Deutsche Bank Guide to Digital Trade Finance
Digitalisation has long been a priority for the trade finance industry, with operational efficiency and lower transaction costs among the anticipated benefits. Where has the journey got to? And how have common frameworks evolved? With contributions from experts across the trade finance industry, this Guide to Digital Trade Finance charts the direction of travel
Despite a strong desire for change within the industry, progress towards trade finance digitalisation has been somewhat sluggish for the past few decades – held back by legal obstacles, a lack of standards and the need for unifying technologies and platforms. The tide, it seems, is beginning to turn.
This Guide to Digital Trade Finance (the Guide) has been produced to identify what has caused the pace of change for trade finance digitalisation to be this glacial, as well as to examine what accelerants are in place to take the industry to the next level. Arranged as an industry ‘toolkit’ into six chapters, with helpful footnotes for suggested further reading, we cover:
- Digital trade finance: the state of play. This is a comprehensive breakdown of the current state of play within the industry – looking at the differing fortunes of the digitalisation journeys within payments and trade finance industries.
Digital trade finance: The opportunities and challenges. The opportunities that trade digitalisation has the potential to release, as well as the challenges that have curbed or slowed progress so far.
Legal frameworks: This covers how legal reform – centred around the Model Law on Electronic Transferable Records (MLETR), together with the Electronic Trade Documents Act (ETDA) – is being brought in across the globe. The Guide examines how the MLETR aims to enable the legal use of electronic transferable records both domestically and across borders – and provides an update on adoption and the need for a “reliable system”.
International standards: The trade standards landscape is set out, with comprehensive breakdowns of how trade finance actors can navigate the range of digital initiatives being worked on by industry bodies and utilities. These include the International Trade and Forfaiting Association, (ITFA); the ICC, Swift, the Bankers Association for Finance and Trade (BAFT); and the Digital Container Shipping Association (DCSA).
Leveraging innovative technologies: We look at the use of emerging technologies in trade finance – from blockchain and AI to OCR and digital signatures – how they are being used and the lessons learnt so far.
The bank perspective: Finally, the paper addresses the need for banks to play a larger role in digitalisation initiatives, with a focus on ensuring interoperability across the trade ecosystem. It also reviews the growing field of trade finance asset distribution in the wider secondary market and how improved digital processes can widen the reach of trade finance.