a priority in the next three to five years, less than half agreed that it was an important goal.

Traditional trade finance continues to be a priority for banks this year in their trade finance operations, while 42% also said they would focus on supply chain finance (SCF).

Priorities may shift, however, in the coming three to five years, as banks said they plan to make greater use of non-bank capital to augment trade financing, focus on emerging technologies such as blockchain, and adjust their geographic coverage of trade financing products and services.

Slow progress

While the ICC found that more than 60% of banks are progressing in the digitisation efforts, progress is slow in developing digital trade finance. Only 12% of those surveyed stating that they had implemented a technology solution. Moreover, out of that sample about 9% had found that digital solutions have increased efficiency.

The ICC admitted that the findings served as a “reality check”, with nearly one in of the banks surveyed admitting they are two years away from implementing trade finance technologies, while 7% said that digitisation was completely absent from their current plans.

While nearly two in three banks said they have taken measures to reduce reliance on physical paper in the issuance/advising and settlement/financing processes in their trade operations, more than half said paper is still an integral part their document verification process.

Although banks recognise the cost savings, the drive to update trade finance processes typically comes from client demand. Last month, US food and agriculture group Cargill completed a soybean shipment transaction from Argentina to Malaysia, using HSBC and ING. Using blockchain to validate trade documentation, Cargill cut the document exchange time – usually between five to 10 days – to just 24 hours.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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