Digital trade finance
could revolutionise
the Future of Trade

"A survey conducted in 2016 found that banks had to spend more than $60 million on due diligence measures."

While digitalised industries are strengthening economies, technological advances are putting trade finance in the spotlight. Traditional debt finance - bank loans, overdrafts, Letter of Credits (LCs), export credit and insurance, account for roughly 80% of financing for world trade. However, due to strict collateral needs and credit history checks, 50% of SMEs funding applications are rejected by banks. This has resulted in a $1.5 trillion gap in trade finance.

As digital trade finance becomes a sought after alternative, start-ups and SMEs are no longer as reliant on banks as before. Blockchain has the potential to significantly reduce cost and bureaucracy in trade finance and payments. Its applications and opportunities are numerous whilst the ledger can be either public or private.

"Blockchain is the big disruptor
and banks will have to re-discover their role in a decentralised digitalised economy."

WTO is forecasting trade volumes to rise 3.2% by the end of 2018, with trade finance volume expected to rise at a CAGR of 3.7% between 2016 and 2020.

The impact of FinTechs
on the Future of Trade

Having revolutionised the payments industry, FinTechs are venturing into the trade finance space through digital lending platforms. The ability to evaluate a borrower’s credit score in real time, along with information symmetry, efficiency, scalability, and reduced cost of due diligence have boosted the growth of alternative finance globally. FinTechs play a pivotal role in developing platforms that foster supply chain financing for SMEs. Currently, more than 12% of all Supply Chain Finance programmes in Europe are channelled through FinTech platforms.

FinTech farms amounted to approximately $122 billion between 2013 - 2016.

Value of China’s alternative finance market in 2016, double that of previous year

Banks reject 50% of SMEs applications for funding, which has created a $1.5tn trade finance gap preventing global trade to evolve at pace.