- AI helps predict trade flows and speeds up document processing.
- Regulation and complexity are rising.
- Digital systems must connect, and centralised platforms can link systems simply and cheaply.
Everything seems to have already been said about the importance of interoperability in trade finance. Its benefits – for efficiency, security, and increasing collaboration – are praised at conferences all over the world: how is it, then, that the industry is so far from achieving it?
This was one of the many issues discussed at the Collaborative Trade Finance Innovation Forum on 18 June, a joint effort between Surecomp and Traydstream to bring the industry together and discuss the key themes of digitalisation, collaboration, and the future of trade finance. During panels, roundtables, and presentations, these five themes came up again and again, showing how different stakeholders, from banks to CFOs, approach the key themes in trade finance.
1. AI is here to stay
AI is making waves in every industry, from entertainment to manufacturing, and trade finance is no different. Speakers reported that companies were using AI to predict global trade flows, adjusting prices and supply chains according to their predictions of demand and disruptions.
AI is also being integrated into digital platforms, like Surecomp’s RIVO™, to reduce processing times and make document drafting more secure and efficient. Generative AI, the newest frontier in AI technology (which ever-present chatbots like ChatGPT are based on), could play an even bigger role in drafting documents and spotting mistakes.
2. Complexity is increasing everywhere
The banking sector is one of the most regulated industries in the world – perhaps with good reason. Increasing regulation, however – which is now extending to banks’ third party providers as well as institutions themselves – is making everyday operation harder and harder to manage.
Regulation specific to emerging technologies (such as blockchain or AI) and jurisdictions can further increase complexity, causing banks to spend significant resources and manpower to ensure compliance. Efforts to set common standards, like the Model Law on Electronic Transferable Records (MLETR), have gone a long way towards making the regulatory landscape more uniform. However, patchy adoption, with some major economies (like Spain) having yet to sign on, means it’s not yet a universal solution.
Beyond regulation, increasing interdependence across countries and industries is making supply chains more complex than ever. This can make it hard to manage, or even predict, shocks, making the whole system more vulnerable. For example, the Liberation Day tariff announcements led to a spike in shipping price across the world – long before the tariffs were actually implemented, and even in shipping routes that were not connected to the US.
3. Interoperability is key – and it’s easier than we think
One thing almost all speakers agreed on is that trade finance cannot reach its full potential without interoperability. Fragmented systems, lacklustre uptake of software solutions and digitalisation, and an industry that is sometimes resistant to change are all making it harder for trade finance to grow with the times.
What many get wrong, however, is how close we are to reaching interoperability – in other words, how little it would take to make a big impact. Interoperability doesn’t have to mean all systems sharing a single API, which would take enormous investment in software, hardware, and employee training.
Some banks have added a ‘middle layer’ like Surecomp’s RIVO™ connecting fragmented offices and systems to a centralised ecosystem, which then processes documents through a single integrated digital platform. This can bring institutions far closer to interoperability, making their processes more efficient and interconnected, at a fraction of the cost.
4. Digitalisation has a long way to go
Despite the technological advancements of the last decade, both globally and in the trade finance industry, the uptake of digital solutions is far lower than in other industries.
For example, despite electronic bills of lading being hailed as a breakthrough in the industry – making document processing far safer and quicker – adoption still sits at a dismal 5%.
5. Centralised platforms are the way forward
To increase interoperability and collaboration, institutions must adopt centralised platforms. Solutions can increase transparency and make operations far more efficient, saving time and avoiding costly mistakes.
Often, corporates – not banks – are the ones pushing for more interoperability, and banks must keep up or risk losing business. As the world becomes more interconnected and increasingly complex, trade finance cannot afford to be left behind: it must evolve, accepting digital solutions and centralised platforms as the key to its growth.
