Trade Finance Accelerating the Digital Shift

In 2025, having already adopted the provisions of the MLETR, a decree will formalise the digitalisation of trade in France. The players, the challenges, and the opportunities of transformation are explored by Societe Generale’s Christian Cazenove, Group Head of Trade Oversight and Advocacy, and Alena Malgina, Trade Advocacy Correspondent.

In broad strokes, the global trade landscape continues to evolve rapidly, with goods and services’ trade equalling an all-time high of $33tr. in 2024¹. Trade finance plays a crucial role in supporting nearly 20% of these trade flows by providing documentary trade solutions that address traders’ needs for risk mitigation, settlement, information, and financing, allowing them to operate with confidence². Yet, despite its vital importance, trade finance is still weighed down by outdated, paper-intensive processes and cumbersome practices that hinder its efficiency.

Owing to efforts deployed by the trade ecosystem’s players, the tide is turning and digitalisation disruption is gathering pace. Along with a regulatory push, trade finance stakeholders are driving change by embracing technology that offers new pathways to growth through innovation.

Trade finance: where paper still reigns

Although many other activities, not limited to the banking industry, have since decades embraced digital solutions, trade finance remains bogged down by its reliance on paper. For each transaction, up to 36 documents and 240 copies are typically involved, resulting in an estimated four  billion new paper documents per annum exchanged by banks³.

Besides, compliance verifications against more than 400 International Chamber of Commerce rules remain desperately manual and time-consuming, leading to a process that can take up to 15 days for a single ‘paper’ LC, regardless of its amount and counterparts. These inefficiencies are costly for banks and business alike, making trade finance complex, risk-prone, and unable to meet the growing expectations of corporate clients.

Recourse to paper is historically due to the usage in trade of negotiable commercial documents (or transferable records) such as bills of lading (BLs), promissory notes, bills of exchange, and warehouse receipts. These essential trade documents award their holders with rights that can be transferred. However, the endorsement and the transfer of rights requires the original paper document to exercise via possession the rights that it represents.

While creating an electronic document with an electronic signature is now easily achievable under French law, ensuring possession of the original of an electronic record seemed for a long time hardly feasible4.

The United Nations Commission on International Trade Law, UNCITRAL, addressed this challenge by developing in 2017 the Model Law on Electronic Transferable Records (MLETR) – a legal technology-neutral framework that enables the use of electronic transferable records (ETR). If transposed into national legislation, MLETR grants these digital records functional equivalence to paper instruments and supports their legal cross-border recognition. The adoption of this framework is a necessary first step towards the digitalisation of trade.

G7 highlighting the urgent need for MLETR global transition

At the 2021 G7 Summit in London, governments recognised that paper-based international transactions were a significant source of “delay, inefficiency, fraud and error”. They declared their commitment to support digital trade to reduce the global trade finance gap, pushing for a wider adoption of the MLETR.

French stakeholders have been key drivers in advancing a much-needed law reform and thus digital transformation. In November 2022, the French government mandated the ICC and Paris Europlace with a joint mission to accelerate the digital transition. Their efforts led to a comprehensive report submitted to the government in June 2023, outlining nine  recommendations that focus on legal frameworks, trade tech ecosystems, improved stakeholder co-ordination, and reinforced capacity building.

Thanks to collaborative efforts within the industry, the MLETR provisions were enacted in June 2024. Their full applicability is expected in the first half of 2025 with the publication of an official decree that will enable the enforceability of the newly adopted provisions in France.

These efforts are crucial as the digitalisation of trade finance can bring substantial benefits for the entire ecosystem, particularly for banks and their corporate clients. According to the 2023 report by the ICC – Paris Europlace, digital trade finance could generate up to €3.8bn in gains for France alone, with an estimated €36bn across Europe by 2030. Digital solutions have the potential to reduce processing times, costs, improve risk management, rendering trade finance more efficient, accessible and secure. For businesses, and especially SMEs, faster processing times and lower costs could enable a greater participation in global trade.

“The benefits of digitalising our international trade operations are clear. Digitalisation will allow our recipient clients to retrieve their goods faster and avoid incurring parking fees at destination. As an intermediary trader, it is key to ensure commercial and logistic documentation is available before the goods arrive at the destination port. When documentation is not received on time, we end up bearing those expenses. Another challenge is to significantly reduce our shipping costs of original documents via secure courier services. In fact, the annual total cost of these reaches several hundred thousand euros,” according to Franck Deschamps – Head of Trade Finance, SNETOR

Challenges to digitalisation: Interoperability and harmonisation 

MLETR enactment in France represents a major step forward for the French ecosystem, but the challenge of international legal harmonisation remains. To date, only 10 countries have adopted this crucial piece of legislation, with Singapore (2021) and the UK (2023) leading the way.

The trade ecosystem currently faces another significant challenge to overcome on the trade finance digitalisation path, that is the lack of technical interoperability between IT solutions deployed by the multitude of stakeholders involved to securely transmit data and electronic documents. So-called ‘digital islands’ – isolated IT solutions adopted by closed groups of actors, complicate the scaling up of digitalisation.

The challenge of interoperability also extends to its semantic interpretation, as well as to the future need for procedural interoperability across institutions to facilitate smooth transactions. A close engagement with different stakeholders is now essential to adopt industry-wide IT interoperability and  other standards, to allow for a seamless data and document exchange across the trade ecosystem.

Looking ahead: 2025 and  beyond

As digitalisation must accelerate in 2025, all ecosystem players recognise its undeniable advantages. The question has long shifted from whether to digitalise to assessing our progress, identifying obstacles, and determining our path forward.

To sum it up, progress is not without challenges, as two major hurdles of legal harmonisation and technical interoperability continue to loom.

A slow uptake but a positive outlook

Although there is still a considerable path to traverse, the industry has made significant progress in recent years, with a host of initiatives dedicated to transforming and modernising trade finance.

More countries are anticipated to transpose the MLETR as the ICC works towards its ambitious goal of 100 MLETR-compliant countries by 2026. Objectively, progress in legal adoption is slower than desired, yet the outlook is clearly positive: more countries engage in the discussions.

Region-wise, strong momentum for adoption exists in Europe and the APAC regions. In Europe, after UK and France’s adoption, promising dialogues are taking place in the Netherlands and Germany, while nascent discussions are being held in Italy and Spain. 

The year 2025 brings a glimmer of hope, particularly for MENA, as several high-level workshops and conferences on MLETR and trade digitalisation have been held in Morocco, Qatar, and Egypt. While it is difficult to predict adoption timeframes, these countries may be next in line for legal reforms.

A concern remains: although the African nations are notable for their high recourse of ICC documentary instruments, most of these countries have yet to show any traction.

In France, the industry eagerly anticipates the publication of the adopted MLETR provisions’ application decree. The development of the decree has been slower than anticipated and stakeholders impatiently await its movement from proofs of concept (PoCs) to real usage cases.

On platforms and interoperability matters

The deliberation on which tech platforms to adopt is still in its early stages, and it is not yet sufficiently developed. Stakeholders remain hesitant to commit to a specific tool, but progress is gradually being made as some fintechs announce improvements in document flow interoperability and PoCs are rolled out by financial institutions. Certainly, advancements are underway; however, it is not yet clear towards which tech providers to gravitate, as legal and technological aspects remain foggy.

Last year marked a period of first attempts, with stakeholders across the globe rolling out PoCs, laying the groundwork for 2025, which is expected to be a year of pilot transactions within the trade finance ecosystem in France.  

 “Only a few banks, particularly Societe Generale, and some shipping companies show a proactive approach. Fintechs are certainly at work, but the entire ecosystem remains cautious,” says Deschamps.

Contributing to the digital future

Societe Generale is actively involved in the trade finance digitalisation movement. From its inception, we support the ICC - Paris Europlace Initiative to accelerate the adoption of digital solutions in France. Societe Generale actively contributes to the working groups the initiative created, namely to the Advocacy pillar, driving dialogue among stakeholders from across the whole trade community. Efforts are underway for the development of multiple PoCs with several commodity and non-commodity corporate clients and their banking counterparts worldwide to assess practical applicability of different tools and platforms as corporate interest grows, exploring new avenues to contribute to trade finance’s incremental transformation.

“The critical areas we should expedite our efforts on are e-BLs, e-LCs and digital documentary collections. […] In a few months, everything will be put in place to start deploying new methods wherever possible. Clearly, the path will be long and will require patience and energy to convince our partners and find corridors that allow this deployment,” notes Deschamps.

Yet, one must acknowledge that the pace of change within the banking industry remains slower than desired, and it is up to the entire ecosystem to sustain and reinforce this momentum. Key actions ahead are (i) to encourage adoption of favourable legal frameworks, such as those promoted by ICC Digital Standards Initiative (i.e. Key Trade Documents and Data Elements; (ii) to further promote dialogue within the industry, particularly with fintechs to identify the most effective interoperable solutions; and  (iii) to strengthen co-operation between financial institutions across all geographies and finally enable digitalisation to take hold.