Trade Finance Sector Review

The Trade Finance Banking sector is in an excellent state as the need to import and export different goods and services from all parts of the world is increasing day by day. International Trade is growing exponentially, and trade flows are predicted to reach US$19 trillion by 2020, according to Boston Consulting Group. Trade finance is a service which includes a number of standard products such as:

  • Documentary Credits
  • Documentary Bills for Collection
  • Bank Guarantees

These products can provide assurance that payment will be made when the required contract terms are met

Trade Finance Products

Documentary Credits are governed by ICC (International Chamber of Commerce) using the following standards:

  • Documentary Credits (UCP 600)
  • Documentary Collections (URC 522)
  • Bank to Bank Reimbursements (URR 725)
  • International Standard Banking Practice (ISBP 745)
  • INCOTERMS 2019

The above transactions account for approx. 20% of all Global Trade Trade Finance also needs to be closely working with Bank Guarantees (URDG

Trade Finance Future Trends

  • Most advances in trade finance technology are on digitizing key trade documentation – like invoices, purchase orders, bills of lading, airway bills, and certificates of origin – for faster processing and more efficient verification of compliance with customs and international trade regulations. Banks benefit from decreased operational costs and the ability to scale growth without increasing headcount.
  • New technologies in trade finance look to bring on a future of paperless documentation with the promise of reducing the trade finance gap for import-export traders. While the impact has yet to be felt by businesses dealing in international trade, a significant increase in funding of fintech companies may accelerate the closing of that gap
  • Fintech companies approach the process of digitization in a variety of ways, including optical character recognition (OCR), machine learning
    automation, and distributed ledger technology like blockchain. The latter stands out as one of the most promising and blockchain technology has the potential to not only lower costs for banks, but also increase the speed and security of transactions for buyers and sellers, according to Boston Consulting Group.

Trade Finance Solution in T24

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