CGI and the Bankers Association for Finance and Trade (BAFT) conducted their third annual trade technology survey at the end of 2022. As banks and the global trade industry return to a more stable state with less direct challenges from the COVID-19 pandemic, CGI and BAFT requested input surrounding technology priorities and investments within financial institutions’ trade organizations.
What’s impacting trade finance today?
The past year saw the consolidation of FinTechs in the trade space, with banks taking a more focused and outcome-oriented approach to incorporating new technologies into their operations. This has been observed with the closures of Serai, We.Trade, and TradeLens, all blockchain consortia or networks which ceased operations in 2022. Based on the survey participants’ feedback, investments in innovation appear to compete for limited resources at trade banks, including environmental, social and governance (ESG) initiatives, digitization, compliance, supply chain finance (SCF) growth and automation.
Investing in innovation – The top technology investments over the next five years
Last year, API services and ESG solutions were the investments that stood out as the most impactful among survey respondents. However, this year’s survey indicates a continued focus on the foundational aspects of trade back-office and trade portal modernization, as well as intelligent process automation (machine learning, natural language processing, artificial intelligence) investments.
Back and front office modernization is crucial for maintaining efficiency on the back end and a positive user experience for customers on the front end. At CGI, we help clients utilize modernized technologies to drive efficiencies through automated workflows and imaging between the customer and the bank, streamlined portal usability and processing services that remove work from the corporate back office. In addition, these core components will enable end-to-end digitization by providing API capabilities to banks. These elements are fundamental, and with their presence, banks will be hampered from a future capability and product offering perspective.
IPA investments like machine learning and AI have the potential to improve the efficiency and accuracy of processes by automating manual work traditionally done by employees. Over time, this will result in decreased human intervention and errors and allow employees to focus more on value-add tasks.
Greatest barriers to innovation
This year’s survey indicated that resource limitations, competing internal priorities and budget were the most significant barriers to embracing innovation. The impact of these barriers has shifted since our 2021 survey, with resource limitation jumping to the top of the list.
Trade banks struggle to prioritize competing investments, including ESG initiatives, digitization, compliance, SCF growth and automation. This challenge isn’t unique to banks or the trade finance industry, as many sectors are being asked to do more with less within an uncertain economic climate. Because of the lack of resources, it’s no surprise that technology investment was a top challenge for banks. The concern with regulatory landscapes and compliance is also still ever-present. The trend towards digitization, heavily influenced by the pandemic, was thought to help combat regulatory challenges and reduce the impact. But will that same push toward modernization continue as we settle into our new normal?
A middling level of satisfaction with FinTech engagement has continued in this year’s survey. The top types of FinTech engagements were SCF platforms and digital document platforms.
The shift towards SCF began last year, with banks expecting only 50% of their revenue to come from traditional trade business. SCF platforms were the most demanded type of fintech engagement because of the digitization benefits they deliver.
SCF platforms offer a tangible and easy-to-understand solution for bankers, so it’s no surprise they are still growing in demand. They also deliver digitization benefits, including improved UX for clients.
Change in ESG impact
ESG initiatives first emerged in last year’s survey, emphasizing investment in environmental sustainability. There was interest from both corporates and banks, although there were no formalized incentives for implementing initiatives.
While this year’s survey indicates that ESG is still growing, there has been little impact on the trade finance business. Since 2021, corporate clients’ interest in utilizing ESG products has decreased by 11.7%, and only 10.1% of participants are executing impactful ESG initiatives. At the same time, 23.2% have implemented ESG initiatives but aren’t seeing an impact on their trade business.
Insights you can act on
As we move to a new normal post-pandemic, it is interesting to see where the industry and clients are looking to invest in the future. CGI and BAFT conduct this survey annually to encourage connectivity to external fintech partners and provide valuable insights into the trade finance industry. We also use these insights to deliver better solutions to meet our client’s needs.
For more information on the topics discussed in this blog and insights into the trade finance industry, download the 2022 survey report here.