Technology for humans: the potential of open-source digital platforms to unlock trade finance liquidity

With technology revolutionising almost every area of business, TFG asked a number of fintech experts whether it also has a role to play in streamlining how trade finance applications are handled and processed to help unlock more trade finance liquidity.

Three European-based companies weighed in on this topic at the finanzsymposium held in Mannheim Germany in mid-May. 

The session ‘unlocking liquidity with collaborative trade finance,’ brought experts together to look at ways to encourage collaboration within the sector, from banks and insurers to exporters and importers, in a secure and efficient way. 

The ultimate aim of this collaboration is to speed up trade finance applications and widen access to liquidity at a time when the industry really needs it.

Corporates are currently challenged by the inefficient process of managing multiple trade finance partners, which is causing supply chain delays, increasing fraud risks, and hampering growth. 

Technology can drive efficiency but there is still work to be done

Enno-Burghard Weitzel, SVP of strategy and business development at Surecomp, believes that technology can be used to enhance the end-to-end trade finance process by deploying faster, more efficient ways to process applications. 

This has significantly enhanced the efficiency of client operations while breaking down legacy barriers, improving the time-to-market of trade finance services to its customers and reducing the risk exposure of paper-based transactions. 

However, Weitzel feels that in order to further improve access to liquidity, the industry needs to address a number of key issues. 

First, the management of trade finance instruments, like guarantees and letters of credit, is cumbersome, slow, and error-prone.

Second, users, such as beneficiaries who apply for trade finance or insurance, are not provided with user-friendly interfaces through which to interact with these documents.

Third, addressing these issues is difficult because work needs to be done seamlessly, securely, and in a way that complies with international regulations. 

Digital solutions designed for human users

“People are not aware that there are viable alternatives to sending spreadsheets over email to communicate with a multitude of financial institutions,” Weitzel said. 

“That’s why we are introducing a new platform that will enable all parties in the payment ecosystem to collaborate in a way that’s designed from the point of view of consumers who are used to working with the likes of Google, Apple, or Amazon.” 

When developing these kinds of solutions, it is important to keep the human aspect of technology in mind.

“Three things that we all agree are important are user-friendliness, the ability to communicate digitally, and taking a collaborative attitude,” said Brooke Conley, Head of IT and Compliance at Tryg Garanti in Denmark. 

The primary aim should ultimately be to speed up the process so that same-day issuance of things like guarantees and bonds becomes the benchmark. 

By itself, this would mean that a lot more applications and transactions could be processed in the course of a business day, which would result in a more equitable and efficient overall system.

In order to achieve this, there needs to be greater collaboration between companies, departments, and end-users across the sector to reduce delays and encourage a more standardised approach to processes like credit and insurance applications.

In practice, this would reduce the need to amend guarantees after issuance, which causes waste and errors and increases the risk of fraud.

A mindset of collaboration

However, it also involves a cultural element – a change in mindset towards greater collaboration.

“In the past, digitalisation was more about optimising processes and implementing APIs,” said Torsten Speiker, head of business process management for treasury systems at E.ON SE. 

“Now, the next steps are related to collaboration – otherwise, it’s always a one-to-one connection that cannot scale on a platform.”

As this type of model is already being implemented at scale in other spheres, such as social media and blockchain, it is not difficult to envision people adapting it for this use case.

Also rather than decreasing competitiveness, it has the potential to make companies more cutting edge and give end-users what they want. 

“As consumers, we’re all used to using collaborative tools like WhatsApp,” Weitzel said. 

“It’s time to bring that online collaborative element to the finance base and make it far more accessible to far more people in far more organisations.”

 Although such a project might currently seem like a pipe-dream, all three experts on the panel in Mannheim feel it is worth attempting. 

“The key here is to just try – to look, assess, and just take the first smallest step forward,” Conley said.

“At the very least, it would create a learning experience.”

At best, it might just change the industry for the better.

Read the latest issue of Trade Finance Talks, June 2022