The industries and customers trade banks serve are digitally transforming their businesses and supply chains. In turn, this is driving customer demand for trade banks to deliver services seamlessly, faster and better through digital channels. To meet this challenge, trade finance is undergoing an unprecedented transformation using emerging technologies to enable new business models, a superior user experience and radically efficient bank operations.
In this two-part blog series, we’ll take a look at some of the key business and technology challenges trade finance companies are facing in the digital era and the type of technology platform required to address those challenges. In this first blog, we’ll focus on the business challenges in today’s trade finance market, followed in part two by the top technology challenges and the type of technology platform we believe trade banks need to succeed.
State of the trade business market
In today’s business climate, the phrase “do more with less” has never been more apt. Trade banks are now facing fiercer competition and fighting for a shrinking piece of business as traditional trade volumes remain flat or decline. More competition for a smaller pie means lower margins, particularly when compounded by regulatory pressure. Open account trade and supply chain finance represent a bright spot for the trade industry. While traditional trade growth remains anemic, global trade has been growing year over year, driven by open account transactions and through channels where banks are attempting to establish new products to add value for their customers.
While banks pursue efforts to increase efficiencies and drive new products, external factors also are influencing the state of the market today. Customer experiences with technology outside of banking are raising expectations of how customers interact with their banks.
For example, if a bank can easily scan and post a check to a personal bank account on the same day, why does documentation in trade finance have to be so difficult. The simplicity, effectiveness and seamless operation of the latest consumer bank applications have influenced a cadre of corporate bank customers.
In addition, we are witnessing the ascent of a new generation of trade bankers. Increasingly, the executives engaged in the business are closer in age and mindset to millennials than they are to boomers. As a result, the business is seeing a shift in focus to value collaboration, technology and change. Paired with heightened technology expectations, this new generation is scratching their collective heads and wondering why digitization and innovation seems to be so difficult in trade.
Demand for change has resulted in the establishment of digital ecosystems and a host of new start-up companies focused on changing the landscape of trade. The result is the emergence of business-to-business networks and hubs enabling corporate customers to interact, distributing POs, invoices and other trade documentation between established trading partners.
Trade banks in the future may play less of an isolated service provider role in corporate trade, and instead become a participant in these business networks, offering their services digitally. Corporate customers will always gravitate to solutions that cost-effectively and efficiently provide a positive user experience. It is now of utmost importance for bank technology platforms to consider interoperability and collaborative engagement as part of a core offering.
Stay tuned for an overview on the key technology challenges trade banks face in our next blog, along with the type of technology platform we recommend to overcome today’s digital challenges. In the meantime, feel free to contact me to discuss your organization’s unique challenges.
About this author
Director of Consulting
Patrick DeVilbiss is a subject matter expert in trade finance and supply chain finance, with a specialized focus on the areas of receivables and payables finance. He also delivers SaaS product management services to clients, defining client needs based on industry changes, platform metrics and ...