At the 51st Annual International Trade and Forfaiting Association’s (ITFA) Conference in Singapore, Mahika Ravi Shankar, Deputy Editor at Trade Finance Global (TFG), spoke to Baptiste Audren, Chief Revenue Officer at Komgo, to find out about the most recent changes in trade finance technology and ecosystems.

Standardised trade: Just a pipe dream?

Historically, one of the biggest issues with trade has been fragmentation and diversity – of different jurisdictions, systems, and practices. An increasing push towards standardisation, aided by technology, is pushing trade ecosystems to be more interoperable. Will this lead to full standardisation in the end?

“Trade is always going to be complicated to standardise,” said Audern. “There are so many specificities to every market, every country. It has changed a lot,” even though “we still feel that it’s very fragmented.” 

Specific initiatives led by international bodies like SWIFT or the ICC are going a long way towards setting global standards, which firms are increasingly adhering to. For example, MT 798 – a messaging format set by SWIFT and used to send messages between banks and corporates – is now adopted nearly universally. 

MT 798 makes it possible for institutions all over the world, who may have different local banking regulations and practices, to communicate and share details of trade finance instruments like bank guarantees and documentary credits. More recently, API standards set by the ICC make it possible for the first time to streamline trade finance processes and make them interoperable across institutions and jurisdictions.

Trade vs treasury management systems

As policy uncertainty makes liquidity more crucial than ever, CFOs are turning to treasury management software (TMS) to handle payments and cash reserves. Now that TMS has become almost mainstream, the new frontier is trade finance management systems, smaller-scale platforms to streamline trade finance operations. 

Large corporates are turning to this booming sector to increase efficiency and monitor all their trade finance operations under one roof. They might be followed by smaller firms in recent years, too, as the trade finance industry increasingly takes advantage of ways to simplify complex processes. 

Technology as a whole has been exponentially growing in trade finance globally: new technologies build on top of each other to accelerate innovation to a scale never seen before. 

For example, the increasing use of cloud computing and storage has made on-site back-office systems obsolete. This means that there’s now a much larger capacity for evolution than there was when systems were on-premise; updating software can now be done with a click and provide immediate benefits. This also makes AI integration much quicker and seamless, unconstrained by higher demands on processing power or needing to change any physical infrastructure. 

The next quarter-century

Even though it looks like much of trade finance has evolved at breakneck speed, crucial areas are being left behind. For example, electronic bill of lading integration is still minimal, with many other processes remaining paper-based or at best mirrored digitally rather than fully digitalised.

While this won’t change overnight, recent innovations will help and bit by bit change the very way trade finance data is shared. “I’m a believer that AI will be an accelerator of digitalisation; I think that trade knowledge will probably disappear and will be replaced by systems that have this knowledge,” said Audren. 

The next 25 years will also be about simplifying trade finance: making existing processes more standardised, more affordable, and easier to access. These changes “will come more on the format of the instrument than on the type of instrument,” said Audern – transforming the way we view and handle trade finance transactions, products, and documents. 

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The past 25 years have brought about enormous changes in the world of trade, and we can expect at least as much change from the next 25. Digitisation, regulatory shifts, and AI are changing both the way we do business and the perspective we see it from – changing not just the “what,” but the “how”.