How Digital Transformation Will Shape The Future Of Trade Finance

The nature of trade business may seem to have remained the same for centuries. This is because the basis of trade is simply defined as the transaction that takes place between a buyer and a seller. However, in today’s world, the situation is not that simple, both commercially and financially.

The world economy, which is mainly empowered by the trade industry, accelerates day by day with increasing global needs. In addition, the flow of physical goods has transformed into digital flows, and the evolution of technology has further fueled rapid growth, especially during the Covid-19 crisis. This also reshaped both domestic and cross-border flows of goods and services, sold and purchased by millions of companies of all sizes across the globe, while also resulting in increasingly complex supply chains. 

Global Trade, Local Markets & Providers 

As a result of the growth in global trade business, the participation of emerging local markets in global trade has increased in a recognizable manner, which has led to a boost in the demand for financing solutions, especially from local providers. 

Therefore, local financial sectors have to find fast and agile ways to finance their own trade and adapt to the sudden market needs quickly because the cross-border movement of goods and services cannot occur without trade finance. 

A Glimpse into Trade Finance

As the pandemic continues to hit businesses around the globe, the world faces a large and persistent trade finance deficit amounting to $6.5 trillion. It is known that today, in the trade business, 50-75% of trade requires finance, and trade finance seems to be more accessible for large corporations than Mid-Corps and SME’s. 

Banks, and especially trade finance departments are looking for ways also to lower the risks they hold and leverage their businesses to be able to respond to the needs sufficiently, to avoid any undesirable consequences of new regulations, and basically to prevent the reduction of the funding of trade finance. 

At the same time, innovative solutions that enable trade finance departments to work in the most efficient way and strengthen their bonds with other departments in the bank will also gain great importance. 

When processes within the bank are digitized and optimized, information flow and transaction processes will also accelerate. This will ensure that the financial needs in the market are met much more quickly, and the risk factor will be minimized with much safer transaction processes.

As a result of all these changes and gaps in the trade sector, many parties are now willingly interested in financing the digitalization of the trade finance industry in terms of innovation and automation, which has been ignored for years in the banking world. And this is extremely good news for trade finance. 

Challenges and Opportunities 

In this complex environment, the non-optimized processes of parties and systems and the lack of interoperability as a result of operational frictions also pose a great risk and increase the pressure of profitability that remains on the flip side of the coin.

Both the reality of still unmet demand for trade finance and the rapid digitalization process of the trade finance market make it difficult for established practitioners, who are already struggling to adapt and work more efficiently while offering many opportunities for new and agile entrants. 

In that regard, being able to provide a transparent and flawless collaboration between B2B and Trade networks gains also great value. Because there are still three basic and key trigger points that need to be digitized in the Commercial Contract Trade Cycle (CCTC): 

  1. Is it ok to fund?
  2. Is it ok to pay?
  3. Is it ok to release goods?

There is a serious need for a greater end-to-end data integration in CCTC processes to regulate suboptimal flows of information and resources resulting from a lack of connectivity and information between parties in the trade business. 

These regulations will not only optimize the flows in the trade sector but also bring a sense of trust to the top. Digital documents now have a significant process optimization opportunity to break the “digital-to-paper-to-digital” cycle, eliminating manual processes and carrying it into “digital-to-digital”.

How to Adapt ?

It is clear that digitalization strategies alone will not be sufficient to meet the mutual needs in the trade ecosystem. In the coming period, it will be important to be able to look at the increasing demand for trade finance solutions with a broader vision and to feed the capacity gap in the traditional banking sector by investing in new asset classes, new processes, or partnerships and developing technologies. 

The future of global supply chains and trade finance will be surrounded by new technologies and solutions that more closely integrate and connect trading participants. The most effective way to achieve an efficient integration with high added value will be to cooperate and join forces with adjacent fin-tech companies between B2B and Commerce networks.


To conclude, buyers, sellers, and also financial institutions will surely benefit from a more closely connected industry, where adjacent players come together to leverage new technologies and join forces to offer more effective and joint solutions.

As we have mentioned before, trade finance is the main key to the workflow in the trade business. So here at RISQ, we try to do our best to support the trade ecosystem by providing innovative end-to-end solutions to help financial institutions cover everything from controlling and monitoring of correspondent wide limits across all divisions, onboarding new financial counterparties, to servicing ongoing credit lines.


Take a look at our innovations to discover the industry’s first dedicated end-to-end institutional banking solution and to benefit from our intelligent products.