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.

Our approach to reimagining how the bank could propel the digitization of its trade finance functions began with thought-provoking collaboration, which underpinned the ultimate transformation journey. To adopt a holistic stance to its digital transformation framework and develop a unique, overarching digital strategy, the bank scrutinized each layer of its finance function, from cost and control to customer experience, to deliver maximum value across the transformation program.