Rerouted trade corridors, regional fragmentation, a currency arms race… these are no longer distant possibilities. They are active geopolitical and macroeconomic forces, reshaping transactional banking. 

At this year’s BAFT Global Council’s Forum in Frankfurt, Germany, a panel of senior leaders from prominent global and regional banks explored how shifting political tensions and economic dynamics are creating deep uncertainty for the industry, and how banks are adapting their strategies, infrastructure, and client relations in response.

The panel, moderated by Nick Smit, head of financial institutions at ING Bank and chair of BAFT’s board, found that transactional banks are being rewired to confront political risk, digitisation, and technological disruption. The panel provided a region-by-region exploration of the subject, and some interesting parallels came up.

Financial integration in Asia

Trade has always been relatively politicised, but it feels that this is the case now so more than ever. Banks must now operate in a system where geopolitics dictates financial flows. 

This is most apparent from how trade corridors are being redrawn. “If you look at China’s trade with Vietnam, during the period from 2016 to 2024, it’s grown by almost $100 billion,” said Ashutosh Kumar, Head of Global Transaction Banking, Asia Pacific at Mizuho Bank.

In line with Kumar’s statement, US President Donald Trump’s steep tariffs following his return to office triggered a statement by ASEAN leaders, calling for increased economic integration within ASEAN countries. 

“The amount of flows we are seeing in CNH versus JPY (Japanese yen) is almost the same – in some cases higher,” Kumar noted, pointing to the Chinese yuan’s rising role in Asian trade. “And the quality of Chinese goods is now as competitive as German or Japanese goods. That is a big change.” The Chinese government has for some time now been seeking to improve renminbi use in international trade; this shift reveals that, alongside increased integration, Asia’s trade flows are being defined by China’s growing economic reach.

Regional fragmentation in Africa

Africa, on the other hand, presents the challenge of fragmentation. Despite rapid growth in external trade with partners such as China, intra-African trade remains limited. The figure stood at 14.9% of total continental trade according to the African Export-Import Bank’s (Afreximbank) 2024 Africa Trade Report – significantly lower than other regions of the world.

“I think the key focus area for Africa is how we grow intra-African trade,” said Bohani Hlungwane, Managing Executive at Absa. “How do we make it easier for someone exporting coffee from Ghana or Kenya to do so across borders in Africa?”

He stressed that initiatives like the African Continental Free Trade Area (AfCFTA), alongside investment in infrastructure and payment systems, are designed to change that trajectory. “In Africa, we’re trying to solve the problem of ensuring easier payments, moving currencies easily, and allowing goods and services to flow.”

According to the Brookings Institution, between 2022 and 2023, formal intra-Africa trade rose by 3.2% – progress, but still underscoring how fragmentation remains a structural barrier. 

Europe’s financial sovereignty

While Africa is trying to overcome fragmentation, Europe is responding in the opposite manner: by hard-wiring sovereignty into its financial and regulatory systems. 

Patricia Sullivan, Global Head of Institutional Cash Management at Deutsche Bank, stressed that Europe is taking a deliberate, political approach: “Europe is asserting its independence in fresh ways  in terms of regulatory position, monetary policy, and also sovereignty.”

In the context of today’s geopolitical tensions, Europe’s sovereign approach is aligning financial infrastructure with strategic sectors, pushing governments to prioritise energy and defence. This, in turn, directs banks to provide greater support and investment into those industries.

For instance, the European Union’s ReArm Europe Plan/Readiness 2030 calls for a massive surge in defence investment, including a €150 billion loan facility. For banks, this kind of initiative sets the parameters for where capital will be needed and what kinds of financing structures must be built.

Sovereignty, in other words, is being operationalised through regulation, monetary frameworks, and investment priorities. Across Asia, Africa, and Europe, geopolitics and economic shifts are actively reshaping trade, requiring transactional banking to adapt accordingly.

Redefining money: Stablecoins and CBDCs

Throughout the panel, the speakers emphasised how adaptation begins with money itself. Transactional banking is beginning to implement tokenised forms of value alongside traditional cash rails, from stablecoins to central bank digital currencies (CBDCs). 

“Europe is very focused on maintaining the dominance of the Euro and having a Euro CBDC,” explained Sullivan. “Whereas if you go over to the US, there’s not much focus at all on a central bank digital coin. There’s much more focus on private issuer stablecoin.” 

This divergence reflects two very different approaches: Europe sees the Euro CBDC as a way to safeguard its independence and keep the euro relevant in global trade, whereas the US is leaving the space largely to private stablecoins, which are designed to always be worth the same as the currency they’re pegged to – the majority of which are US dollars. 

For banks, this means navigating a fragmented monetary system where both public and private digital currencies will coexist. 

Technology, digitisation, and AI

As banks adapt to new forms of money, digitisation and AI become essential for cross-border payments, but the barriers are social as much as they are technical.

According to McKinsey, digitalising trade documentation, replacing paper bills of lading with electronic ones, could save $6.5 billion in costs and unlock $40 billion in additional global trade. However, digitisation has human costs. “In the developing world, the challenge is not technology – it is a social,” said Kumar. “There are thousands of people who are involved in managing paper-based trade and customs requirements. What will they do when all of that becomes electronic?” 

The aim is not to replace employees but to give them tools that improve productivity and reduce routine workload.

From Hlungwane’s perspective, the bigger opportunity is in using AI to transform data into strategic insights. He highlighted how AI is not only a tool for efficiency, but also a way for banks to position themselves as advisors, helping clients anticipate risks and opportunities.

Client relationships and the advisory role

The panellists emphasised that in times of global uncertainty, clients expect banks not just to process transactions, but to advise and guide – turning trust into a competitive edge. Hlungwane highlighted how clients increasingly approach banks with practical questions: “They say to us, ‘How do I get involved? How do I reduce my own cost? How do I become more efficient?’”

Sullivan echoed this sentiment: “Underlying everything we’re talking about here is still the need for trust. Whether it’s trade or cash, clients want to be sure that the institutions they bank with can handle these serious services. They don’t want their money just flowing through blockchain or digital assets; they want to know that if it’s happening, it’s being done safely.”

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From Asia’s currency shifts to Africa’s integration efforts and Europe’s sovereignty agenda, the panel showed that transactional banking is being reshaped by forces far beyond economics. 

Trade is now political, money itself is being redefined, and technology is redrawing the boundaries of what banks can do. In this environment, success depends on maintaining the trust and advisory role that clients demand just as much as adopting new systems and digital tools.