Cash & Liquidity ManagementPaymentsSWIFTBanks see uneven digitisation in trade

Banks see uneven digitisation in trade

Documentary trade lags behind trade finance as bank’s push to digitise the sector

While supply chain finance has made steady progress digitising through third party fintechs, traditional trade/documentary trade still requires both physical paper and manual intervention said panelists at this year’s BAFT conference.

“Supply Chain Finance is predominately digital with various proprietary third party platforms that support the transfer of data and payables industry,” said Merlin Dowse, executive director of global trade finance product management at JPMorgan.

Documentary trade has yet to see the same level of digitisation as trade finance.

“Even under the supply chain finance transaction, the corporate client is still asked to create the invoice the transport document and a certificate of origin, which has yet to be digitised. The question for banks is ‘do you need to possess the physical document?’ Or are you comfortable offering the same risk mitigation tools out to your clients based solely on data.”

The need for physical documentation remains high in documentary trade. A 2018 report by the ICC found that there are four billion pages of documents related to international trade in circulation. They estimated that only one percent of documents added value.

Though the banking sector has been slow to digitise documents, the technologies to accomplish this are already here said John Murray, vice-president at BNY Mellon.

“With the advances in OCR, we’ve opened up new capabilities in terms of processing documents, adding in machine learning, artificial intelligence and robotics. We have now digitised our trade documents, where we’re able to. This speeds compliance reviews and eventually checking of documents against the letter of credit terms.”

Dowse agreed and said initiatives were underway at his own bank to reduce the amount of physical documents in an effort to improve the bank’s operational efficiency.

“We may need to see the documents but we don’t necessarily want them. Can we rely on digital images as we do through SWIFT’s FileAct? Through digital images this dovetails nicely into our operational efficiencies using OCR, automated compliance checks, moving towards doc checking solution in the future.

Though large banks like BNY Mellon and JPMorgan are transitioning towards greater digital trade documentation, Dowse added that some financial institutions, specifically small and medium banks face challenges when making the move.

“We are familiar with Bolero, essDOCS and other fintechs that are helping support the digital transfer of documents. [These solutions] are subscription based, you need to maybe sign up for a different set of rulebooks.

“It’s a challenge for the smaller, medium sized banks, who may not have the resources or the investment capital to get on boarded onto one of these platforms.”

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