Collaboration and the right technology are key to overcome the challenges of digital trade and to accelerate ESG initiatives

Finastra, a global provider of financial software applications and marketplaces, exhibited at Sibos last week, where industry experts shared valuable insights about trends in financial services. In particular, the future of trade was discussed extensively, as the industry prepares to embrace a new era of truly digital trade.

Finastra’s Iain MacLennan, Head of Trade and Supply Chain Finance, spoke on a panel hosted by IBM to discuss the role of end-to-end digitalization in trade and supply chain finance. Moderated by Shanker Ramamurthy, Managing Partner – Global Banking & Financial Markets at IBM, the panelists discussed how a platform approach that leverages AI, real-time data and increased transparency to eliminate manual processes can help financial institutions unlock greater value and strengthen their environmental, social and governance (ESG) credentials.

Key takeaways from the panel, ‘Digitalization of trade and supply chain finance: Solving for today, anticipating tomorrow’, include:

1. Challenges of digitizing trade: Trade digitization, driven by advances in technologies such as blockchain and AI, has been a topic of conversation for years. Yet challenges remain, contributing to the widening of the trade finance gap. Many transactions still rely on paper due to traditional practices and fragmented supply chains across jurisdictions. Modern trade and supply chain finance demands straight-through processing, but digitizing paper and manual processes remains a difficult journey. However, innovation in trade has never happened at the pace that it is happening right now. Technology has matured extensively and can be adopted and adapted at scale.

2. Unlocking AI’s potential: When it comes to document digitization, artificial intelligence (AI) solves some of the challenges associated with Optical Character Recognition (OCR) as it can ‘read’ documents, extract the information required and offer actionable insights without requiring different document templates. Moreover, generative AI allows corporates to directly engage with banking systems using natural language to find the relevant information, such as sourcing working capital solutions suited to their needs. For mass adoption, a shift in bank and corporate culture is required, alongside preparation for future regulation around the use of AI.

3. The value of collaboration: While in the early 2000s industry players wanted to build everything themselves to remain competitive, pre-packaged solutions today enable quicker and more seamless integrations. Collaborating with technology and fintech companies supports the integration of multiple solutions via a unified platform, enabling banks to decrease time to market and time to value when launching new offerings. Solutions for document digitization, compliance checking and fraud detection already exist – it’s a case of plugging them together in a truly integrated and interoperable solution. Consuming solutions ‘as a service’ also lowers barriers to entry for banks and provides them with the agility to keep pace with new demands.

4. Embracing ESG: With a growing emphasis on ESG, banks must understand their own and their corporate clients’ supply chain logistics, including how goods are sourced and transported, and the impact of their emissions. Banks can then provide favorable financing offers to corporate customers to strengthen their progress. The lack of standard KPIs and fragmented data sources hinder effective ESG reporting, but banks cannot afford to stand still. ESG is becoming both a regulatory requirement and a necessary driver for better financial outcomes and business longevity.