Efficient global trade of physical goods relies on availability of three key factors: credit, solid logistics and transparent payment. Trade finance addresses the challenges with well-established instruments to issue credit, document the transfer of exported or imported goods and execute subsequent payments. Yet, in spite of its established nature, our clients state that the trade finance business is becoming harder to manage than ever. Why?
To answer this question, we took a deeper look at how trade finance works today. Traditionally, the business has targeted exporters and importers of a certain size. Only mid-range to larger players have been able to afford trade finance services such as issuance of letters of credit and payment services on the buyer’s side, as well as creation of bills of lading on the seller’s side. As practitioners well know, the combination of these two instruments, along with the respective shipping and payment processes, form the foundation of traditional trade finance. But change is, inevitably, heading to disrupt tradition.