Research & Thoughts

Trade Finance Modernization

Can banks capitalize on change?

This Capco white paper explores how banks can enhance their ability to provide trade finance services and maintain ROE performance by deploying digitization and adapting operating models to today’s environment. Banks can modernize their trade finance operations incrementally without making wholesale upgrades, opening the door to greater efficiency and new revenue streams.

It has become increasingly difficult for banks to serve the trade finance market and maintain return on equity (ROE) performance since the 2008 financial crisis. Factors such as the approaching Basel III minimum capital requirements, growing customer expectations, and the expansion of open account trade and supply chain finance are compelling banks to assess whether they can serve the trade market profitably or should consider exiting the business.

Despite these challenges, banks have ample opportunity to make their trade operations more efficient. As digitization technology continues to spread throughout banking, trade finance remains a stronghold of paper-driven processes. By transforming trade operations, banks can free capital to develop new financial products and services.