Our first blog examined why commercial banks should introduce cashflow management tools for small- and medium-sized enterprises (SMEs) as part of an overdue drive towards fully digital banking. Our second blog looked at the impact of COVID-19, while our third and fourth blogs examined how data-driven banking can help relationship managers. Our fifth blog looks at how commercial banks in APAC can – and must – use technological advances to automate trade finance.

Eliminating the paper trail…

The most compelling reason why commercial banks should focus their attention on trade finance automation is that, in an overwhelmingly digitised world, this process is still dominated by paper – four billion pages and documents annually.[1] That makes for a manual, paper-heavy process, with much of the work carried out by trade operations teams at strategic “factory” operational centres.

COVID-19 has forced banks and clients to boost trade digitisation to overcome challenges including working from home, which is less efficient, and staff and clients reluctant to handle physical documents. There is also greater awareness of the need for change. The International Chamber of Commerce and regional trade bodies, for example, have ensured scanned documents are legal for trade processing.[2] And the ASEAN nations[3] are working to implement the ASEAN Single Window, which will see cross-border trade-related documentation done electronically, with documents received by banks and automatically mapped to their systems.[4]

Banks that fail to implement solutions to deal with this will be worse off – they will need to print digital documents before carrying on as before: entering them manually (or using optical character recognition (OCR) to scan them), correcting errors, and manually validating information before sending it to the next stage.

“Banks that automate trade finance will reap the rewards – improved revenues, lower risks and greater customer satisfaction.”

Additionally, corporate clients increasingly want their bank to be a digital-savvy collaborator that can help them move up the digital ladder and be more efficient.

The benefits of doing so can be substantial. Traydstream, a fintech that offers trade finance solutions, says automating the pre-checking and processing elements of the value chain – two of the most labour-intensive tasks – could see banks cut costs by 70 percent and turnaround time from days to minutes (see diagram).[5]

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In the near future, then, banks can expect to receive greater volumes of digital data from external ecosystems, industry players and clients. How their core trade-finance-processing systems use this data will determine their growth, market standing and relevance.

The solution is to develop a strong core-processing capability enhanced with emerging technologies, allowing banks to collaborate with external players, and serve their clients effectively and efficiently. It rests on three foundations.

1. Smart automation

Although standard OCR does a good job extracting data from documents and reading it, it is not an intelligent system. That means a manual effort is needed to double-check, correct and clean data.

However, a system that combines OCR with robotic process automation (RPA), artificial intelligence (AI) and natural-language processing (NLP) can read documents fast, understand what words mean, and learn from manual corrections (see diagram).

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This improves process efficiency and compliance-related validation, cuts costs and supports strategy. Over time, such systems become

more intelligent, further cutting costs.

Standard Chartered bank – which processes more than 36 million trade documents annually – implemented a Trade AI Engine that automates the processing of unstructured documents like bills of lading and import/export paperwork.[6] This cut by 10 percent the time to review and process documents.

2. Data analytics

Commercial banks should also increase the use of data analytics. They could, for instance, crunch incoming trade finance data to calculate total payables and receivables, then reconcile that to create a working-capital proposition. And they could use data analytics to create value for their clients – seeing which buyers are likely to default, for instance, and passing on that information.

Data analytics can also help banks to combat criminal activity and flag up compliance concerns – as, for example, Citi’s use of AI in trade areas like AML, export controls and military/dual-use goods.[7]

3. Innovate with APIs

The third element is to use open APIs, which are commonplace in banking and beyond, and which allow firms to share information securely between their internal systems or with external ecosystems. We expect that banks’ future performance in trade finance will be closely correlated with how open their platform is; that links directly to their APIs.

Having a mature API-driven platform benefits banks and their clients:

  • Quicker time to market: APIs ensure products, services and offers are launched faster, and are easily integrated.
  • Lower costs: APIs standardise and simplify customer onboarding, drastically cutting the cost of this process.
  • Easier customer access: APIs allow banks to enable omni-channel access for services, so clients can take advantage of targeted offers more easily by sharing data securely.
  • New revenue channels: APIs bring the opportunity to boost revenues significantly by embracing a revenue-sharing business model.
  • Fast-track innovation: an API approach means banks can share assets with innovators to develop new products.
  • Customer intimacy: the security afforded by APIs boosts customer trust, and means banks can better deliver personalised and connected smart services to customers via intuitive and compelling digital interfaces.

Digital future

In short order, trade finance will be digitally driven. Banks that use digitisation will be more profitable, lower risk and more likely to survive. Digitisation makes the value chain more efficient, and ensures that significant limitations can be overcome – those include long transaction turnaround times, high handling and storage costs, and a lack of process standardisation.

Our final blog will look more closely at supply chain finance, and illustrate how commercial banks can reap rewards by applying technological solutions to this crucial area of global commerce.


[1] Digital Trade Roadmap: A Communication Tool for Policymakers, International Chamber of Commerce (2020). See: https://iccwbo.org/content/uploads/sites/3/2020/05/2020-icc-digital-roadmap.pdf

[2] See, for example: https://iccwbo.org/global-issues-trends/banking-finance/icc-digitalisation-of-trade-finance/

[3] The 10 ASEAN member states are: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

[4] See: https://asw.asean.org/

[5] For more, see: https://traydstream.com/

[6] AI and machine-learning help Standard Chartered automate trade finance processing, Techgoondu (June 12, 2020). See: https://www.techgoondu.com/2020/06/12/ai-and-machine-learning-help-standard-chartered-automate-trade-finance-processing/

[7] The Next Frontier: Streamlining Trade Compliance through Artificial Intelligence, Citi (2020). See: https://www.citibank.com/tts/insights/articles/article80.html

Nicholas Conlon

Director – Commercial Banking Lead, Growth Markets

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Mahendra Kasula

Principal Director, Corporate Banking & Innovation, South East Asia

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