Keeping a Finger on the Pulse of Trade Finance Advancements

Published  3 MIN READ

Big data, blockchain, the Internet of Things and AI are set to revolutionise trade and supply chain finance, reveals a Commerzbank and Fraunhofer whitepaper.

A recent industry report has indicated a turning point for the global trade and supply chain finance (SCF) industries, driven by emerging technologies and the increasing volume of data.

Commerzbank, in partnership with the Fraunhofer Institute for Material Flow and Logistics (IML), has launched a new whitepaper entitled, Relevant Advanced Technologies for Trade and Supply Chain Finance. It is the one of the most comprehensive bodies of research currently available looking at technology in the trade and SCF sector.

The paper highlights how digital advancements are shaping the development of improved business models to meet evolving business needs, in areas such as increased operational efficiency, and alignment with complex sustainability goals. Cutting-edge innovations, including blockchain, the Internet of things (IoT) and AI now form the building blocks for new trade finance ecosystems.

Big data and AI

As one of the world’s most data-intensive industries, trade and SCF is transforming at a rapid pace thanks to the ability to share, process, and analyse vast volumes of complex information. Big data has been highlighted as an indispensable source of technological innovation, but it can be truly effective only if implemented in tandem with other technologies.

With global data set to grow by 500% between 2018 and 2025[1], the report explains that processing this mass of information will be a key challenge for banks and trade participants. Done effectively, however, rich, structured data can enable AI and ML solutions to automate decision-making processes and forecast trends in risk management, financial analytics, and portfolio management.

Blockchain and DLT

The report looks at the growing opportunities for businesses in the form of B2B platforms, which can reduce barriers, improve transparency, and support automation. These platforms are predicted to profoundly alter the way in which international trade is undertaken. One such example is the blockchain-enabled, distributed trade network Marco Polo. Developed by an international consortium, the solution significantly increases speed and transparency by automatically matching digital trade data.

More broadly, it is believed that DLT and blockchain technology could reduce trade finance operating costs by 50 to 80% and improve turnaround times three- to four-fold. The barriers removed could lead to more than US$1tr. in new trade over the next decade.[2]

IoT and sensorics

By 2030, the number of internet-connected objects will reach more than 125 billion, according to a preliminary forecast by the American Bankers Association. The networking of each object opens new revenue opportunities in novel demands on payment and finance flows.

One application scenario in SCF arises through the creation of automated payment solutions triggered by sensor data. By linking the physical and financial supply chain using the IoT, it is possible to design fully automated order processing along the entire supply chain.

“Supporting Germany’s trade corridors is in Commerzbank’s DNA. That is why it is vital we have our finger on the pulse of the latest technological advances in trade finance and deliver enhanced solutions to our clients,” comments Nikolaus Giesbert, Divisional Board Member, Commerzbank. “This paper underpins Commerzbank’s commitment to shaping the trade finance business of the future, and we very much hope it serves as a catalyst to drive further progressive discussion and action across the industry.”

To read more, download your copy of the report here.

[1] Reinsel, D., J. Gantz, and J. Rydning 2018. The Digitization of the World. From Edge to Core. USA

[2] World Economic Forum. 2018. The Global Financial and Monetary System in 2030. Geneva.