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Trade Finance
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How We’re Reinforcing the ‘Open Account’

by Dave Phillips, Global Head for Trade Services and Supply Chain Finance, Lloyds Banking Group

What’s exciting, argues Dave Phillips, is how rapidly banking technology is developing to facilitate trade by meeting two supply chain funding challenges in today’s increasingly testing global environment.

In today’s uniquely risk-laden global conditions, how can we strengthen the essentially trust-based advantages of Open Account trading? It’s an intriguing, and to me, an increasingly pertinent question as UK corporates seek to streamline their financial supply chain in their drive into new and often unfamiliar international markets.

Right now, let’s remember, some 85% of all global trade transactions are estimated to be managed on an Open Account basis. For more than two decades, it’s grown to become what is now the world’s optimal trade model, far outstripping the settlements still made with traditional trade products such as letters of credit. But as the dynamics of global trade have shifted towards new growth arenas of Asia and South America, international corporate clients are increasingly confronting their banks with two specific challenges: first, how to extend the benefits of Supplier Finance/Approved Payables programmes to suppliers in the world’s key growth geographies; and second, how to deepen funding access across a greater sweep of supplier cash flow needs in those territories.