Patrick DeVilbiss professional photo

Patrick DeVilbiss

Director and Senior Offering Manager, Trade and Supply Chain Solutions

CGI and the Bankers Association for Finance and Trade (BAFT) conducted their second annual trade technology survey at the end of 2021 and held a webinar to discuss the results. The survey focused on gathering trade technology insights and the resulting impact on banks’ day-to-day operations. This included feedback from banks throughout North America, Europe, Asia Pacific and Africa. A panel of representatives from National Bank of Canada, Scotiabank, CGI and BAFT shared their insights on the results of the survey at the webinar held in May.

In this blog, we’ll look at the growing trends in trade finance, including APIs and ESG initiatives, the most significant barriers to innovation that banks are experiencing and how these will impact the future of trade finance.

What’s impacting trade finance today?

The influx of new and innovative technologies has given rise to a variety of initiatives in banking and trade finance to support digital acceleration, collaboration, rising compliance requirements and improving processes to increase efficiencies. Banks are also contending with mounting environmental, social and governance (ESG) expectations and the continued challenges related to the Covid-19 pandemic.

The future of trade finance

A shift towards supply chain finance (SCF) was noted in the survey results, 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 are tangible and easy-to-understand solutions that create a slick UX for clients.

This shift in business focus requires banks to make new technology investments to speed up modernization, including:

  • Trade back-office modernization
  • Portal modernization
  • Trade application programming interface (API) services
  • ESG solutions
  • Blockchain/distributed ledger technology (DLT)

While back-office and portal modernization investments were expected based on the prior 2020 BAFT/CGI survey, API services and ESG investments appeared as the latest trend. These investments are mirrored in our enhancements for the CGI Trade360 platform.

The impact of APIs

Trade API services like AI and machine learning are core technologies banks are looking to invest in to positively impact their internal and front-end experience. The CGI Trade360 application supports a modernized back office solution that is API-enabled out of the box.

Internally, APIs reduce manual data entry, risks, delays and errors by automating internal processes and increasing efficient reporting across geographies and requirement compliance. On the front-end, they create a seamless and controlled user experience using reliable data. By combining and leveraging automation, banks provide clients with meaningful information for more effective decision-making and forecasting.

A growing focus on ESGs

ESG requirements and initiatives have been a focus for corporates and banks alike, with a significant emphasis on environmental sustainability and a desire to invest in ESG solutions.

While 85% of banks indicated that they already had ESG initiatives, 42% of corporates indicated a gap between where they want to be and what is being provided in this space. Many banks and corporations have made public ESG commitments. Interestingly, several factors, including geography, company size and industry, impact the level of ESG initiatives in place, with Europe being ahead of other regions.  

So, are there any incentives for banks to implement ESG initiatives? There is currently no standardized scoring for banks to distinguish themselves from their peers, but we are seeing significant investment in the trade space to align to broad internal bank initiatives. An organization’s values and efforts in environmental and social issues also impact talent acquisition and retention.

Barriers to innovation

While there are many opportunities for innovation in trade finance, there are still challenges that make it difficult. The top three challenges for banks in meeting unexpected revenue shits are an insufficient investment in technology internally, compliance and the regulatory landscape.

The trend toward digitization has helped combat compliance and regulatory challenges, reducing its impact since our 2020 survey. When banks need to allocate funding among competing priorities, they will invest in areas that deliver the most value to the whole organization. Trade is often siloed from the rest of the bank’s operations and processes, resulting in a struggle to receive the internal technology investment they need to meet external pressures to innovate.

To combat internal investment challenges, trade banks need to be aligned with the rest of the bank’s priorities and get involved in cross-ecosystem versus standalone projects. By integrating with the overall payment ecosystem of the bank and better understanding the bank’s strategy, trade can become less siloed and show the value it delivers to the bank as a whole.

How the CGI-BAFT survey helps us adapt

We view the future of trade as interconnected and leverage the CGI Trade360 application as the hub to provide connectivity to external fintech partners that can provide value-added services to the community of banks using the platform. The survey results from 2020 and 2021, along with industry and client input, have enabled us to gain valuable insights into market shifts, emerging technology and gaps in fintech engagement.

For more information on the topics discussed in this blog and insights into the trade finance industry, download the 2021 survey report here.

About this author

Patrick DeVilbiss professional photo

Patrick DeVilbiss

Director and Senior Offering Manager, Trade and Supply Chain Solutions

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 ...