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Advancements in Trade Finance

April 26, 2018 - Manish Patni


Globally, trade finance transactions encompass multiple steps/processes heavily dependent on manual processing which is prone to errors.
The complexity involved in processing trade finance transactions can be understood by looking at the number of players involved right from the importer, exporter, importer’s bank, exporter’s bank, insurer, custom house, shipper and so on. The user processing the transactions needs to go through various types of documents and capture numerous data; some used for processing and some only for reporting and information purpose.
Overall, there is a need to invest in advancement in processing the trade finance transactions enabling the manual activities to be more abridged, eliminated or industrialized. Investment focusing on digitization will help the bank in providing a better customer experience and in reducing the cost of processing.
Advancement in trade finance processing can be targeted in the following areas:

  • Processing enablers like OCR

    Smart Optical Character Reader (OCR) is the solution to move to a more efficient way of processing trade finance transactions. This shall help in extracting data from the documents and automate processing the transactions. Adoption of the technology will help reduce time to process the transaction, reduce the mistakes as the process is automated and make the process cost-effective.

  • Enabling electronic channels within the Bank and the Corporate

    Banks are adopting technologies which are enabling the corporates to increasingly rely on electronic channels to interact with the bank, including request for processing a trade finance transaction. Adoption of the channel aimed to enable digital flow of information between the bank and the corporate clients and vice versa will lead the way towards processing trade transaction as a straight through process without paper.

  • Adoption of Blockchain

    Blockchain as a platform can also help advance the way a trade finance transaction is processed. Since blockchain allows real time transparent and secure means of sharing information between multiple stakeholders, it will help in smoother and faster processing.

  • Internet of Things (IOT)

    Finally, IOT is an area which is ready to unsettle traditional trade finance processing. The technology will enable connecting the goods in transit to internet, resulting in tracking and monitoring of real time movement of goods. The same will help in reducing the risk on financing a trade finance transaction and will bring better control over fake transactions.

    Adapting to IOT will also see inflow of additional set of data pertaining to the details of the movement of goods, e.g. GPS details of the goods, and this will require digitization of traditional trade finance system. The current labour-intensive and paper based processing will become more complex.

To conclude, because of the complex manual transaction involvement, advancement in trade finance processing despite moderate progress in the past is an area of high priority for all banks. The advancement involves revamping the existing and other surround systems. The fact that the end state cannot be achieved immediately, the banks need to lay down the path with a short, medium and long term view for the end state.

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4 thoughts on “Advancements in Trade Finance

  • Like!! Great article post.Really thank you! Really Cool.

  • These are the use cases which would propel IOT to the next level, transitioning from the world of DIY toys to viable business enablers. Well written.

  • really nice blog to understand the current market demands. thanks Manish

  • Very well explained. I completely agree with what is mentioned in the blog. Loads of errors are due to manual interventions only. Adoption of Block Chain globally will be more effective in the future. Thanks for bringing this to the forum.

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