The International Finance Corporation, a member of the World Bank Group, has released a whitepaper, “Banking on Women Who Trade Across Borders”, exploring the gender disparity in international trade.

To learn more about this research and its implications for women-led traders, Trade Finance Global (TFG) spoke with Nathalie Louat, Global Director of Trade and Supply Chain Finance at the IFC.

Lack of research creates a lack of understanding

The IFC has been active in financing businesses led by women for 15 years, financing $4.5 billion of loans to these businesses. The organisation also has a Global Trade Finance Program (GTFP) aimed at reducing the trade finance gap, which has financed $100 billion worth of trade since its inception. 

Louat said, “At some point, we brought our heads together and thought that we should focus on supporting more women-led exporters and importers. That’s where the idea of this program was launched.”

Five years after its launch, the IFC had financed $260 million of transactions for women-led businesses. While that is a large figure, it pales in comparison to the $40 billion of total financing the organisation provided for the same product class over the same time period.

When IFC tried to uncover the reasons why they were unable to reach more women-led businesses, they found there simply was not much research available.

Louat said, “We found a lot of research on why trade finance is important for trade. We found lots of research on why it is important to support SMEs, specifically. But there was no research on women-led businesses.”

With that realisation, the Banking on Women Who Trade Across Borders whitepaper was born.

The Banking on Women Who Trade Across Borders whitepaper

The white paper explores some of the barriers that disproportionately impact women in trade, including cultural barriers and lack of financial literacy and it ultimately discovers that the barriers are on both the demand and supply side.

Financial institutions tend to perceive that women-led businesses bear a greater risk profile, likely because they lack specific knowledge of these businesses, due to their generally shorter history. 

Further, 90% of commercial bank respondents identified the absence of collateral as the primary reason for rejecting trade finance applications. 

Louat said, “The lack of collateral is a problem in general for SMEs who are trying to access financing, but we found that the women businesses lack the assets to provide as collateral.”

On the demand side, companies seeking financing tend to have less financial experience and a smaller network.

Louat added, “Trade finance is complex. It requires a lot of documentation. It’s a little distracting for women to have to focus on these administrative aspects when they’re looking to grow their business.”

However, it is not just these characteristics that hinder access to finance. Trade finance also has structural barriers that prevent women from joining the industry, but there are measures that governments and financial institutions can take to help change the narrative. 

Blended collaboration drives business growth for women in trade

Financial institutions should explore specific solutions to look out for women who face those challenges and put programs in place to help them develop their businesses.

Louat said, “We would like banks to focus on facilitating access to credit for women-led businesses. We want them to consider a variety of payment options and to offer a variety of trade solutions to these women-owned businesses.” 

Multilateral development banks can also support these businesses by enhancing financial literacy and working with banks to simplify complex trade finance instruments.

Promoting blended finance may be another way to catalyse interest and help drive support for women-led businesses.

Blended finance combines funds from donors or development finance institutions with commercial capital, providing an incentive for banks to look for ways to better support women entrepreneurs access global markets. 

Many of these innovative approaches will be strengthened by government support and institutions that can underpin the changes needed, such as credit bureaus and collateral registries.

Louat said, “With more credit bureaus, more collateral registries, financiers will be able to provide financing with less need for formal collateral, which these women often don’t have access to.”

There have been successful case studies for these ideas, providing a roadmap for future implementation across different regions.

Louat said, “In Vietnam, it is clear that once we got the government and the private sector to collaborate, the banks were able to pick up on those commercially attractive opportunities and work on focusing on these segments to increase access to trade finance for women-led enterprises. 

“What we have seen is that the women, in turn, are able to take advantage of these opportunities and really grow their businesses.”

To learn more about the case study in Vietnam and the factors impacting women in trade, read the IFCs full white paper here.

At the EBRD 2024 annual meeting in Yerevan, Armenia, the Trade Facilitation Program (TFP) was in the spotlight as it transitions leadership from Rudolf Putz to Shona Tatchell.

Trade Finance Global (TFG) spoke with both leaders to discuss the past, present, and future of global trade finance.

The evolution of global trade: Reflections from Rudolf Putz

Rudolf Putz, the outgoing head of TFP, has plenty to reflect on throughout his 40-year career. From seeing the shift from financing imports of raw materials and foodstuffs from emerging markets to supporting the export of machinery and equipment, and the transition from state-owned economies in Eastern Europe to the current landscape, trade finance looks very different.

Putz said, “When I started my career in Vienna 40 years ago, I financed trade trade with Eastern Europe, and it was all with the state-owned economies and with state-owned organisations in Eastern Europe.”

This shift brought new trade flows and partnerships, challenging but ultimately enriching the trade finance landscape.

A new era for EBRD’s Trade Facilitation Program

The EBRD’s Trade Facilitation Program, established in 1999, has grown significantly under Putz’s leadership. From a small team with just two assistants, it has expanded into a vital component of EBRD’s mission, dealing with a high volume of small transactions in high-risk countries.

The programme’s success lies in its ability to adapt and evolve, supporting partner banks as they transition to serve the contemporary needs of an evolving industry.

Putz said, “Our partner banks today need our support in different areas of trade finance than they did 25 years ago. The role is never finished, it keeps evolving.”

The latest evolution for the programme will take place under new leadership, as Putz steps out of his leadership role after 25 years at the helm.

Shona Tatchell, the incoming head of the TFP, brings a wealth of experience in trade finance, distribution, origination, sustainability, and trade technology.

Tatchell said, “I cut my teeth on distribution, at the very emergence of unfunded risk participations and the development of that secondary market in trade.”

“I later went into innovation because I could see that the digitalisation of trade was really beginning to emerge and I had the fortune of working with some really cool startups.”

While her own startup, Halotrade, a venture aimed at harnessing emerging technologies for sustainable trade finance, eventually closed, the lessons learned, and the vision behind it remains highly relevant today.

She said, “I’m just so excited about the future and being able to actually continue the legacy that Rudolf has established.”

Harnessing digitalisation and sustainability: Shona Tatchell’s vision

Tatchell’s vision for the Trade Facilitation Program focuses on enhancing, expanding, and securing trade finance through digitalisation and sustainability.

Tatchell said, “It probably won’t surprise you to hear that digitalisation and sustainable trade are very high on my agenda. They are so fundamental to the industry and the TFP is already doing great work in that space. I want to build on those foundations and really help develop a green economy around trade finance.”

Achieving such a lofty vision will require a high degree of cooperation between banks, development institutions, and trade finance associations.

Tatchell said, “We have such a huge challenge ahead of us in the global economy and in trade, in particular. The only way that we’re going to overcome the challenges that we have is through working together.”

By working together, these entities can overcome the challenges facing the global economy and trade, paving the way for a more sustainable and inclusive future.

Tatchell’s forward-thinking approach signals a promising future for EBRD’s TFP, one that will embrace digitalisation and sustainability to drive positive change in global trade finance for years to come.

But what’s next for Rudolf? 

“I don’t yet know – it will be an adventure for myself,” Putz said.

“I will take a few months off, but then I hope that we will soon meet again. I do not yet know where or for whom I will be working, but I hope that I will be able to continue my career in trade finance.”

Regardless of what he lands on, Putz will be able to rest easy knowing that the program he helped start 25 years ago is in capable hands.

Shipping is the backbone of international trade. 

According to UNCTAD, over 80% of all trade is transported by cargo ships. Over the past few years, however, we have seen increased macroeconomic and geopolitical tensions that have caused supply chain disruptions, directly impacting the shipping industry.

To help demystify some of the greatest challenges facing the shipping and freight forwarding industry today, Trade Finance Global (TFG)’s Deepesh Patel (DP) spoke with Director of HR Maritime, Richard Watts (RW).

DP: Maritime disruption, or what many call ‘the end of the big boat era’ is the flavour of today’s conference at Commodity Trading Week. We’ve seen huge reductions in volumes that the Panama Canal can handle due to extremely low water levels, port congestion in places like Long Beach, a continuation of the Red Sea crisis leading to 10% increased transit times and CO2 emissions, and many other shipping challenges. How do these supply chain woes impact commodity trading?

RW: Shipping is a very big part of commodity trading. But, when you look at the transportation of goods around the world, the amount of time it actually takes to move goods from A to B doesn’t really matter that much, as long as the supply chain is well-planned and well-organised. 

It’s when things don’t go as expected that you have a major issue. 

We saw the disruption within the Suez Canal, where the Evergiven given got stuck for six days in March 2021. That isn’t a particularly long time, but it became a massive problem for shipping because vessels had to start deviating unexpectedly. 

We’ve seen more and more disruptions over the last couple of years. It may be that global supply chains have become dependent on increasingly delicate systems, but as a result of these disruptions, we are starting to see many trading companies build more robust systems and incorporate contingency plans into their supply chains. 

Take some of the current shipping disruptions that we are seeing now in the world – like the Red Sea or the Panama Canal. These are situations that we have now been able to calculate for and, for the most part, we know how to handle them. 

If a vessel can’t go through the Red Sea, then it can still go around the Cape of Good Hope. If it can’t go through the Panama Canal, it can still go around the Magdalene Straits. 

As long as we know about these in advance, we can make the necessary plans and adjust our supply chains accordingly. Where the big problems arise is with unanticipated disruptions.

For example, if we were to suddenly see the Strait of Hormuz closed tomorrow, then the world supply of oil would nearly get cut off overnight, which would cause major issues. 

DP: For vessel operators, buyers and sellers, and those involved with maritime transport, understanding contractual obligations and wording is absolutely key, especially when things go awry. Dali’s recent collision with the Key Bridge in Baltimore is one example of this. How can we ensure that contractual obligations are tight when accidents such as this happen?

RW: The problem is when everything goes right, you don’t really need a contract because everyone is happy. It’s when things go wrong that people start laying blame and pointing fingers, which is when you need to start identifying what the contract actually says. 

Unfortunately, this is when a lot of people start looking at the contract and realise that it’s not anywhere near as accurate as it should be. But there are also a lot of times when people don’t actually understand what is included in the contract. 

I had a client who recently shipped cargo from Asia to the US east coast and their vessels would always go through the Red Sea and the Suez Canal. In January, just after the attack started happening and vessels started deviating, this particular ship owner also decided to deviate. 

The question became: who was responsible for paying for that added voyage? 

In this case, since the contract didn’t say anything about who would be responsible for this, there ended up being a dispute with the ship owner.

It’s important to realise that it really doesn’t really matter who you agree will be responsible for something like this – because it will ultimately get priced into the contract anyway – what matters is that it is clearly determined ahead of time. 

DP: Why is it important to understand for trading companies to understand their shipping positions with respect to Incoterms? Can you give any case studies? I’ve heard the Ex Works is a pretty bad Incoterm to use.

RW: The Incoterms are really the foundation of our business and are one of the most important aspects of what we do on a day-to-day basis since they determine some very important aspects of our contract. They determine where risk is transferred from one party to another and who is going to pay for what costs. 

But its important to realise that there is plenty they do not determine. For example, Incoterms do not govern the transfer of title, they do not determine when payment must be made, and they do not cover a lot of other areas that people tend to assume they do. 

This is why it’s important to be very clear about what is covered under the Incoterms and to avoid using what we call ‘hybrid Incoterms’, where we take one Incoterm and stick it onto another. 

For example, I’ve seen people try to use something called ‘FOB + Freight’, instead of the correct ‘CFR’ (Cost and Freight). I’ve also seen ‘FOB + Freight Delivered at Destination’, which doesn’t actually have any meaning at all. 

And I even saw a contract recently that called for ‘DES’, which is an Incoterm that doesn’t exist under the latest rules. Does that mean ‘DES’ as per the latest set of rules when it existed? Does it mean the replacement to DES now, which would be either DAP or DAT? When there are multiple interpretations, if something goes wrong in the shipment, it will almost certainly end up in a costly dispute.

To be effective, these things need to be clear within the contract.

DP: Sanctions regimes are hard to keep up with, particularly for cross-border commodity traders. Can you give any examples of why it’s important to ensure you’re compliant, and what could happen if you’re not?

RW: Over the last 20 years, sanctions have become something that’s more and more important to pay attention to. 

Today, it can destroy a company to be in breach of sanctions. Take BNP Paribas, they ended up suffering a $10 billion fine because of sanctions and ended up closing down their trade finance business. 

Trading companies have also realised the consequences of this. In terms of the different sanctions themselves, it’s a question of what your exposure is and what you’re involved with. Some companies take it more seriously than others, but they all should take it very seriously. 

A few years ago, I had a client who had loaded cargo of bitumen from Dubai. The problem is that Dubai doesn’t export bitumen; bitumen comes from Iran. The shipping documentation, which was written in Farsi, ended up in a bank where the employees were Arabic-speaking, making it obvious that something was awry. 

At the time the bank dealt with this directly with their client, and it didn’t end up in the hands of the regulators, but today it would. 

DP: Demurrage charges are another complex yet important topic to understand. Why must charterers understand these risks and their positions?

RW: Demurrage is important to understand for the sheer amount of money that can be involved. 

I was dealing recently with the situation of a large oil tanker, where the penalty for delay was around $100,000 per day. In this case, the intended loading couldn’t occur because of an issue with negotiations, and they had to find a different terminal to load from.

Ultimately, the vessel waited 27 days before loading, costing around $2.7 million. 

Even if you feel comfortable that your counterparty is responsible for the delay – perhaps because there’s a contract that says they are – the question is would you be able to enforce it? Can you actually get that money back from your counterparty even if you win a dispute? 

DP: What are your top tips for commodity traders when it comes to avoiding some of the biggest risks when it comes to maritime transport?

RW: One of the main tips I would give is that if it looks too good to be true, it probably is. 

Don’t chase those business opportunities that promise to make you a quick fortune because it’ll probably be more trouble than it’s worth. 

I would also say the devil’s in the details, so make sure that you are careful. We often say that you make your money in trading and you lose it in operations. You don’t need to, but it’s very easy to lose money in the operations side of the business. 

A wonderful PnL that’s lost through operations still ends up a loss.

The commodity world is vast. It touches all industries and all corners of the globe. The vastness of the commodity industry makes it even more important to bring the community together to network, converse, and share best practices. 

At Commodity Trading Week (CTW) in London, where the commodity community was gathered for two days, Deepesh Patel, Editorial Director, Trade Finance Global (TFG) spoke with Ben Hillary, Managing Director at Commodities People.

Stabilising volatility in commodities markets

The commodities markets have been faced with tremendous amounts of uncertainty over the last 5 years, bombarded by the effects of inflation, wars, and a global pandemic.

While this uncertainty is still rife, the last year has felt calmer than those preceding it, owing to government interventions – including tighter monetary policy and inflation-controlling measures – and also industry resilience.

Hillary said, “They’ve learned a lot of hard lessons. They’ve learned how to quickly adjust to supply chain disruption. They’ve learned to act quickly, to manage risk, and as a result, challenges that might arise now are somewhat mitigated.”

A third factor that has contributed to a relative calming of market volatility is technology. 

With advancements in emerging technologies like artificial intelligence (AI), many firms are able to leverage more robust data protocols, which provides better insights for traders and allows firms across the industry to operate more effectively.

The changing wave of CTRM and ETRM

In the past, the CTRM and ETRM space has been relatively static with few new firms entering the space. However, this is now changing.

Hillary said, “At Commodities Trading Week and some of the other events we have seen a wide range of newer CTRM and ETRM players that we hadn’t heard of a few years ago.”

In tandem with these new entrants comes a continued transition in the way that firms in the space operate. For instance, the move to Software-as-a-Service (SaaS)-based systems has continued.

Hillary said, “SaaS is very much the standard now. When we used to poll attendees in previous years, there was this perception that it might not be secure, and now it’s actually quite the opposite.”

This transition has also facilitated the development of ecosystems allowing CTRM and ETRM providers to integrate their offerings and work with different providers, such as advanced data analytics tools or AI automation offerings.

These platform ecosystems are also increasingly looking at implementing new product offerings that align with the needs of the commodity and energy trading industries.

Hillary said, “There’s a real rush across the commodity sector to get into environmental products – like renewables or carbon – and that throws up all sorts of complex technology challenges in itself.”

As these shifts in the sector and the broader economy become more entrenched, CTRM and ETRM providers are becoming more comfortable with the changes and are continuing to develop solutions that meet these needs.

Looking ahead to more Commodities People events

Commodities People – the group behind the CTW conferences – understands that when it comes to commodities markets, knowing what is happening today is not enough; an effective programme must explore what is likely to be happening in the future. 

With a constant eye on the future, understanding what they are planning for upcoming events can provide a sense of the direction that the industry may be heading.

Hillary said, “We are working to create a gathering point for the global multi-commodity industry, particularly around all things tech, risk, and trading strategies and we’re going to be giving more focus to trade execution as a whole.” 

The organiser’s trial with a more differentiated focus on derivatives and hedging has met with great success at its roll-out for events in the US and they are continuing to explore the best way to optimise attendee information absorption at the events. 

Hillary said, “There’s a lot more appetite for more interactive deep dive workshop-type sessions. So you can expect more of that. And we’re also toying with having an opening party, but I can’t confirm that yet.” 

Opening party or not, these are events that you won’t want to miss.

The passage of the UK Electronic Trade Documents Act (ETDA) in 2023 was a significant milestone for the internationalisation and digitalisation of trade. The UK government has estimated that moving to the use of digital documents can accelerate the trade process from approximately 7 days to 10 minutes.

Moreover, the International Chamber of Commerce (ICC) UK has estimated that digitalisation of trade documentation could generate £25 billion in new economic growth by 2024, freeing up £224 billion in efficiency savings.

The ETDA therefore presents a revolutionary step for the international trade industry. Nevertheless, implementation and adoption will be complex. With the Act officially coming into force at the end of 2023, the industry must now adapt and respond to new challenges, as well as milestones, presented by the next phase of the regulatory process.

To discuss these aspects of the ETDA in detail and shed light on the digital trade transition for the industry, Paul Landless, Partner and Co-Head of the Technology Group, Clifford Chance, joined Deepesh Patel, Editorial Director, Trade Finance Global at the Trade and Investment Forum, organised by BCR in partnership with ITFA.

How the ETDA will impact global trade finance

8 months since the enactment of the ETDA marks a useful point of reflection on the process thus far, as well as the future outlook. Landless said, “The ETDA is amazing because I think it is probably the shortest piece of legislation, only three pages, but probably the most important piece of legislation that we have now in the UK statute books.”

The critical element is speed. The reduction in processing times frees up costs significantly. This will add greater efficiency gains, increase liquidity in terms of financing opportunities, as well as permitting the analysis and assessment of different types of credits and borrowers. 

Another positive element of the legislation concerns risk management and reduction. Digitalisation presents better risk management opportunities in terms of dealing with fraud, credit and ESG risks, and general compliance efforts. 

As the ETDA continues to be effectively used, the pricing of financing will improve for SMEs, therefore increasing access to financing for the wider market.

Key legal and regulatory technical hurdles for transitioning to electronic trade documents 

From a legal perspective, Landless predicts some forthcoming clarity and support in terms of the first relevant court judgements being handed down that demonstrate the legislation in action. Landless said, “At a domestic legal level, we will start to see a lot more clarity and support with judicial interpretation, but also judicial expertise and learning as well.” 

Even more importantly, at a global level, different jurisdictions need to continue attempting to follow and implement the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Transferable Records (MLETR). 

Landless said, “Will they start to recognise each other, almost as sister jurisdictions? Will we start to see interoperable frictionless trade from a legal perspective in terms of cross-border recognition?” 

However, reducing cross-border legal conflicts is not an easy task.

Landless said, “You can get quite a mix and match of different jurisdictions and legal regimes. I think it is going to be key to see over time [that] those different jurisdictions recognise each other cross border if they each followed the UN Model Law.”

Each jurisdiction currently has different standards for what constitutes a reliable system, leading to a disjointed international system. This has been seen as different jurisdictions started to implement MLETR into their domestic laws.

Real progress towards a digitalised industry requires different jurisdictions to converge and agree upon the definition of what a reliable system is. 

Landless said, “When we talk about interoperability, it is not only about legal interoperability in terms of cross-border, it is not only about platforms connecting; it is also about data flows and making sure there are not any breaks in those data flows cross-border is going to be key. I think different operational standards placed on differing banks by differing regulators is not going to help the adoption process over time.” 

The next steps for true digitalisation can come from the regulators. Once regulators encourage banks to use electronic trade documents, real progress could be made.

Landless predicts this will become an operational risk standard, with the expectation that for banks to be considered “best in class” and truly safe in terms of mitigation of operational risk, they will have to widely adopt electronic trade documents. This modernises processes, minimises risk in terms of fraud, and increases operational efficiency. 

Landless said, “I would not be surprised if you start to see certain banks hearing from regulators that it comes down to the safety and soundness of that bank, that having these types of paper-based or paper-related risks in the business is no longer acceptable.” 

If this happens, banks will increasingly be expected to make use of what is available in terms of cutting-edge technologies and platforms, supporting the growth of digital trade. 

Key takeaways and opportunities 

The digital transition presents real tangible opportunities for businesses, particularly smaller or mid-market traders. According to Landless, there are three important groups to note: people, products and processes.

Landless said, “Any attempt to think about onboarding with one trade finance platform or one electronic bill of lading (eBL) system has got to be done in tandem with those people worrying about payments, worrying about the treasury function, thinking about the IT side, and those worrying about compliance and risk management. 

“It is a collective effort, a cultural and organisational effort, and a relatively holistic total commitment to what is really a digital change initiative. It is a change management agenda that needs to be done across the organisation, involving different teams.”

Concerning products and platforms, Landless predicts a multitude of platforms coming online over time. A crucial question is whether and how they will link with one another. 

Landless said, “Each institution has to choose one or two platforms. Racing after multiple platforms is not going to help. You need to concentrate your efforts and energies around your due diligence around one of those platforms.” 

Internally, companies must examine existing processes and architecture – legacy IT resources and policies – and ensure they are ready for the transition.

The opportunity to capitalise on digitalisation is there, the imperative is now on the industry to act.

Estimated reading time: 6 minutes

Sustainable finance, changing macroeconomic landscapes, digitalisation, and increasing financial inclusion. 

All are big challenges facing the international trade community today and all are topics on the agenda at the European Bank for Reconstruction and Development’s (EBRD) 33rd Annual Meeting and Business Forum in Yerevan, Armenia.

To learn more about the bank’s work and gain insights into these challenges ahead of the forum, Brian Canup, Assistant Editor, Trade Finance Global (TFG) spoke with Francis Malige, Managing Director, Financial Institutions, EBRD.

EBRD and its Trade Facilitation Program

The EBRD serves a vital role in bolstering economic stability and growth within its regions, and the Trade Facilitation Program (TFP) is an integral part of achieving these goals. 

The TFP facilitates international trade across EBRD economies and the global economy by providing guarantees to international commercial banks that cover political and commercial payment risks associated with transactions performed by issuing banks located in EBRD countries. 

This structure allows for the mitigation of risks that might otherwise deter banks from facilitating trade finance.

Furthermore, the EBRD TFP extends short-term loans and cash to selected banks and factoring companies, which is crucial for supporting trade-related financing for local companies, particularly small and medium-sized enterprises (SMEs). 

The program’s influence is extensive, working with over 100 issuing banks in 26 EBRD countries and over 800 confirming banks worldwide, with annual transaction limits frequently surpassing €3 billion. 

This substantial network highlights the TFP’s role in maintaining trade flows, especially during periods of economic disruption like the war in Ukraine and throughout the COVID-19 pandemic, when the bank acted as a countercyclical investor to keep trade moving.

Malige said, “When it comes to geographic areas today, of course, Ukraine and its reconstruction and support during the war is the number one priority. The TFP has remained active without any interruption since the first day of Russia’s invasion.”

However, the bank is no longer limited to work within Europe.

The EBRD is broadening its geographic footprint and expanding operations into sub-Saharan Africa and Iraq, reflecting a commitment to using financial instruments and partnerships to support economic development further afield. 

Malige said, “We’ve been approved to grow into six countries of sub-Saharan Africa. All of them have applied to become members of EBRD: Nigeria, Kenya, Ghana, Ivory Coast, and Senegal. Benin, as well as Iraq have become full members. We are going to set up operations in those countries with a view to continuing to use banks and trade to support these priorities. ”

The expansion aims to bring EBRD’s expertise and resources to a broader array of developing economies, enhancing their access to international markets and promoting sustainable economic practices.

Banking as a catalyst for greener change

One of the main aims of the EBRD is to promote the greening of the broader economy, starting with the banking sector.

Malige said, “I see the banking sector as the equivalent of the blood circulation system in the human body. That’s what banks do in an economy. They carry the oxygen – the funding – into the muscles that are the companies, the entrepreneurs. If you can green the DNA of your blood, then you can green the entire body, and that’s exactly what banks are going to be used for.”

In addressing the environmental impacts traditionally associated with trade, such as emissions from transportation, the EBRD is focused on introducing and facilitating access to green technologies in its countries of operation. This includes the import of equipment for renewable energy sources like wind power and sustainable resource management technologies such as water treatment systems.

On the digital front, the bank recognises the critical role of digitalisation in modern economies and considers it one of its strategic priorities, alongside greening the economy and enhancing inclusiveness. 

Digitalisation underpins these dimensions by streamlining processes and reducing inefficiencies, which in turn supports environmental and inclusive initiatives. The EBRD is committed to reducing the digital divide between its regions of operation and more advanced economies, thereby ensuring that these regions are not left behind in the digital transformation. 

Malige said, “This is especially important because we work in economies that are typically not the first recipients of investments when it comes to digital investments.”

Initiatives include supporting the digitalisation of trade processes and encouraging partner banks in the EBRD’s countries to adopt digital solutions for operations such as KYC and client onboarding. 

Through these efforts, the EBRD leads the way in fostering economic development by integrating digital technologies that support green and inclusive growth within its member countries.

It all starts with the right people

The EBRD’s success and that of the TFP hinges significantly on effective collaboration and the strategic engagement of diverse stakeholders, which makes establishing and nurturing key partnerships across various international bodies and institutions vital. 

This includes prominent organisations such as the International Chambers of Commerce (ICC), the World Trade Organization (WTO), and other international financial institutions like the International Finance Corporation (IFC) and the Asian Development Bank (ADB), which share technological frameworks and cooperative strategies with the EBRD.

Such collaborations, while adding layers of complexity, are crucial for aligning strategic initiatives and implementing them effectively. 

Malige said, “Only through dialogue, cooperation, and knowledge sharing can we attain the synergies that will help to amplify our efforts.”

Leaders in the space are encouraged to embrace trade as a complement to local industrial strengths and to invest in it as a critical driver of economic development with an emphasis on training, community building, and fostering personal connections within the trade sector.

Malige said, “Trade is not just about sending messages via Swift to one another. Our experience is that trade works much better when people who know one another physically, who have met.”

Such investments in knowledge and relationships can make trade not only more effective but also more rewarding, positioning trade finance as a vibrant and impactful field for aspiring professionals.

What advice would Malige give to professionals just entering the trade finance industry? 

“For aspiring readers or aspiring trade practitioners, it’s a fantastic field, and you will absolutely enjoy it. Invest your time in it and become industry specialists, because you will enjoy every minute of it.”

For those interested in the future of trade finance and economic sustainability, consider attending the EBRD’s 33rd Annual Meeting and Business Forum in Yerevan, Armenia from 14 – 16 May. 

When it comes to international trade, digitalisation and legislation have a complex relationship. In 2021, the results of a TFG industry survey indicated that respondents viewed legal challenges as the key impediment to the trade, treasury & payments industry – more than standards, governance, or technology issues. 

However, with the passage of the Electronic Trade Documents Act (ETDA) in the UK, things may be about to change. Nevertheless, the industry must remain realistic in terms of the outlook for a digital trade future. 

At the second Trade and Investment Forum, organised by BCR in partnership with ITFA, TFG’s Deepesh Patel was joined by André Casterman, Chair of the Fintech Committee, ITFA, and Managing Director of Casterman Advisory, and Shobhit Singh, Head of Trade Finance, Concentrates, Trafigura, to explore what the next steps will be, how businesses can navigate these momentous shifts, and what the broader impacts on other fields may be. 

Adoption of digital trade documents

There has been much talk about digital trade and accelerating the adoption of digital trade documents to grow opportunities when it comes to cross-border trade. Digital trade is critical to scale businesses and improve practices, reducing costs and accelerating processing. 

ITFA’s Fintech Committee has focussed for the past five years on aligning policy developments with technology developments. This is because numerous technologies have been developed to digitise trade, but they have not scaled. 

The 2017 United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Transferable Records (MLETR) legally enables the use, in electronic form, of transferable documents and instruments by complementing existing national substantive laws. 

Singapore, Bahrain, and the Abu Dhabi Global Market were early adopters of the MLETR complaint laws, and the United States followed suit quickly. In the UK, the ETDA was enacted in September 2023 and stood out as a significant milestone in the digitalisation of trade. 

Casterman said, “We are going to see more and more bank involvement in digitising trade flows in support of their corporate customers, in support of their SMEs, and in support of alternative lenders entering the space. So, across origination and distribution, we see most developments around the alignment of policy and technology for digital negotiable instruments on the origination side and for tokenisation and securitisation on the distribution side.” 

Importance of digitalisation of trade documents 

The digitalisation of trade documents is particularly important for the trade finance industry and, in general, the commodity industry due to the document-intensive nature of the sectors. Singh said, “Imagine the billions of trade documents flowing across the trade industry. You have issues with the documents or bills of lading being lost. They have cases where you have duplication of documents, then you have cases where you would have duplication of documents.”

Digitalising the documents not only cuts down on these issues but also decreases transaction times and lowers costs.

When the working capital cycle is lowered, this is accompanied by a reduction of the transaction cost itself due to the lowering of financing costs. There are also reductions in costs related to financing products on the trade side. 

An important benefit for corporates in the commodity industry is to be able to reduce the usage of letters of indemnity, which can be either on the payment or discharge side. 

Singh said, “It is very important because the people who are associated with the commodities industry know the contingent risk that lies with these letters of indemnity. Getting corporates like us to work with suppliers and receivers, making them understand why this is important, and getting them on board with making these trades digitally. And, of course, with the banks as well.”

Banks and digitalisation: Resistance to change?

Over the past decade, banks have faced issues relating to the misalignment between rules and technology. All of the technologies to digitise bills of lading or electronically signed documents are available. However, the legal environment has not been supportive. 

This may be changing with the introduction of the ETDA, as well as similar initiatives in the pipeline in other regions. An enabling legal system/environment that recognises electronic transferable reports is key to more efficient trade transactions. 

Nevertheless, Casterman said, “There is still, for banks, this resistance to change. Are my corporate customers really expecting this? What are the new risks involved in moving to digital options? Which digital options are acceptable?”

A key message, not only for regulators but also for banks is the need for increased transparency. Casterman said, “There is new value that can be added on top of digital records such as continuous transparency and visibility of the asset you are funding as a bank or as a credit insurer, or even as an asset manager in the distribution space. That is what this enhanced transparency should support – risk mitigation – and give greater comfort to the lenders that what they are financing still exists.”

Some regulators, such as Singapore, have gone even further in this regard and have used leveraged digitisation to combat double spending and double financing fraud. 

Turning technological interoperability challenges into opportunities 

With Trafigura being multi-banked, it can use several platforms from a commodity trading perspective, from a digital documentation perspective, and even from a lending and trade finance perspective. 

However, with the ETDA coming into fruition, it could introduce more challenges for technology and interoperability. 

This is a challenge that Trafigura continually faces. Working with over 150 banks, it is critical for technology to remain agnostic, ensuring easy interoperability. Due to the scale of their operations, corporates such as Trafigura cannot be dependent on a single platform.

Next step: Technology agnostic 

Given the importance of interoperability, it is critical to encourage providers and technology platforms to be technology agnostic, ensuring they are interoperable with other providers. 

In the digital trade space, the technology for this is available today. A digital negotiable instrument (DNI) can “navigate” from one party or platform to another. Casterman said, “We really need, and that is what we are doing through ITFA, to focus on scaling the market  interoperating.” 

Corporates want, and need to be technology agnostic and to be able to move from one platform to another when necessary. This requires interoperability with hundreds of banks and future lenders through various channels. 

Casterman said, “It is not about forcing everyone into one platform which is, as I often say, a 20^th century mindset…in the 21^st century, we can interoperate; we have Web3 technologies, tokenisation technology, and we can make sure that one party in the chain is not forcing the second party in the chain to onboard the technology chosen by the first one…We are getting there. We have proof points that it can be achieved, and we hope that those who are still trying to lock in their communities are basically going to be forced to open up to interoperable practices.” 

Early usage of digital trade instruments

Eight months since the enactment of the ETDA, industry leaders such as Trafigura have begun the digitalisation processes through the use of DNIs and digital trade documents due to the increases in efficiency, cost reductions, as well as increases in transaction speeds. 

Trafigura has already worked with electronic bills of lading (eBLs) for close to 2 years, successfully reducing transaction costs and time.

Singh said, “We have been able to demonstrate with our suppliers and receivers that we can do trade transactions end-to-end; using electronic bills of lading and export letters of credit that are covered by e-UCP, allowing electronic bills of lading to be presented under the platform.” 

This has led to decreasing the overall transaction time from 40-45 days to 20 days. 

Breaking it down further, Singh said that now, the transfer of electronic bills can happen in a matter of seconds, and the process of documentation flow from the confirming bank to the issuing bank can be completed within one or two days.

The expedited transaction time is a game changer. But this is just the start, as the ETDA continues to be adopted, the industry will become better and more efficient.

Listen to this podcast on Spotify, Apple Podcasts, Podbean, Podtail, ListenNotes, TuneIn

It is easy to think that 2014 was a long time ago, and the world was very different. 

China has grown substantially during this period, with its GDP rising from $10.48 trillion in 2014 to $17.52 trillion in 2023, a 67% increase. In 2014, the United Kingdom was still two years away from voting to leave the EU, and TikTok was still just an idea, as it was not launched until 2016.

While there are differences economically and socially, in reality, historical events tend to repeat themselves. In 2014, Russia invaded and annexed Crimea, sparking deep international concern for the security of the entire country. A few months later, Israel and Palestine engaged in a seven-week-long conflict, as the United States and Egypt pushed for a ceasefire.

While the world looks very different today than it did ten years ago, it also very much looks the same. The same can be said about commodity finance. While some circumstances may have changed, many of the problems we face have similarities to those of 10 years ago.

To discuss the changes of the past decade, what might come in the next 10 years, and TXF’s Global Commodity Finance Conference in Amsterdam on 22-23 May 2024, Trade Finance Global’s (TFG) Deepesh Patel (DP) spoke with Jonathan Bell (JB), Editor-in-Chief and Director at TXF.

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DP: Let’s start by talking about how commodity trade financing has changed over the last ten years and how it may continue to change over the next decade. Many banks have exited the market in recent years. Likely due to frauds, a shift of strategic priority towards ESG and return on equity. What are the impacts of this retreat?

JB: There has been a massive change in the number of banks involved in commodity trade financing from 2014 to 2024. 

Through this period, many banks, particularly investment banks, have been opportunistic and jumped in and out of the sector when it suited them. Several other regular players jumped out of the soft commodity sector, largely due to the increased risk – accentuated by climate risk.

There has also been a realignment by banks regarding which commodities they want to finance, which led to many pulling out of financing soft commodities (agri-business) between 2011 and 2015.

However, the big changes have largely been caused by fraud and other such activities. This is not new – such cases go back many years – but between 2014 and more recently, certain banks and traders lost a lot of money in some high-profile cases. For example, the Qingdao and Penglai warehouse frauds of 2014 in China. There is also the notorious case of trader Hin Leong in Singapore in 2020.

A competitive world: Winners and losers across the industry

DP: Who are the winners and losers?

JB: The real big names that have exited the sector are ABN AMRO and BNP Paribas, albeit they still have some key clients who deal in commodities. Many other banks have retrenched to cherry-picking deals or the so-called misnomer ‘flight to quality’ syndrome!

With banks exiting or pulling back, the winners could well be the many more non-banks that are now involved, such as funds and capital management entities (e.g. Drumlin, Horizon, INOKS, Qbera, Tradeflow, etc.). There has also been the rise of smaller, specialist, localised/regional banks that have come in to fill the void left by mainstream banks.

Most mainstream banks that are still involved no longer support coal/coke financing, and many are trying to get out of being seen financing crude oil. Again, specialist traders have become big winners in coal and crude oil trading. Reputational risk is being pushed heavily by bank boards. However, with the requirement for oil and gas for decades to come a realistic approach is also being taken by most financiers. 

There is also now a much bigger push by banks to be seen as involved in sustainable financing – to be aware of environmental, social and governance (ESG) considerations and also mindful of the UN’s 17 Sustainable Development Goals (SDGs).

Overall, another winner is greater attention to sustainability and governance. It is changing financiers, as well as producers’ and traders’ attitudes, more quickly than others. So the sector is an overall winner here.

Law firms, of course, have been winners because they have picked up a lot of work in sorting out the mess of warehouse receipt frauds, of which some cases have been going on for years. But there are also many other commodity deal workouts or restructurings that keep legal teams in institutions busy, as well as many of the big law firms themselves.

It is also worth mentioning the change that has taken place with private insurers. Since the COVID-19 pandemic, several key insurers servicing the commodity sector have also pulled out of or pulled back from, the commodity market – citing increasing losses and not enough reward for the risks involved. This has led them to what may be considered safer territory, such as deals that may be backed by developmental finance institutions.

It should also be noted that because of the frauds that have taken place big commodity centres such as Singapore, for example, have introduced a centralised Trade Registry to try and eliminate potential frauds. So, another winner here could be the push for greater scrutiny of transactions and also the need for more electronic trade.

With the high-profile frauds, which hit the sector over the past ten years, the overall cost of finance went up for the smaller traders and producers, so they could well be considered a loser group in this case. Larger traders claim their cost of finance did not necessarily increase. 

DP: The underlying structures are changing too, right? Although unsecured finance represents nearly ¾ of CTF volumes, secured debt has seen an uptick in the past two years. What’s happening, and is this due to a ‘flight to quality’ for structured commodity finance? 

JB: Yes, indeed. When things have gone wrong in commodity finance, it has often been because deals and arrangements have become too loose. There has been a significant realignment to more structured transactions. Properly structured commodity finance transactions rarely encounter problems that cannot be dealt with sensibly and practically.

You are right, unsecured commodity trade finance still represents the largest segment of the sector – but an increasing number of deals will now have added structured elements. Additional security and more covenants are coming into many transactions that had previously been unsecured. At the same time, we are seeing more pure structured commodity finance – for example, pre-export finance, pre-finance, borrowing base, and reserve base lending.

In addition, other trends are happening on the lending scene – most of the big traders are still able to secure very sizeable standard revolving credit facilities (RCFs). Still, a much larger proportion of these are now tied to ESG criteria, meaning that the loan or parts of the loan cost less when it adheres to pre-determined environmental, social, or governance requirements. Last year, for example, we saw a high profile, very well-structured $785 million ESG-tied borrowing base transaction with metals trader IXM supported by some 14 international banks. 

It should also be mentioned that many big traders are also actively diversifying their sources of finance. As an example, Singapore-based trader Olam Agri in early April 2024, secured a Murabaha-financing (Shariah-compliant) amounting to $625 million from a group of diversified investors from the UAE, Malaysia, Singapore, and Hong Kong. 

And in June, Trafigura secured a Samurai loan equivalent to $821 million in March from some 28 institutions, including a number of new investors. The Samurai loan route was established a few years ago by Trafigura and others to diversify away from other more traditional loan routes out of Europe, the USA, and Singapore.

Pushing through a turbulent situation

DP: How is the fragmentation of the global political order influencing trade routes and commodity markets? Could you elaborate on the roles of countries like India, China, and Turkey in shaping the future distribution of Russian commodity exports, and the rising phenomenon of ghost traders?

JB: We are living in strange and often very difficult times, which in turn has led to this very strained fragmentation of the global political order. In particular, the two biggest economies – the USA and China – are competing for global supremacy, both economically and technologically, not to mention militarily. 

China, as the huge producer it is, has always been the giant sponge globally for raw materials (even though it is also a huge producer of many important commodities). However, China’s overall role is vital within commodity-based global trade. 

Russia is, of course, hugely influential as a critical producer of a vast range of commodities – from oil and gas to nickel, copper, gold, potash, diamonds, and fish – you name it! So, Russia’s invasion of Ukraine in February 2022 has been disastrous for Ukraine and Russia and overall global commodities supply – even though some nations don’t see it that way and are using the opportunity to bolster themselves in various ways. The negative impacts of this invasion by Putin and supported by his allies cannot be underestimated.

On the energy front, the disruption has been immense – particularly so for Europe as European countries had always been primary consumers of Russian gas and oil. Russian oil has consequently had to find new routes for export and new markets – even though some Russian oil still does end up in Europe through new routes. 

China certainly saw this as an excellent opportunity to secure vast quantities of oil and gas at considerably discounted prices. India, too has used this whole mess to push its weight on the global trade stage and act as a conduit for Russian oil, as well as bolster its overall trade relations with Russia. 

Turkey has also become a key route. Some established traders have taken advantage here. Beyond that, there is also a raft of so-called ‘ghost traders’ moving cargoes of oil even directly out of Russia shipped at heavily discounted prices on a range of tankers (‘ghost vessels) to destinations where that oil can then be trans-shipped to an end-user or refinery.

DP: With the increased sanctions regime and ongoing global conflicts, how are commodity trade and transportation being reshaped? What strategies should participants adopt to navigate this landscape and ensure deal security amidst these disruptions?

JB: The increased sanctions regime, ongoing global conflicts, and the overall fragmentation front have had and continue to have a significant impact on international commodity markets and transportation. We initially saw energy prices surge because of the Russian invasion of Ukraine. And, of course, Russia, along with Saudi Arabia, essentially control OPEC+ to ensure their cuts in production keep the oil price where they want it – Brent is currently at around $90/barrel. 

The energy problem has allowed the USA, in particular, to increase significantly its supply of gas (LNG) to European markets. Other countries with surplus supplies, such as Oman, have also gained ground.

On the soft commodity front, many countries had to pay a lot more for food staples such as wheat, barley, maize and vegetable oils due to the disruption to Ukrainian exports to key markets in the Middle East and Africa.

Russia now exports more of its own grain to these markets and also the grain it has stolen from Ukraine. At the same time, this has provided other big soft commodity producers – such as Argentina, Brazil, the USA, Canada, and Australia – with the opportunity to move into new markets or provide increased supplies to established markets. 

Globally, we have seen shortages of particular commodities lead certain governments to introduce export restrictions on their own produce to ensure security of supply to their own populations and industries.

Transportation was, of course, heavily disrupted during the pandemic – particularly for container goods, but this also includes commodities as many more commodities are now containerised rather than carried on bulk carriers – for instance, global sugar. 

However global conflicts are influencing disruption to transportation routes. Most noticeably, transport through the Suez Canal. Transport costs have skyrocketed as many vessels are taking the longer route around Africa to get to destinations. The Panama Canal has been badly impacted by drought, so passage has been limited and is much more expensive accordingly. 

Some big traders, in particular, have tried to limit the added costs by maintaining or expanding their own shipping fleets. This can have huge benefits as it also allows them to control where and when vessels are at any one time. On another aspect, some traders are helping in the decarbonisation of the shipping sector by converting to different and more environmentally friendly fuel sources.

It should also be mentioned, but almost probably goes without even saying, that on the sanctions front, lawyers have been big winners. There are many fraud cases taking place today in which law firms are engaged.

A vast industry requires a global effort

DP: With the global push for electrification escalating demand for key metals such as copper, nickel, lithium, zinc, and critical minerals like germanium and rare earths, how are commodity traders planning to address these changing market needs? Also, how are governments and agencies ensuring resource security, especially in light of their increasing reliance on ECAs for securing essential supplies?

JB: The energy transition and electrification drive have certainly driven the push to secure critical minerals and metals. However, this has not always been mirrored in the price of certain commodities over the past few years, and copper is a case in point. However, we are almost at $9,500 per tonne for copper, so things are picking up. 

And with low stocks globally, some predict copper will be at $10,000 by year-end. Most analysts agree that because of the requirements of the energy transition and electrification, there is likely to be a significant deficit of at least 4 million to 5 million tonnes emerging for copper by the end of the decade. And this has been exacerbated by the underinvestment in mining.

China, as it produces around 60% of global EVs, is key. Global electrification – with a requirement for much more cabling is also crucial. 

And, of course, traders are essential here, as they fully recognise the requirements of the market. Some traders are even increasing their investments in mining developments, for example, Trafigura in the Democratic Republic of Congo (DRC) with involvement from Burundi-headquartered Trade and Development Bank in a $600 million financing for the Mutoshi copper-cobalt deposits in November 2022. 

We are also seeing ECAs and other DFIs getting more involved in financing commodity and raw materials supply, and this has been led by national and regional interest and the need for the security of raw materials – predominantly metals and energy – for domestic industries. China Exim has been on this case for some time, with support for its strategic reserves. 

Still, Western agencies such as Japan’s JBIC, Korea’s KEXIM, Italy’s SACE, Canada’s EDC, Australia’s EFA, and Germany’s Euler Hermes, in particular, have become very active – and all working closely with global traders to secure energy or raw materials supplies. 

Euler Hermes came up with an $800 million financing for Trafigura to supply non-ferrous metals to the German industry in late 2022. The agency has also provided, in principle, some $600 million to the Arafura Nolans rare earths project in Australia. EKN and SEK of Sweden also came up with $208 million in ECA financing for the Kamoa-Kakula (Ivanhoe Mines) copper mine in the DRC in 2022.

DP: What does all of this mean for international commodity trading companies? What is their future role (big and small) in commodity trade finance? 

JB: Well-established international commodity trading companies already run the show in the supply of major commodities. Consequently, they are magnets for financiers and can control their access to affordable finance. 

This scenario will only get stronger as we move into a world where the security of supply is paramount. The strength of many trading companies also allows them to buy from producers at prices and volumes they command. In many cases, traders bring already well-structured deals to the bank/non-bank market for financing or better refinancing. 

It is no wonder they are crucial to global commodity trade and essential to global commodity activity. Vitol made profits of $13 billion last year (2023), and Trafigura, profits of $7.4 billion – for example. The ability of prominent traders to raise finance can be expected to increase. 

There are suggestions in the market that overall commodity finance levels are declining, but one must also consider that finance to big traders is increasing. In turn, while smaller traders will still struggle to raise finance, one has to realise that the big traders, when working hand-in-glove with some of the smaller traders on selective deals, will themselves be financing smaller traders. However, the cost of financing for smaller businesses has undoubtedly increased.

Digital adoption: Making real gains in the commodity world

DP: Digitalisation. A lot has happened, but what are your thoughts on the impact of MLETR adoption, the push towards 100% eBL usage and the acceptance of digital trade documents on commodity trade finance?

JB: Overall, in commodity trade finance, there has been a big wake-up call that better documentation is required, and that is aligned with a push to electronic documentation to move away from the vast paper trails where falsifying documents is much easier for fraudsters to orchestrate. Digitalisation in the commodities markets can potentially reduce fraud by making it easier to track transactions and scrutinise documents.

MLETR (the Model Law on Electronic Transferable Records) was introduced by UNICTRAL in 2017, and the UK played a big part in this as it was the leader of the G7 that year. Further adoption within G7 countries is at different stages, with the US being quite advanced, but it needs to be used more thoroughly. 

The same applies to Germany. France has produced a white paper to help implement it. Outside the G7, Singapore and UAE have adopted it. India and China both have a strong interest in the implementation, with China working with the ADB towards it.

Banks see MLETR as making trade and commodity finance more efficient, but it also helps with compliance and governance. Overall, MLETR represents a significant milestone for trade digitalisation.

The overall environment for accepting digital trade documents, including eBLs, improved considerably through the pandemic. However, the take-up across the sector still has a long way to go, and further impetus is needed. Big trading companies are leaders in helping this transition. 

DP: Before we wrap up, I wanted to mention that TFG is delighted to be a media partner of TXF’s Global Commodity Finance Conference in Amsterdam on 22-23 May 2024. Why are we celebrating the number 10, and what can we expect?!

JB: Well, last year was the 10th year since the start-up of TXF, so we are now into our 11th year – but crucially on the commodities front, our Global Commodity Finance Conference in Amsterdam on 22-23 May 2024 is the 10th one we have done in the city. So it will be a celebration! 

Along with that, we will have an anniversary black-tie dinner on the evening of 21 May – and this will also incorporate the TXF Commodity Deals of the Year for 2023, along with industry awards and some other special recognitions. Over the next three days, we anticipate that over 400 people will come to the event, including high-profile people from producers, traders, bankers, financiers, law firms, insurers, advisers, and various logistics companies involved in commodity trade and finance. 

We will have great presentations and discussions and plenty of networking, relationship-building, and deal-making time. 

It’s going to be fun, and I, for one, am really looking forward to it!

At BAFT’s 2024 International Trade and Payments Conference in Washington, D.C., TFG’s Deepesh Patel sat down with Keith Melton, Senior Vice President and RTP®Strategic Programme Manager, The Clearing House (TCH), to discuss the transformative impact and prospects of the RTP® network, recent regulatory updates, and the future of cross-border payments.

What is The Clearing House?

The Clearing House has operated within the United States private sector for a long time, over 171 years. In fact, the United States only had 31 states when TCH first began operations.

Now in 2024, TCH functions as a private sector payments operator, with networks for wire, automated clearing house (ACH), real-time payments, as well as cheque image clearing. 

Melton said, “We’ve been in this business for a long time, and we’ve been driving collaboration and innovation in the space…we were actually the Fed before there was a Federal Reserve, and working with the financial institutions in times of crisis … and finding more efficient ways to clear cheques, and, more recently, really collaborating with the industry, the stakeholders, around real-time payments.”

The RTP network and industry collaboration

The RTP network is a retail real-time gross settlement system. The Clearing House launched this platform roughly six years ago, which helped usher in the era of instant payments in the US.

Melton said, “It’s transaction by transaction, clearing, settling, and having funds available instantly. It is unique in nature in that both sender and receiver can see confirmation that the transaction is complete and fund availability instantly. It’s irrevocable in nature. It’s a credit push system, and I think it’s important to note that it’s also based on a very data-rich messaging set based on ISO 20022.” 

The creation and adoption of the RTP network is a significant step forward for the payments industry. It is this collaboration that enables the RTP to be such a successful system.

Naturally, TCH collaborates with other players within the wider payments ecosystem including banks, fintechs, and other vendors. 

In recent months, The Clearing House has worked with financial institutions across the US. Melton said, “It’s truly a payments network available to everyone, both large institutions, smaller institutions, credit unions, and community banks. It is the largest real-time payments network in the country, both from a payments value and reach perspective.”

To date, The Clearing House has over 500 participants actively involved in their network. This accounts for roughly 67% of Demand and Deposit Accounts (DDA) across the country, and continues to grow each month.

In the fourth quarter of 2023, The Clearing House processed 74 million transactions on the RTP network, representing $39 billion in value. Melton said, “We’re growing at about 15% per quarter on the RTP network.” 

This was only possible because The Clearing House worked with industry stakeholders, financial institutions, and several third-party service and technology providers to bring the brand-new payment rail to the market. 

But the collaboration doesn’t stop there. 

To stay up to date with the newest payment trends, The Clearing House also recently introduced a tokenisation solution to the market to be able to tokenise DDA for both the ACH network as well as the RTP network. 

However, it is equally as important to not only continue to innovate, but to simply increase accessibility for all institutions. Considering this, TCH has worked with third-party providers to streamline access to the RTP network for small institutions, banks, and credit unions.

Challenges with changing regulations in the payments space

The regulatory landscape is constantly changing, an issue repeatedly reported at the BAFT International Trade and Payments Conference as one of the largest challenges faced by the industry. 

With The Clearing House processing over $2 trillion in transactions per day, Melton said, “Our primary focus is really working with our members, our owners, our financial institutions that are part of those networks. Making sure they’re secure, they’re reliable, and they’re resilient, is our primary focus.” 

In this regard, The Clearing House watches regulation changes very closely. Specifically, they have been monitoring developments in open banking, data privacy, and what the Consumer Financial Protection Bureau (CFPB) does concerning Section 1033 of the Dodd-Frank Act on Consumer Access to Financial Records. 

But regulation isn’t the only industry development that needs attention. 

The CHIPS® network is a high-value payments network offered by The Clearing House. It is the largest private sector U.S. dollar clearing and settlement system in the world, providing fast and final payments and the most efficient liquidity savings mechanism available today. 

Melton said, “The Clearing House is driving the implementation of ISO 20022 for CHIPS…working with all of our participants on the network.” It is targeting the conversion to go live in early April of this year. According the Melton, the development has progressed smoothly, and the implementation is expected to proceed on schedule.

Industry progression with the G20’s roadmap for cross-border payments 

The G20 roadmap for cross-border payments was recently published. Objectives include decreasing costs and fees to 1-3%, increasing speed for 75% of transactions so that they are available within one hour, and for 100% of users to have access to at least one form of payment, as well as increasing transparency. 

Currently, the RTP network is domestic only, but already meets many of the requirements set out by the G20 roadmap. The RTP network prices transactions at four and a half cents per transaction for sending, with any insured bank or credit union receiving it for free. All of the payments are settled within seconds, beating the G20 Roadmap objectives.

To help stay competitive in cross-border transactions, The Clearing House completed a proof of concept for US Dollar-Euro transactions. 

At Trade Finance Global’s annual Women in Trade, Treasury, and Payments (WITPP) event in London, Neha Noronha (NN), Unit Head, South Asia spoke with Carmen Maria Ramirez Ortiz (CR), Relationship Manager, both from the Trade and Supply Chain Finance Program at the Asian Development Bank (ADB), to discuss how to inspire inclusion and make trade an equitable place to work for everyone.

Promoting financial inclusion at the ADB

NN: Can you give us a quick introduction as to what you do at the ADB?

CR: I’m responsible for scaling the supply chain finance (SCF) business in Asia and the Pacific. This means I work on deploying risk-sharing arrangements and developing new supply chain finance products to address the trade finance gap.

Financial innovation is crucial for addressing the trade finance gap, especially for small- and medium-sized enterprises (SMEs). SMEs are the backbone of most economies, but unfortunately, they are also the most affected by the trade finance gap. 

To address this challenge, ADB has brought together an amazing working group, and we are seeking to develop a framework for deep-tier supply chain finance. This product will be an innovative solution to support those SMEs that are deeper down in the global supply chain. 

We are very excited about this space because we believe it will have great potential to drive liquidity to those underserved segments of the economy and enhance transparency. 

If you are interested in learning more about this, the ADB will be publishing an industry guideline very shortly, so stay tuned.

Trade digitalisation at the multilateral level

NN: The digitalisation of trade has been deemed an essential step for making trade cheaper, faster and easier. What initiatives have you been working on to drive trade digitalisation at the multilateral level?

CR: The digitalisation of global trade will be transformative, but it will never happen unless governments step forward and adopt legislation that recognises electronic versions of key documents in trade, such as electronic bills of lading (eBL).

We have already seen some countries – such as the United Kingdom and Singapore – take the lead on this and adopt enabling legislation. 

As part of my role in ADB, we actively promote this type of legislation – the UNCITRAL Model Law on Electronic Transferable Records (MLETR) – through capacity building and technical assistance. 

Our objective is to ensure that developing Asia is not left behind. 

We are trying to gather an array of stakeholders – from multilateral development banks to other regional organisations – to join efforts and incentivise the private sector and governments to move forward with this agenda.

Inspiring the next generation of trade finance professionals

NN: As a young professional coming into the space, what advice would you give to new people joining trade finance to inspire them to join trade finance?

CR: Trade finance is the engine behind the global economy. It is what fuels growth, prosperity, and job creation. 

We need to highlight a developmental angle, which is natural from trade, to foster more young professionals to join the industry. 

Reflecting on my previous work in treasury and seeing the impact in day-to-day business, I’m very happy to be on this side of the coin because trade finance is about supporting businesses to cross borders to empower themselves. 

It’s beautiful that trade finance not only provides a career prospect but also gives you an opportunity to make an impact in your day-to-day job. It is a great deal.

Inspire inclusion

NN: Inspire inclusion is this year’s International Women’s Day theme. What does that mean for you?

CR: To me, inspire inclusion means empowerment. 

It’s about granting yourself and others the freedom to grow, to learn, to stumble, and to make mistakes without the fear that you will be judged, irrespective of your gender, your origin, or even your professional background. 

To me, it entails the power and the confidence that when you think about transitioning not only professional careers but also maybe countries or personal choice, you will be received with an open mind. 

That’s the most powerful gift anyone can give to you, or you can give to others: the fact that you will be unbiased in welcoming that person.