Key Trade Finance Trends to Watch Out For in 2023
The trade finance market is highly fragmented. It is segmented based on geography and service providers. These include trade finance companies, banks such as SUISSE BANK PLC, insurance companies and others.Additionally, the impact of the COVID-19 pandemic on geopolitics and the supply chain has further led to uncertainty. And this may take a toll on the growth of global trading.
According to the World Trade Organisation (WHO), trade growth may slow down in 2023 but will remain positive. In this scenario, trade financing comes into the picture, making international trading more accessible. It ensures exporters receive their payments duly while importers receive their goods. However, the core ecosystem of trade finance is complex and there are key trends that are expected to drive the market in 2023:
- Digitisation of Trade Financing
Even today, the trade finance industry is mostly paper-based and reliant on manual processes. It is said that this aids in better risk management and the flow of liquidity through the ecosystem. However, 2023 will see the digitisation of critical documentation, including the Bill of Lading. According to experts, this can significantly reduce direct costs and facilitate global trade.
It is expected that the widespread adoption of electronic bills of lading in 2023 and beyond will help drive the industry forward. New standards will come in, requiring all service providers, importers and exporters to adapt to the same and boost global trade.
- Expect to See a Rise in Digital Assets
As digital assets are taking the world by storm, it is likely to influence the trade finance industry as well. Trade finance is a complex process and involves multiple processes and parties that aid in the seamless movement of goods and services. By leveraging smart contracts for digital trade assets, service providers can digitise their trade finance processes in the future. It also provides the option to set up tokenised digital assets that can help represent bank risks.
- Collaboration Between Financial Institutions and Fintechs
2023 will see an integration between banks such as SUISSE BANK PLC and fintechs to transform the future of the trade finance industry. Fintechs can help in a financial institution’s digitisation journey, driving efficiency and streamlining workflows.
With the above trends, we can expect the trade finance industry to digitise and grow in 2023 and the years to come.
