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Digitized Trade Banking? A Sight for Sore SME Eyes

SMEs love trade but hate trade finance, it’s no wonder

Despite what you read about protectionism and trade wars, international trade is still a vital engine of growth worth around $20 trillion per year. In the digital age, it offers small and mid-size businesses a bigger opportunity than ever to expand and reach new customers and suppliers.

But a huge proportion of it, at least 80 percent according to the International Chamber of Commerce (ICC), depends on the ancient, sometimes arcane world of cross-border trade finance. An area of commercial banking that, until recently, has seen all parties involved in buying, selling, shipping and receiving goods trapped in a complex, time consuming and costly paper trail.  

This is a major problem for small businesses that don’t have the time or access to the expertise required to navigate these tortuous processes. As such, it becomes a sizeable barrier to growth.

According to the ICC:

  • Lack of trade finance funding led to a global trade shortfall of $1.5 trillion last year
  • SMEs suffer the most. The smallest expect to be rejected for trade finance 50 percent of the time
  • Of those, two-thirds have no alternative source of finance    

But there is light at the end of the tunnel. Digitization of paper-based manual processes and the rapid evolution of new technologies are beginning to impact areas such as identity verification, distributed ledger technology, smart contracts and even tracking of goods in transit.

This all helps to reduce friction, simplify the process and reduce the cost of trade finance. But many of these solutions only focus on a small part of the overall supply chain and struggle to "talk" to each other.

Delivering big solutions at great speed

Many mainstream banks are signing up to consortia such as Marco Polo or, a blockchain-based digital trade finance network, in an effort to address the challenges. But there’s still a long way to go.

Anglo-Gulf Trade Bank (AGTB) is one company leading the way.

Together we rapidly built a new digital trade bank from scratch. The company aims to disrupt the UK–UAE trade corridor before expanding into other geographies, outpacing incumbents by putting the needs and expectations of businesses at the centre of its thinking. Here are a few of the key lessons we learned along the way:

  1. Avoid digitizing legacy systems and processes
    Instead, reimagine your offering for example from the business owner’s, Finance Director or Treasurer’s perspective to unlock new ways of operating.
  2. Technology-enabled collaboration shouldn’t stop at FS providers
    Be sure to collaborate with logistics and storage providers, ports, customs authorities, etc. to help customers connect to multiple trade ecosystems.
  3. Don’t forget your colleagues
    Empower them with modern and secure digital workstyles. Provide data-driven insight into compliance and risk management. Transform products with open systems and digital processes.
  4. Select a core banking system that’s lean, open, modular and flexible
    It must pull in data at critical points along the supply chain and meet evolving customer expectations by integrating quickly and securely with preferred partners.
  5. Create a single source of truth to avoid multiple teams reconciling data
    This enables analytics, powerful machine learning and AI-driven decision making. Intelligent use of data improves risk management, offers transparent pricing, deepens understanding of clients and optimizes compliance processes.
  6. Start small and build in increments
    Offer simple, functional client journeys from onboarding to transacting. Provide intuitive user interfaces and delivery channel choice including fully digital propositions.
  7. Keep your eye on the deliverables at all times
    Focus on operational readiness and MVP launch to deliver immediate goals and support future growth. Challenge unnecessary customization and use out-of-the-box functionality from vendor products. Co-create with real clients, iterate with a wider target audience, then scale. 
  8. Own the experience
    Your experience is your brand so protect your primary touchpoint. This also allows you to swap out vendors in the future, with limited impact on your customers.

This is by no means an exhaustive list. We’re continually seeking new ideas to pull an age-old industry into the 21st century, and we’re challenging ourselves to go further.

Andrew Wright
Andrew Wright
Vice President, Business Development

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