The Digital Future of Trade Finance

By: Tushar Chitra, Vice President Product Strategy & Marketing, Oracle Financial Services

The ongoing economic downturn has affected global trade, and consequently, trade finance. Emerging technologies, agile competitors, supply chain disruptions, and a low interest rate environment are mounting further challenges on the banking and corporate sectors – but beneath these challenges, there may yet be a business opportunity.

Crises Drive Change 

Yes, crises drive change. That’s why now more than ever, banks need a better understanding of corporate customer needs and a willingness to recognize, embrace, and become a catalyst for change. There’s a lot of buzz around trade digitalization and the urgency to leverage emerging technologies and capabilities to do many of the things banks regularly do, but in new and better ways that drive improved outcomes. 

The key underlying question is:  how can organizations build a resilient business that’s ready for whatever comes next? There’s no guaranteed answer to this question, since each organization has its own reasons for transformation, but it’s important to remember that it’s less about choosing a specific technology and more about choosing the right technology to achieve your desired outcomes. Where change previously came over years or decades, present-day organizations must learn to adapt at digital speed. 

Nowadays, crisis response begins with recovery. While some organizations may have adopted digital platforms to enable smarter trade finance operations, the rationale and imperative to find ways for humans and machines to work together to get work done quickly has never been more apparent.  Many organizations were already gearing up for the new and ‘different’ future of trade finance with trade finance-as-a-service. However, due to the global business environment, a gradual process of evolution has suddenly become a business imperative. 

Enabling Technological Transformation

Today, digital transformation is beyond the conversion from manual and analog processes to digitized processes in every aspect of trade finance from initiation to fulfillment. The umbrella of trade digitalization now encompasses a wide variety of technologies, including artificial intelligence, machine learning, blockchain, the cloud, and more:

• Machine Learning (ML)/Natural Language Processing (NLP): Banks can use optical character recognition (OCR) to convert documents into e-documents without any human intervention. NLP is a great tool to automatically mine information from scanned copies of purchase orders and invoices and extract relevant information.
• Digital Assistants: Digital assistants, such as chat bots can recognize a wide variety of user requests, match them to the appropriate entry in the database, and formulate an appropriate answer to the user. For example, a digital assistant can help track outstanding credit across borrowers, or for a specific borrower, and decide how to address the borrower within minutes.
• Open API: With the open banking momentum emerge new opportunities for better engagement. Corporates expect data to be seamlessly available in their ERP system and in turn expect banks to respond to triggers generated by the ERP without manual intervention. 
• Blockchain: When a blockchain adapter is used along with a trade finance system, it gives access to the technology’s cryptographic security and unchangeable recordkeeping, providing a full audit trail within a trading ecosystem. With a blockchain-based transaction, members can automate liquidation of bills under Letter of Credit (LC), automate liquidation of loan contract, and transmit real-time data across smart contracts in minutes.
• Software-as-a-service: Trade finance-as-a-service have all the same features and functionality as their on-premises’ counterparts, but without the overhead of IT infrastructure, maintenance, and upgrades. The current global business environment, in which on-demand agility and scalability is an imperative for banks, is accelerating the shift to trade finance operations in the cloud.

Reaping the Rewards

These technologies are quickly becoming mainstream—and banks are already realizing their benefits:

• Automate routine tasks: AI-guided digital assistants can automate a large number of routine tasks, while freeing up employees to work on more revenue generating customer service tasks.
• Improved data confidence: Blockchain reduces manual, error-prone information exchange and transaction execution across enterprise boundaries, while avoiding the costs and delays of offline reconciliations.
• Get work done faster: With NLP, businesses are better able to analyze their data to help make faster decisions.
• Rapid deployment: SaaS applications enables customers to get up and running faster, on a more reliable resilient technology backbone than ever before. 

The Bottom Line

Banks have an opportunity to bridge the global trade finance gap. This can be achieved when banks start digitization and automation of their trade finance function to serve their customers better in this connected real-time world. 

Each of these technologies is increasingly vital, whether a bank wants to improve an existing or new business process, innovate in one key area, or reduce data silos. As SaaS applications are becoming the status quo, differentiating a business by leveraging emerging technologies have opened up new pathways to meet rapidly changing customer, employee, and counterparty expectations.  

A technology-first approach is to embed AI, machine learning, digital assistants, and other emerging tech into the trade and supply chain finance application – leading to larger successes down the line.

By: Tushar Chitra, Vice President Product Strategy & Marketing, Oracle Financial Services

The ongoing economic downturn has affected global trade, and consequently, trade finance. Emerging technologies, agile competitors, supply chain disruptions, and a low interest rate environment are mounting further challenges on the banking and corporate sectors – but beneath these challenges, there may yet be a business opportunity.

Crises Drive Change 

Yes, crises drive change. That’s why now more than ever, banks need a better understanding of corporate customer needs and a willingness to recognize, embrace, and become a catalyst for change. There’s a lot of buzz around trade digitalization and the urgency to leverage emerging technologies and capabilities to do many of the things banks regularly do, but in new and better ways that drive improved outcomes. 

The key underlying question is:  how can organizations build a resilient business that’s ready for whatever comes next? There’s no guaranteed answer to this question, since each organization has its own reasons for transformation, but it’s important to remember that it’s less about choosing a specific technology and more about choosing the right technology to achieve your desired outcomes. Where change previously came over years or decades, present-day organizations must learn to adapt at digital speed. 

Nowadays, crisis response begins with recovery. While some organizations may have adopted digital platforms to enable smarter trade finance operations, the rationale and imperative to find ways for humans and machines to work together to get work done quickly has never been more apparent.  Many organizations were already gearing up for the new and ‘different’ future of trade finance with trade finance-as-a-service. However, due to the global business environment, a gradual process of evolution has suddenly become a business imperative. 

Enabling Technological Transformation

Today, digital transformation is beyond the conversion from manual and analog processes to digitized processes in every aspect of trade finance from initiation to fulfillment. The umbrella of trade digitalization now encompasses a wide variety of technologies, including artificial intelligence, machine learning, blockchain, the cloud, and more:

• Machine Learning (ML)/Natural Language Processing (NLP): Banks can use optical character recognition (OCR) to convert documents into e-documents without any human intervention. NLP is a great tool to automatically mine information from scanned copies of purchase orders and invoices and extract relevant information.
• Digital Assistants: Digital assistants, such as chat bots can recognize a wide variety of user requests, match them to the appropriate entry in the database, and formulate an appropriate answer to the user. For example, a digital assistant can help track outstanding credit across borrowers, or for a specific borrower, and decide how to address the borrower within minutes.
• Open API: With the open banking momentum emerge new opportunities for better engagement. Corporates expect data to be seamlessly available in their ERP system and in turn expect banks to respond to triggers generated by the ERP without manual intervention. 
• Blockchain: When a blockchain adapter is used along with a trade finance system, it gives access to the technology’s cryptographic security and unchangeable recordkeeping, providing a full audit trail within a trading ecosystem. With a blockchain-based transaction, members can automate liquidation of bills under Letter of Credit (LC), automate liquidation of loan contract, and transmit real-time data across smart contracts in minutes.
• Software-as-a-service: Trade finance-as-a-service have all the same features and functionality as their on-premises’ counterparts, but without the overhead of IT infrastructure, maintenance, and upgrades. The current global business environment, in which on-demand agility and scalability is an imperative for banks, is accelerating the shift to trade finance operations in the cloud.

Reaping the Rewards

These technologies are quickly becoming mainstream—and banks are already realizing their benefits:

• Automate routine tasks: AI-guided digital assistants can automate a large number of routine tasks, while freeing up employees to work on more revenue generating customer service tasks.
• Improved data confidence: Blockchain reduces manual, error-prone information exchange and transaction execution across enterprise boundaries, while avoiding the costs and delays of offline reconciliations.
• Get work done faster: With NLP, businesses are better able to analyze their data to help make faster decisions.
• Rapid deployment: SaaS applications enables customers to get up and running faster, on a more reliable resilient technology backbone than ever before. 

The Bottom Line

Banks have an opportunity to bridge the global trade finance gap. This can be achieved when banks start digitization and automation of their trade finance function to serve their customers better in this connected real-time world. 

Each of these technologies is increasingly vital, whether a bank wants to improve an existing or new business process, innovate in one key area, or reduce data silos. As SaaS applications are becoming the status quo, differentiating a business by leveraging emerging technologies have opened up new pathways to meet rapidly changing customer, employee, and counterparty expectations.  

A technology-first approach is to embed AI, machine learning, digital assistants, and other emerging tech into the trade and supply chain finance application – leading to larger successes down the line.