When we think about efforts towards the digitisation of global trade, it can be helpful to visualise a journey. We know the destination – one where businesses across the world reap benefits including reduced costs, greater connectivity, improved transparency,
faster turnarounds and reduced risk of fraud.

But the road to that destination may not always be smooth, as corporations and countries across the complex global trade landscape face differences in their access to technology, their priorities and their timing. As an industry, we have many steps ahead
if we want to realise a fully digital solution that works for all – and it’s important that we don’t take shortcuts.

As we navigate the challenges and opportunities that come with an increasingly digital world, we must prioritise connectivity as a pillar for success in global business and a key foundation for our entire trade system. For it to function properly, we must
protect rich data, security and identity every step of the way, so we have an environment for safe, secure and transparent trade engagements. And for it to work as effectively as possible, and truly realise the benefits of digitisation, we must have wholesale
connectivity throughout the entire supply chain.

Reimagining a new world for trade finance

Many of the products we use today to execute trade are decades old (some even centuries old) in terms of their structure and use. At this point in our trade digitisation journey, we have an opportunity to imagine a new world with reengineered processes and
activities. We can develop new innovative “derivatives” of existing solutions to deliver real value.

For decades, Swift Trade Standards have enabled effective communication and transaction processing for Swift’s community of over 11,500 financial institutions. However, even with that, organisations often have various platforms with different processes which
can create friction. Take Letters of Credit (LCs), for instance. LCs have been around for generations and are very important for protecting buyers and sellers in international trade against factors such as distance or differing laws, whilst also providing
opportunities for finance. Despite LCs often being available in digital formats, in many cases they (or the accompanying shipment documents) are printed on paper and then need to be manually handled to execute a transaction. And while individual organisations
have enterprise resource planning (ERP) systems that contain the contractual and technical data needed, the banking process is managed through each bank’s proprietary system, or aggregators. So, even with parts digitised, data still comes from multiple systems
– potentially creating fragmentation and, ultimately, delays.

To address this, Swift and other key industry players are examining ways to further enhance trade standards through structured data to modernise corporate-to-bank or bank-to-corporate communications. Imagine a world where these systems are interoperable,
such as when we send messages to our friends in another country via WhatsApp. It doesn’t matter what phone or operating system they have, what country they are in or what service provider they are using. The experience is a shared one, and the results are
instant. This is what we need in our trade efforts.

The road to success for inclusive global trade

For this journey to be successful, it must be truly global. We need to bring everyone along for the ride – and that means addressing the trade finance gap that is often felt prominently in developing economies. The

Asian Development Bank found that the gap grew to a record $2.5 trillion in 2022 because of several factors, including rising interest rates, inflation and geopolitical volatility.  

Today’s ever expanding digital landscape has already allowed established businesses to expand their solutions and open the gates for new, nimble, tech-enabled platforms. While the intent is to connect with more consumers, the rapid growth of these new –
and numerous – platforms can risk greater fragmentation in the market. Standardisation, such as establishing structured data guidelines, will benefit the entire business world by establishing a global infrastructure and a connectivity framework. This will
reduce the risk of fragmentation by streamlining processes and allowing communication between various platforms. True inclusivity means real interoperability, and our platforms need to be able to connect around the world.

Continuing the journey

A truly digital world will be a more efficient one. And that means assessing these processes today so that we can see the potential for the future. Taking steps to eliminate out-of-date practices, using technology and digital practices to eliminate paper
and undertaking real time trusted data in physical supply chain tracking, will help us to improve trade settlement and financing processes moving forward, whilst providing risk mitigation in the inherent risk involved in trade and trade transactions. It’s
promising to see the rise of initiatives such as increased adoption of electronic Bills of Lading (eBL) based on a common standard, showcasing a shared drive for interoperability. However, lets be clear, whilst the Bill of Lading is a vitally important and
integral document in global trade, it is just one of many.

We know making these changes will take time, and that’s okay. When it comes to trade digitisation, we are on the first phase of an in-depth journey – but we are moving forward together.

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• Source: https://www.finextra.com/blogposting/26038/the-journey-to-trade-digitisation?utm_medium=rssfinextra&utm_source=finextrablogs