The Fintech industry has undergone great positive progress around diversity in recent years. One of the areas Fintech is greatly working to improve on is Finance Trade. The goal for this development is to allow an effective delivery of relevant, reliable and sustainable Fintech solution particularly in global trade.
Technology advancements continue to shape the world of trade and trade finance, and there is no sign of a slowdown in 2021. According to the International Chamber of Commerce, $9 trillion in global trade finance is done each year, but non-banks and institutions contribute only $250 billion of that.
Fintech has a future in small business financing due to innovations that allow smaller companies to participate in international trade and broaden the range of commodities and economies available. It aims to make it easier for banks to enter into lower-value-ticket agreements by streamlining the process of extending payment periods and reducing paperwork for SMEs. This also makes trade finance book pooling, securitization, and non-bank investor participation easier and more feasible for investors. Due to the high cost of opportunity (relative to reward size), banks frequently find it difficult to accept SMEs, and with fintech, there will be a focus on agile customer boarding, automation, and e-KYC. Fintech will create three opportunities for banks, enterprises, and businesses in the cross-border trade finance sector: KYC and the provision of quality client information, onboarding travel time, and banking system integration.
There is also the issue of physical paperwork management in trade finance, which is already a barrier to electronic customs processing using a single window. As a result, the transition to digital documents to finance digital transactions is a natural progression into the future, primarily driven by the private and commercial sector’s desire to fund digital transactions. Advantages for commercial players and banks include intermediation, which reduces costs and friction, machine learning, which provides data-driven predictive analysis leading to sharper business decision making, safe, verifiable records of identity, digital transaction times for currencies, and a reduction in currency exchange rates. Completely paperless trade is extremely unlikely to occur anytime soon. However, banks can advance the majority of their revenue by going paperless internally and creating a digital ring-fence around their actions.
Furthermore, digitalization using optical character recognition (OCR), natural language processing (NLP), and progressive machine learning is becoming the norm to reduce the risk and cost of trade finance operations. This solution will improve trade finance operations by expediting trade finance document approval. It is also expected to digitize manual, paper-based processes, reducing processing time by 30% and trade finance risk levels by up to 80%. 29% of banks use OCR for data extraction and searchable documents, including major trade finance companies such as HSBC and Standard Chartered, according to the ICC Global Survey 2020. OCR is often utilized in conjunction with other digital technologies, including artificial intelligence (AI) and machine learning by numerous fintech companies in the digitization area (ML). Traydstream, for example, is a cloud solution, utilizing ML to automate screening, clause matching, and rules and compliance control processes. It digitizes documentation trading (credit letters, documentary collects, and open account finance) into a machine-readable format. Nabu is a new Fintech firm that employs OCR, understanding of natural languages, and profound learning to digitize trade finance tedious operations.

Finally, newer Fintech companies are emerging with newer innovations to solve the archaic processes in place in Trade finance. This also mean that consumers of these newer innovations have a plethora of options when choosing Fintech or Trade Technologies to adopt. Hence, at Business Kinetics Nigeria Ltd, we will continue to provide advisory services in the choice of Fintech or Trade Technology to use for our clients. We achieve this by doing a thorough review of the application functionality and its capabilities to meet our customer’s expectations.

 Author:
Fisayo Fatade: MD/CEO, Business Kinetics Nigeria Limited