How digital transformation is redesigning trade finance

Global trade is facing a period of heightened uncertainty owing to ongoing trade tensions, market volatility and the continued fallout of the COVID-19 crisis. Now more than ever, banks that facilitate international trade are aware of the importance of digital operating models, and the benefits they can bring.

Although digital transformation continues to sweep across the banking industry, banks facilitating international trade are still eagerly searching for better ways to revamp their age-old trade finance functions – and do so quickly.

Given the highly complex nature of trade finance, and the fact that each trade transaction requires the input of multiple people in various locations worldwide, banks must seize the opportunity to transform their trade finance functions now, to compete successfully in the future.

At the root of the industry’s slow shift to digitization is its heavy reliance on paper. Although alternatives to documentary trade finance are on the rise (including supply chain finance to distribute short-term credit to provide working capital for the buyer and seller), the services trade finance provides to importers and exporters still require documenting millions of transactions each year. This drives associated compliance checks as necessary protections against financial crime.

To digitally transform these manual processes, one bank looked to an external partner to support this change through innovative design and customer experience solutions, while also unlocking value rapidly to improve short-term profitability.

The bank recognized the need to transform its operational processes to deliver a better customer experience, reduce costs and facilitate secure global trade practices. It understood that by redesigning its trade finance ecosystem, it would have greater oversight of its data, platforms and processes – which would also help to curb financial crime and boost trust among its customers.

It began by working with EY teams to reframe its end-to-end approach to digital transformation.

The ideas and opportunities that derived from EY’s approach invariably translated into a new vision of how the bank’s trade finance function could operate. By reimagining a global end-to-end process that addresses the function’s core transformative needs, EY teams helped to shape and articulate how structured, quality data, well-designed processes and appropriate control design and deployment could revamp an age-old industry such as trade finance.

“Banks are used to binary change – regulatory driven or process cost optimization – but redesigning your business is more complex,” says James Sankey, Director, EY EMEIA Corporate, Commercial and SME Banking.

Together with the bank, EY teams helped to: 

• Accelerate the design and delivery of transformation initiatives across the bank’s trade finance function
• Validate targeted design
• Design future processes across multiple products to inform further business and technology development
• Identify and prioritize simplification opportunities across trade finance to reduce costs now and simplify the transformation later
• Run team-by-team sessions to challenge opportunities and accelerate benefit quantification and delivery
• Improve efficiency and customer service while addressing existing control gaps
• Provide insight for potential development and investment initiatives