At a recent workshop organised by the International Trade and Forfaiting Association (ITFA) in association with FCI and the European Bank for Reconstruction and Development’s Trade Facilitation Program (EBRD TFP)in London, banking executives gathered to discuss the state and trends of international trade finance. At the centre of their conversation was the panel discussion on the four corners model and how it’s helping build resilience in global trade finance. 

The panel, moderated by Neal Harm, Secretary General, FCI, brought together experts representing various aspects of the trade finance space:

• John Beaney, Director, Product Management, Global Trade & Receivables Finance, HSBC
• Dilawar Khan, EMEA Head of SCF Origination at Mitsubishi UFJ Financial Group, (MUFG), and 
• Anzhela Barseghyan, Deputy CEO, Director of Trade Finance and Correspondent Relationship Department, ArmSwissBank CJSC. 

Their insights highlighted how innovative financial solutions are enabling businesses to navigate the challenges of the uncertain market.

Four corners bringing trust in cross-border trade

The four corners model has quietly revolutionised cross-border trade finance. It operates neither as an exotic derivative instrument nor as conventional bilateral financing, but rather as a strategically engineered framework. 

At its core, it solves a fundamental problem in international trade: how to conduct business when the involved parties are separated by jurisdictional boundaries, operating under disparate legal frameworks, and navigating distinctive business practices across multiple territories. The risk of non-payment becomes much higher when chasing debts across borders.

The model, developed by FCI, gets its name from its four participants: the exporter (wanting payment security), the importer (seeking extended terms), and the two financial institutions in each country, known as the export factor and the import factor, who bridge the trust gap.

The model’s ability to distribute risk appropriately makes it particularly valuable in emerging economies where credit information may be less accessible and legal frameworks less harmonised.

As per Neal Harm, “It’s been a very successful program: something that EBRD brought to FCI […] a few years ago. It’s something that over the years, we’ve really developed with them, and we brought members to them to say, ‘This is where we see needs in certain markets, especially in those markets where we just don’t have some of the larger financial institutions.’ So they’re running a balance sheet to the table.” 

The FCI’s 2024 World Industry Statistics reveal that global factoring turnover reached €3,894 billion in 2024, a 2.7% increase from €3,791 billion in 2023. Europe remains the dominant market, accounting for €2,600 billion or 66.7% of global turnover. However, the most dramatic growth occurred in emerging markets, with Moldova (+122%), North Macedonia (+63%), Georgia (+51%), and Turkey (+36%) showing remarkable expansion.

These growth patterns showcase how the model’s usage has been evident in facilitating trade across markets where traditional financing mechanisms struggle with cross-border risk assessment. 

Filling critical gaps in trade finance amidst uncertainty 

The trade finance landscape has changed dramatically in recent years. The WTO’s 2025 Global Trade Outlook Report shows uncertainties and contractions ahead.

At the start of 2025, WTO economists had anticipated continued trade expansion supported by improving macroeconomic conditions. That optimistic outlook has now given way to more sobering projections. The volume of world merchandise trade is expected to decline by 0.2% in 2025 before posting a modest recovery of 2.5% in 2026. 

This new estimate marks a significant reversal from earlier projections, with the 2025 forecast nearly three percentage points lower than it would have been without recent policy shifts.

The broader economic picture shows similar strain. WTO economists expect world GDP at market exchange rates to grow by just 2.2% in 2025, 0.6 percentage points below the no-tariff-change baseline, before slightly recovering to 2.4% in 2026.

The impact of tariff changes will not be felt equally across regions. North America faces the steepest projected decline, with growth 1.6 percentage points lower than baseline. Asia follows with a 0.4 percentage point reduction, while South and Central America and the Caribbean are expected to see a 0.2 percentage point drop. Amidst such a situation, it is important that financing options are available for businesses to reduce the stress on sustainability, for which the four corners model can be useful. 

The model’s applicability becomes more profound as we see the gap in trade finance widen. According to the World Economic Forum (2023), the global trade finance gap has reached $1.7 trillion, with small and medium-sized enterprises (SMEs)  disproportionately affected by this shortfall. This financing gap represents a significant barrier for smaller businesses attempting to engage in international trade. By spreading risk across institutions with complementary expertise, the four corners model helps bridge this massive financing gap.

This risk management capability becomes even more valuable as businesses venture into unfamiliar territories. The biggest concern is unfamiliarity with counterparty risk in new markets, which the four corners model was designed to address.

“Our customers will be looking for new customers and new supply chains,” Beaney noted during the discussion. “That’s going to be conducted on open account trade. So that’s an opportunity. But again, we’ve got to help them manage the risks of that.”

The model’s effectiveness in managing risk is backed by remarkably low default rates. Despite rapid growth in challenging markets, credit losses across the FCI network stayed at just 0.04%, lower than the 0.54% default rate for traditional trade finance instruments reported by the Asian Development Bank.

Banks and financial institutions need to adopt innovation and flexibility 

For banks and financial institutions, the growing relevance of the four corners model can mean opportunities and imperatives.

Financial institutions with strong cross-border capabilities can gain an additional market share in trade finance in the coming years. Those positioned within international networks like FCI gain immediate access to risk assessment capabilities across markets where they lack physical presence, allowing them to support clients entering new territories without building costly infrastructure.

The EBRD-Armenia case presented by Barseghyan showed how creative adaptations can overcome limitations in developing markets. When ArmSwissBank attempted to structure a four corners transaction with Georgia’s TBC Bank, they hit a roadblock. Without recognised agency ratings, ArmSwissBank’s credit cover wasn’t acceptable to TBC Bank, a situation that could have killed the deal entirely.

However, the team identified a solution by leveraging their existing EBRD trade finance program. By having EBRD issue a standby letter of credit in favour of TBC Bank, they effectively bridged the trust gap that ratings typically address. The results spoke volumes as all parties derived significant benefits from the arrangement. 

The answer here lies in collaboration and being flexible and open to innovating for new trade finance tools.

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Geopolitical tension and trade disruptions are as old as the Silk Road, highlighted Khan. They’ve been around for centuries, and they’re here to stay. 

Looking ahead, the four corners model appears set for technological enhancement rather than replacement.  For financial institutions, the imperative is clear. As summarised by Harm, “This is about bringing a resilient supply chain finance network to your clients… knowing that it’s going to be dynamic, whether it’s the tariffs that are here today or some other issue that comes out […] next week.”