As the world recovers from the global pandemic and economies begin to slowly raise their heads, we are finding ourselves in a transformed trade landscape. Businesses large and small are having to revaluate their priorities and processes, and one thing is becoming clearer than ever. Trade finance has a large role to play in the impending global recovery. More importantly, digital trade finance will become a pivotal factor in how well the recovery progresses. This is why countries around the world, including the G7, are pushing for and moving towards a completely digital trade and trade finance system.
Changing Priorities
If import and export trade businesses are to survive in the post-covid environment, they will need to become leaner and meaner. Resources, especially financial resources, are scarce. This means that streamlining processes and minimizing costs wherever possible will be key, not just for trade businesses but also for providers of trade finance. This is where digitalized trade systems will shine.
One of the most important measures that import and export trade businesses will need to undertake is a complete re-evaluation of supply chain risks. The complexity, interdependence, and thus, brittleness of the vast global supply chains of today were laid bare by covid. Thus, to survive in the future, international trade-related businesses and others will need to do some work to strengthen and monitor their supply chains. These will include protecting existing activities, rebooting supply chains and operational transformation within supply chains, along with initiatives aimed at supply chain diversification.
Digitalized Trade Finance
While digital trade finance has been emerging over the past decade, it has been slow. However, the pandemic has propelled it forward like nothing else could have. Through technologies such as optical character recognition (OCR), AI, blockchain and robotic process automation, the industry is being transformed. Just recently, an entire shipment of iron ore from Australia to China was handled and managed in a seamless and automated manner using digital trade finance platforms.
Digital trade finance providers, such as Euro Exim Bank, are now able to more widely offer digital trade solutions such as electronic LCs, guarantees and digitally driven supply chain financing. Smart contracts, powered by blockchain are helping to automate the enforcement and settlement of cross border transactions. At Euro Exim Bank, we are one of the first adopters of blockchain to power international trade settlements, via our partnership with Ripple Net, and through our state-of-the-art multi-currency online global trade settlement platform, Exim Wave, with instant access to over 150 global currencies. The post-covid environment will likely see digital trade finance grow, along with digitalized end-to-end supply chain monitoring. Together, these developments will further lubricate and streamline global trade, resulting in, what we believe will be, a new, leaner but more lucrative age of international trade.
