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BAFT and CGI 2022 State of Trade Technology Survey Results

A Clearer Picture After the COVID-19 Pandemic?

BAFT and CGI conducted their third annual trade technology survey at the end of 2022. As banks and the global trade industry return to a more stable state with less direct challenges from the COVID-19 pandemic, CGI and BAFT requested input surrounding technology priorities and investments within financial institutions’ trade organizations.

What’s Impacting Trade Finance Today?

The past year saw the consolidation of Fintechs in the trade space, with banks taking a more focused and outcome-oriented approach to incorporating new technologies into their operations. This has been observed with the closures of Serai, We.Trade, and TradeLens, all blockchain consortia or networks which ceased operations in 2022. Based on the survey participants’ feedback, investments in innovation appear to compete for limited resources at trade banks, including environmental, social and governance (ESG) initiatives, digitization, compliance, supply chain finance (SCF) growth and automation.

Investing in Innovation – The Top Technology Investments Over the Next Five Years

Last year, API services and ESG solutions were the investments that stood out as the most impactful among survey respondents. However, this year’s survey indicates a continued focus on the foundational aspects of trade back-office and trade portal modernization, as well as intelligent process automation (machine learning, natural language processing, artificial intelligence) investments.

Back and front office modernization is crucial for maintaining efficiency on the back end and a positive user experience for customers on the front end. CGI helps clients utilize modernized technologies to drive efficiencies through automated workflows and imaging between the customer and the bank, streamlined portal usability and processing services that remove work from the corporate back office. In addition, these core components will enable end-to-end digitization by providing API capabilities to banks. These elements are fundamental, and with their presence, banks will be hampered from a future capability and product offering perspective.

IPA investments like machine learning and AI have the potential to improve the efficiency and accuracy of processes by automating manual work traditionally done by employees. Over time, this will result in decreased human intervention and errors and allow employees to focus more on value-add tasks.

Greatest Barriers to Innovation

This year’s survey indicated that resource limitations, competing internal priorities and budget were the most significant barriers to embracing innovation. The impact of these barriers has shifted since our 2021 survey, with resource limitation jumping to the top of the list.

Trade banks struggle to prioritize competing investments, including ESG initiatives, digitization, compliance, SCF growth and automation. This challenge isn’t unique to banks or the trade finance industry, as many sectors are being asked to do more with less within an uncertain economic climate. Because of the lack of resources, it’s no surprise that technology investment was a top challenge for banks. The concern with regulatory landscapes and compliance is also still ever-present. The trend towards digitization, heavily influenced by the pandemic, was thought to help combat regulatory challenges and reduce the impact. But will that same push toward modernization continue as we settle into our new normal?

Fintech Collaboration

A middling level of satisfaction with fintech engagement has continued in this year’s survey. The top types of fintech engagements were SCF platforms and digital document platforms.

The shift towards SCF began last year, with banks expecting only 50% of their revenue to come from traditional trade business. SCF platforms were the most demanded type of fintech engagement because of the digitization benefits they deliver.

SCF platforms offer a tangible and easy-to-understand solution for bankers, so it’s no surprise they are still growing in demand. They also deliver digitization benefits, including improved UX for clients.  

Change in ESG Impact

ESG initiatives first emerged in last year’s survey, emphasizing investment in environmental sustainability. There was interest from both corporates and banks, although there were no formalized incentives for implementing initiatives.

While this year’s survey indicates that ESG is still growing, there has been little impact on the trade finance business. Since 2021, corporate clients’ interest in utilizing ESG products has decreased by 11.7%, and only 10.1% of participants are executing impactful ESG initiatives. At the same time, 23.2% have implemented ESG initiatives but aren’t seeing an impact on their trade business.

Insights You Can Act On

As we move to a new normal post-pandemic, it is interesting to see where the industry and clients are looking to invest in the future. CGI and BAFT conduct this survey annually to encourage connectivity to external fintech partners and provide valuable insights into the trade finance industry. We also use these insights to deliver better solutions to meet our client’s needs.

For more information on the topics discussed in this blog and insights into the trade finance industry, download the BAFT and CGI State of Trade Technology Survey – 2022 Results here.

From Discussions to the Real Deal: The Digitalization of Trade Finance

Advancements in technology have contributed to an acceleration in the trade finance industry’s digitization efforts, but the reality is that many processes are still done manually and with paper. When will we see critical change in digitizing trade finance?

Via Contour

Advancements in technology, from legal entity identifiers (LEI) to digital trade finance platforms, have contributed to an acceleration in the trade finance industry’s digitization efforts. The pandemic and subsequent lockdowns were a big push factor for many to jump on the digital bandwagon, but the reality is that many trade finance processes are still done manually and with paper.

When will we see critical change in digitizing trade finance? We define that moment as when all participants – banks and their clients, are part of a wider digital network.

“I think it is in this decade – five to seven years is reasonable,” commented Tod Burwell, President & CEO of BAFT (Bankers Association for Finance and Trade), in a recent Contour podcast.

Burwell noted that governments are starting to drive the push towards digitalization through incentives and penalties. He cited deep tier supply chain financing as an example of when policymakers can spur action and activity.

“The more we start to see real examples of success as a function of digitizing, the more it will increase the rate at which we see other organizations adopting it,” he said.

Driving Change in Standards and Interoperability

In June 2022, BAFT, which is the leading international transaction banking association, released a whitepaper “Digitizing Trade Finance: Now and the Future”. The report highlighted the inefficiencies of the global trade system, where roughly 30% of time is spent on processing documents. As a result, $150 billion is estimated to be lost annually to the manual activities of trade finance operations.

The whitepaper concluded that the two major obstacles standing in the way of more digital adoption are interoperability and standards or legal frameworks.

“Those are the two huge pieces that we’re trying to solve for as an industry,” said Burwell.

There are steps made in the right direction to drive change in these areas. Burwell gave the example of the Model Law on Electronic Transferable Records (MLETR), proposed by the United Nations Commission on International Trade Law (UNCITRAL) which has been adopted in seven to eight countries.

“There has been a huge push to try to drive change in the legal framework, in order to allow for data and digital documents to be legally acceptable and legally binding in the context of digital trade,” he added.

BAFT is helping its members, which include banks, technology companies and advisory firms, navigate the obstacles and opportunities that trade digitization presents. It created the Distributed Ledger Payment Commitment (DLPC) as a useful standard to address issues on interoperability. On the broader scale, Burwell added that this is where the ICC Digital Standards Initiative (DSI) comes in.

Solving for Interoperability Through Partnerships

Digital trade finance solutions like Contour are addressing the issue of interoperability by forging partnerships and integrating with other solutions providers.

“We work with bank bank-office systems that manage trade and risk, and we bring our transaction data into those systems,” said Carl Wegner, CEO of Contour.

The fintech’s recent tie-up with Finastra, a bank solutions provider, demonstrates interoperability at its best, as it integrates both solutions – removing friction and simplifying the process for bank operators and their clients.

“The banks’ staff do not need to log in to Contour and can manage their digital Letter of Credit workflows as part of their normal transaction process,” he described.

With the collective power of organizations trying to work towards digitalization, Burwell believes the industry will get there sooner than he personally thinks it would.

Sustaining the Future of Digital Trade

Contour has led the way for more efficient, streamlined and paperless trade finance. It is a platform that creates opportunities for everyone in the trade ecosystem.

This is where sustainability and digital trade solutions intersect. At its core, digitalization and sustainability are the two topics that BAFT is engaged in with their members and what Burwell consistently hears is “achieving sustainability is not possible without digitalisation”.

While Burwell observes that the primary purpose of an organization’s investment in technology is to improve efficiencies or reduce fraud, he fully believes that “sustainability is another fundamental reason why organizations are making that investment in technology”.

However, ESG priorities should not just focus on the environment but also about society and governance. Small and medium-sized enterprises (SMEs) are a big part of the “S” in ESG and a big part of closing the trade finance gap is ensuring that all technological solutions are within the reach of everyone.

“Often, the smaller banks, regional banks and emerging markets banks are best placed to serve that SME population, but they’re not the early adopters of this technology,” Burwell noted. “I think we’re in a place right now where we’re trying to meet those two.”

Wegner emphasized the need to have an SME model to allow them to participate as well.

“Everyone wins when you have more data to exchange and follow,” said Wegner.

The future of trade digitization is now, but this has to happen in a way that is inclusive. SMEs play a big role in many economies, especially in the emerging world. The World Bank estimates that they represent about 90% of businesses and more than 50% of employment worldwide. Improving SMEs’ access to finance is what will make a difference in narrowing the trade finance gap.

To listen to the full podcast featuring Tod Burwell, click the link here.

A Message from the Chair – February 2022

Dear fellow Transaction Bankers,

It’s now 2022 and we are still in the midst of the pandemic – still dialing in for virtual meetings and events, talking about digitalization, ESG, and digital currencies.

However, what we did not realize is that the topics and trends are so deep-rooted and continuously evolving that we as Transaction Bankers have progressed alongside them too. For a long time, bankers have been dubbed as slow, too much in our comfort zone, and set in our ways. Well, all that has changed, and it is about time it did.

Embracing the Learning Curve

The pandemic placed new demands on our industry and drove banks to look at how we conduct business differently. We acknowledged supply chain disruptions, their impact on global trade, and navigated accordingly. We collaborated with fintechs on different products and technology offerings where we developed a steep learning curve along the way. We moved towards streamlining and standardizing ESG frameworks and practices. We embraced the digital currency trend and found ways to be among the key players in the space. We are now looking at the metaverse and exploring how we can play a role as Transaction Bankers in an inescapable virtual reality. We started thinking of different ways to enhance our customer journey. Yes, we jumped on the bandwagon of virtual, moved further online, and embraced fintechs, faster payments, and digital currencies.

Without realizing the extent of the transformational process, we have all been through as bankers, I believe we have emerged as resilient, forward-thinking, and dare I say, innovative.

Welcome New Members

That said, we welcome our new members with whom we look forward to sharing our above journey at BAFT:

So, here’s to a new, collaborative and inventive world of transaction banking!

 

Yours Truly,

Maram Al-Jazireh
Senior Vice President & Global Head of Financial Institutions, Arab Bank
Chair, BAFT

A Message from the Chair – November 2021

Hi All and Marhaba from Amman, Jordan!

As you may all know, I took over as the Chair of BAFT in May 2021 and promised Mark Garfield (Past Chair & Member of the BAFT Board of Directors) that I would continue his “Letter from the Chair” initiative, except the frequency will be quarterly as opposed to monthly. So here it goes.

The Silver Lining

If there is any silver lining that I can mention while living through this pandemic, I would say it was the close ties that were forged during our virtual calls and meetings. Seeing kitchen closets in the background, pictures of loved ones on a mantelpiece, a colorful vase in the distance, or even a glimpse of a tidy bed gave a strange feeling of familiarity, relatability, and a sense of comradery that for a change, we are all going through the same thing together.

Now that the tides are shifting, vaccines are being administered (not fast enough, but at least they are being rolled out), and the wheels of the world are slowly turning and trying to return to a sense of normalcy; we realized more than ever that we are all in this together on several fronts and more so than we initially thought.

Staying Connected

So what is this togetherness all about? It is quite straightforward. It is about recovering our mental health. It is about maintaining our ties with one another so in the case we cannot travel, we can stay connected virtually. It is about dwelling over the future of correspondent banking in an ever-changing environment with new entrants and customers who want services instantly and effectively. It is about achieving a quality of life in our businesses by ensuring that the Environment is taken care of, the Social wellbeing of our communities are safeguarded, and that Governance is entrenched in all aspects of what we do. In other words, it is about Sustainability.

This is what we are committed to achieving as BAFT Members and as transaction bankers. We will continue to reach out to all of you through our webinars, virtual forums, regional councils and committees, in-person conferences, and you may see us play a trivia game or two to lighten up the not-so-light mood that looms over us every now and then.

Our Focus

Our focus includes ESG, continued collaboration with stakeholders and enablers, the BAFT Future Leaders Program, transaction banking trends in faster payments, the digitization of trade finance, supply chain disruptions, the LIBOR cessation, CBDCs and digital assets, all while delivering thought leadership, advocacy, education and sense of community to our members. This is what the core of transaction banking asks of us.

Welcome New Members

As Chair, I look forward to being a part of all those efforts alongside each and every one of our members. Speaking of members, my “Letter from the Chair” is not complete without welcoming the following members to the BAFT family:

 

On that positive note, I hope to see you all during the upcoming BAFT CONNECT networking sessions on November 17, 2021. Otherwise, I look forward to reconnecting next quarter.

 

Warmest Wishes,

Maram Al-Jazireh
Senior Vice President & Global Head of Financial Institutions, Arab Bank
Chair, BAFT

A Message from the Outgoing Chair

On June 3 BAFT’s Outgoing Board Chair, Mark Garfield, published his last monthly communication to the wider BAFT membership.

During BAFT’s 2021 Virtual Global Annual Meeting next week, we will celebrate the association’s 100th anniversary. I imagine the first meeting in 1921 was not global; just a few men in a small conference room in Cleveland, Ohio smoking cigarettes and discussing foreign trade. Next week’s meeting will have 1,500+ attendees representing financial partners from around the world in a virtual event discussing topics such as artificial intelligence, open banking, and digitization. Yet, many of the conversations between us are likely the same: how to integrate globally to support the worldwide flow of goods and services, and how to recover following a global pandemic.

My maternal grandmother was a young adult in 1918, and she recorded her memories of the challenges, deaths, and scarcities during the Spanish Flu. She wrote, “It was a very sad and dark time. It was hard to be cheerful. I hope and pray it never comes again.” I’ve reflected on my grandma Verna’s experience many times this past year. What is different? What is similar? It’s interesting to reflect that the first BAFT meeting also came on the heels of a global pandemic. This time, though, we are fortunate to have modern technology that allows us to stay connected, share best practices, and collaborate to solve problems. Over the past 100 years, our industry’s support of the global supply chain has grown more important and sophisticated, and I expect another 100 years of progress.

It has been an honor to serve as the Chair of BAFT for the past two years. I’ve enjoyed working with the BAFT staff, its Board of DirectorsRegional Councils, planning and product committees, and individual members. I’ve observed the tremendous effort made to transform BAFT into a virtual global association and expand its reach and role, and I am pleased that our four regional councils of North America, Europe, MENA, and Asia became five with the addition of the African Council.

As Chair, I represented Zions Bancorporation, a regional U.S. bank headquartered in the Rocky Mountains. Our new Chair, Maram Al-Jazireh, represents Arab Bank, headquartered in Amman Jordan, which is the first time the Chair has been held outside Europe or North America. It’s exciting and gratifying that BAFT truly has become a global organization.

My grandmother survived the Spanish Flu, and I knew her only as cheerful. She made it through those difficult days and would frequently marvel at all the many innovations that were developed after 1918. I look forward to a future of innovation, collaboration, connection, and friendship with you all. 

Cheers!

Mark Garfield
Outgoing BAFT Chair
Head of Global Financial Institutions
Zions Bancorporation

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A Message from the Chair – April 2021

On April 27 BAFT’s Board Chair, Mark Garfield, published his monthly communication to the wider BAFT membership.

The recent grounding of a large container vessel in the Suez Canal was a sharp reminder of how disrupted trade upends our way of life. Container vessels moving through the Suez represent 13% of global maritime trade. At one point, over 360 vessels waited in line to pass through the canal. The grounded ship itself carried 20,000 containers. That’s a lot of stuck stuff!

Years ago, I visited the Panama Canal. Like the Suez Canal, its passageway transports a significant percentage of global trade. The original architect of the Panama Canal, Ferdinand De Lesseps, had also led the creation of the Suez Canal. He attempted to build the Panama Canal in the same design as the Suez Canal, as a sea-level canal. The attempt to excavate the massive amount of material and additional challenges from malaria and yellow fever ultimately resulted in the project’s failure. A new and different design was required: a canal with locks.

What I learned this past year from BAFT conferences, workshops, and webinars, is that many past practices are changing quickly and new and distinct ideas are the solutions for the future. We, as the practitioners of trade finance, need to offer our expertise as we advance and advocate for change.

The blockage of the Suez Canal also was a lesson on the collective efforts of engineers, sailors, and officials collaborating with skill and specialized equipment in working to solve the crisis. This effort was coupled with a moment of good fortune. A supermoon, a full moon that passes nearest the earth, allowed the tide to increase 19 inches above the level from when the vessel was grounded. That phenomenon, in combination with tug boats and dredging up to 60 feet, freed the ship.

I have had the very good fortune to work with skilled colleagues throughout the world that keep trade flowing. It gives me a sense of purpose and gratitude that in a small way I may have helped in the delivery of needed goods globally.

May good fortune be with you always!

Mark Garfield
BAFT Chair
Head of Global Financial Institutions
Zions Bancorporation