Resilience in banking and digital trade

Resilience in banking comes down to preparation. 

Burwell said, “When I hear the word resilience, I think of how you respond to risks in the ecosystem in which you operate. That applies whether it’s your personal life, your family life, your business, your company, and so forth.”

To be resilient, financial institutions must anticipate changes and adapt accordingly. These changes are not always inherently negative risks, like tariffs, regulatory changes, or the emergence of trading blocs. They could also be developments intended for good – take, for instance, recent developments in digitalisation.

Legislative frameworks, which have long been considered the biggest blocker in the path towards trade digitalisation, are strengthening. Legislation based on or influenced by the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Transferrable Records (MLETR) has been adopted by 10 countries, and is in the works amongst key G7 nations, to reinforce the legitimacy of digital transactions. 

Standardisation efforts are also helping to push the digital envelope and may soon contribute to more widespread accessibility of digital trade tools for banks to adapt into their operations.

Burwell highlighted that a lot of the “building blocks for digital trade” already exist, largely in the form of the technology itself, but there are some remaining pieces required in order to build a stable structure. “From my perspective, one of the biggest challenges is still demonstrating to corporate clients of the banks what the value proposition is,” said Burwell. “Where do they find the benefits of their investment?” 

Payments and correspondent banking

The payments sector is experiencing its own major shift, centred around the transition to ISO 20022. For its part, BAFT has been working closely with early adopters, gathering insights and producing a series of best practices to guide financial institutions through the transition. Burwell said, “I can’t take credit for the success stories of the banks that have done this successfully, but we’re trying to help ease the pain and help the community learn from those who have already gone through this.”

Beyond ISO 20022, cross-border payments face another challenge: regulatory misalignment. As faster payment networks emerge worldwide, integrating them across different jurisdictions introduces new risks that policymakers, with support from organisations like BAFT, are beginning to address.

Correspondent banking is another area that is changing alongside global trade patterns. The purpose of correspondent banking is to connect companies in different jurisdictions, even if they’ve never dealt with one another before. But for Burwell, the question for banks which have been doing correspondent banking is: “Can they provide the connectivity for those new entrants to the ecosystem?”

Banks need to keep up, and those that can provide seamless global connectivity will play a key role in shaping the next phase of international banking.

—

BAFT’s independence marks a turning point, but its mission remains the same: to champion best practices in trade finance, payments, and global connectivity for the betterment of the industry.