Transaction Banking

BAFT Applauds New York for Modernizing Trade Laws 

WASHINGTON, D.C. (December 10, 2025) – New York enacted major legislation to support and increase the digitalization of trade finance. BAFT (Bankers Association for Finance and Trade), the leading global industry association for international transaction banking, applauds Governor Kathy Hochul for signing, Sen. Brad Hoylman-Sigal, and NY Assemblyman Alex Bores for their efforts to bring legal clarity and recognition for digital trade payment instruments. 
 
“New York Law governs a significant volume of international commerce, so this was particularly important for the United States to maintain its leading role in international trade. This update will provide interoperability with the global community that have already adopted or are currently considering similar legislation,” said President and CEO Tod Burwell, BAFT. 
 
A large obstacle to trade digitalization is the lack of recognition for electronic trade documents under various legal frameworks. Much of the trade finance process is to this day physical paper dependent. The law allows for interoperability between New York and is compatible with electronic records contemplated by UNCITRAL’s Model Law of Electronic Transferable Records (MLETR), which is the basis for many legal frameworks around the world. Thirty-three states in the United States have adopted similar legislation. 
 
With New York being one of the leading and most influential states for commercial transactions in the world, the passage of this legislation marks a significant advance in digitalizing the trade finance process. 
 
BAFT will continue its efforts to bring all 50 states to adopt similar legislation as well as continuing its efforts globally to bring acceptance of digital trade finance documents. A link to the bill can be viewed here. 

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About BAFT
BAFT is the leading global industry association for international transaction banking. Bringing together financial institutions, service providers, and the regulatory community, BAFT provides thought leadership, advocacy, education, and a platform for collaboration to promote sound financial practices that foster innovation, efficiency, and commercial growth. The association engages in a broad range of issues affecting transaction banking, including trade finance, payments, and compliance, helping members navigate a rapidly evolving global landscape. For more information about BAFT, visit baft.org, or follow BAFT on X (Formally Twitter), LinkedIn, and YouTube.

Podcast | The G20 Roadmap and the Future of Cross Border Payments

To explore how far the industry has come since the G20 Roadmap for Cross Border Payments was endorsed in 2020, and how much more remains to be done, Trade Treasury Payments (TTP) spoke with Deepa Sinha, Senior Vice President for Payments and Financial Crimes at BAFT, and Shriyanka Hore, Global Head of Industry Engagement at Swift.

Via Trade Treasury Payments by Deepa Sinha

Amid four packed days at Sibos 2025 in Frankfurt, experts from across the transaction banking space came together to discuss (among many other topics from a long agenda) how to make cross-border payments better. Today, trillions of dollars move across borders each day and global commerce has become more digital than ever, which means that implementation is becoming a central priority.

In the final hours of the conference, Trade Treasury Payments (TTP) made time to sit down with Deepa Sinha, Senior Vice President for Payments and Financial Crimes at BAFT, and Shriyanka Hore, Global Head of Industry Engagement at Swift, to discuss how far the industry has come and how far it still has to go.

The G20 roadmap for cross-border payments, endorsed in 2020, set a collective goal of making international payments faster, cheaper, more transparent, and more accessible by 2027. Even in 2025, fragmented regulations and differing market practices mean that a cross-border payment can look very different depending on where it starts and ends.

Read the article and listen to the full episode here.

Banking in an uncertain world: How geopolitics and technology are rewiring transactional finance

Via Trade Finance Global by Doga Usanmaz

  • Geopolitical tensions and shifting trade corridors are requiring banks to adapt to political risks and regional economic changes.
  • Europe’s focus on financial sovereignty is driving strategic investment into sectors like energy and defense.
  • Regarding digitalisation, challenges remain in balancing technological innovation with social impacts, particularly in developing regions

Rerouted trade corridors, regional fragmentation, a currency arms race… these are no longer distant possibilities. They are active geopolitical and macroeconomic forces, reshaping transactional banking. 

At this year’s BAFT Global Council’s Forum in Frankfurt, Germany, a panel of senior leaders from prominent global and regional banks explored how shifting political tensions and economic dynamics are creating deep uncertainty for the industry, and how banks are adapting their strategies, infrastructure, and client relations in response.

The panel, moderated by Nick Smit, head of financial institutions at ING Bank and chair of BAFT’s board, found that transactional banks are being rewired to confront political risk, digitisation, and technological disruption. The panel provided a region-by-region exploration of the subject, and some interesting parallels came up.

Read the full article here.

10 lessons banks have learned from the ISO 20022 migration

Via Trade Treasury Payments by Deepesh Patel

The shift to ISO 20022 marks one of the most significant changes in global financial infrastructure in decades. ISO 20022 is a universal messaging standard that uses structured, machine-readable XML data to describe financial transactions. It replaces SWIFT’s legacy MT (Message Type) format, which has been in use for more than 40 years and relies on unstructured text fields with limited capacity for automation and analytics.

SWIFT introduced ISO 20022 for cross-border payments and reporting (CBPR+) on 20 March 2023, launching a three-year coexistence period in which both MT and ISO 20022 (MX) messages could be exchanged. This period ends on 22 November 2025, when SWIFT will retire MT messages in Categories 1, 2, and 9 in bank-to-bank communication. After that date, all cross-border payments, bank-to-bank transfers, and cash-management messages must be sent and received in ISO 20022 format.

These categories include common flows such as MT103 (customer credit transfer) and MT202 (bank transfer), which are being replaced by pacs.008 and pacs.009, as well as MT940 statements, now superseded by camt.053.

For banks, corporates, and treasurers, the migration enables richer, more consistent data for reconciliation, sanctions screening, and analytics. For the wider trade, treasury, and payments (TTP) ecosystem, ISO 20022 creates opportunities to enhance supply-chain visibility, improve straight-through processing, and align cross-border and domestic systems under a single standard.

BAFT’s ISO 20022 Migration Lessons Learned paper, drawing on insights from leading global banks, outlines key takeaways from this transformation. The following ten lessons summarise what has worked, where challenges remain, and how institutions can prepare for the final phase.

Read full article here.

PODCAST | Tariffs, inside and out

To explain the impact tariffs have on global trade and the strain they cause on banks, Trade Finance Global (TFG) spoke with Craig Weeks, Senior Vice President of BAFT.

Via Trade Finance Global by Craig Weeks

Since US President Donald Trump came to office in January 2025, not a day goes by without some mention of ‘tariffs’ in the news. International markets have reacted to landmark shifts initiated by US President Donald Trump’s new tariff policies. Tariffs have evolved from a more specialised economic tool to one gaining political and ideological ramifications, generating renewed and expanded interest in them.

At the 51st Annual International Trade and Forfaiting Association’s (ITFA) Conference in Singapore, Mahika Ravi Shankar, Deputy Editor at Trade Finance Global (TFG), sat down with Craig Weeks, Senior Vice President for Trade at BAFT (Bankers Association for Finance and Trade), to discuss the impact of tariffs from a banking and trade finance perspective. 

What are tariffs?

Tariffs have historically had two essential uses: raising revenue for the government or protecting domestic industries by making foreign goods more expensive. Tariffs can be imposed on imports or exports. 

There are three main types of tariffs: 

  • Ad Valorem tariffs are added as a fixed percentage of the total value of the imported product. 
  • Specific tariffs are a fixed monetary charge added to each unit, such as a kilogram, a ton, or a pair, which operates regardless of the total value of the product. 
  • The last type, compound tariffs, is a hybrid of the two. 

Tariffs differ in aim and impact from other trade barriers such as quotas and sanctions.

Quotas are a tool to cap foreign competition by limiting “the quantity of a product that can be imported or exported during a certain period, ” Craig Weeks explained. Restricting the total number of goods from one or several countries drives up the cost of that import, making domestic products more attractive. 

Quotas serve an economic purpose for governments. By comparison, sanctions, another form of trade barriers, are often used as political and ideological tools.

“Sanctions are broader restrictions and sometimes total bans on trade with a specific country, company, or individual”, explained Weeks. “People use sanctions to pressure governments to punish bad behaviour or to restrict access.”

Breaking down the differences, Weeks said: “Tariffs impact the cost, quotas restrict the quantity, and sanctions restrict who.”

Impact on trade finance and financial institutions 

This year, financial institutions involved in trade finance have been heavily impacted by US tariff developments in several ways. 

Firstly, tariffs on key inputs increase invoice values, necessitating increased working capital and larger credit value facilities, including credit lines, letters of credit, and pre-export or import loans. This increases “the overall value of supply chain finance programmes”, explained Weeks.

Secondly, tariffs cause increased credit risk, a side effect of larger sources of credit requirement, and borrowers either try to absorb tariffs, or if unable to, pass them on, reducing the banks’ margins. Some contracts now also include a Material Adverse Changes (MAC) clause, allowing a party to exit or renegotiate an agreement if a significant adverse event increases volatility. 

Thirdly, compliance risks have increased due to “the need to interpret the intent of trans-shipment and alternate supplies, which raises the risks of misdeclarations and misunderstood rules of origin”, explained Weeks. 

Fourthly, increased operations risk due to heightened documentation checking and compliance requirements and unclear mitigating protocols. “This is new territory for a lot of banks”, said Weeks, which can increase operations risk as banks are “feeling their way”.

And fifth, insurance premiums have increased, which hikes up the overall cost of business. 

Impact on SMEs

Tariffs have exacerbated the trade finance gap, particularly for small and medium-sized enterprises (SMEs) in emerging economies. Increased working capital demands, to fund the same-sized shipments, are more challenging to finance for less capitalised, smaller banks that cannot proportionally expand credit facilities. 

“It becomes a vicious cycle”, Weeks said, as “increased uncertainty about supply chains (causes) banks respond with stricter credit terms, higher collateral requirements, shorter tenors, and tighter covenants.”

“This negatively impacts SMEs disproportionately as they are the least able to pass along the tariff impact onto their client”, he added.

In the US, big box stores have been more able to absorb the impacts of tariffs than smaller suppliers, forcing smaller companies out of business, who had no choice but to pass on increases to clients.

US tariffs have already significantly impacted SMEs globally. For instance, by the end of March this year, following the announcement of President Trump’s tariffs, two South Korean automotive suppliers had declared bankruptcy despite reporting high turnovers. Notably, both filed for bankruptcy before Trump’s 25% tariffs were due to take effect on 2 April.

South Korea’s example opens a broader issue of the impact of the anticipation of tariffs. On 8 August, the US and China announced that they had agreed to a 90-day extension on their tariff break, the third similar extension this year. However, despite the delayed and postponed impact of many of Donald Trump’s tariffs, financial institutions acted to prepare and reacted to uncertainties.

“They’ll front-load inventory purchases or shipments, getting it now before the tariff takes effect, making advanced payments, reducing tenors, accelerating discounting”, said Weeks. Front-loading refers to bulk ordering before tariffs take place, before prices increase.

Tariffs have also caused a transition away from letters of credit (LCs), which have grown increasingly expensive under the added complexities caused by Trump’s tariffs, towards other forms such as documentary collections or open accounts, both of which now have broadly lower associated costs.

Perhaps the most aggressive form of tariff anticipation responses has been proactive derisking, which Weeks explained involves “moving your suppliers to other countries or changing your customer base from one country to another to get out from under this uncertainty”.

Trade wars and retaliatory tariffs

One of the most significant problems caused by Donald Trump’s tariffs is increased market uncertainty. Buyers and sellers are left unclear on what to buy, what to sell, how much to buy, how much to sell, and when to buy. 

The uncertainty in the market reduces global market efficiency, complicating the decision-making matrix behind transactions. Commenting on the additional risks that trade wars can pose, Weeks said: “Trade wars inject cost, uncertainty, and compliance complexity into supply chains. The risks and effects cascade exponentially onto SMEs.”

Tariffs: What’s next?

This year has seen a political demonstration of new and old economic alignments between nations. China, in particular, has taken centre stage, positioning itself as the source of global financial stability in the face of US uncertainty. China signed several huge deals this week, indicating an economic alignment and desire to reduce uncertainties. 

On Friday, Pakistan signed a £6.29 billion new investment agreement with China and unveiled the next phase of the China-Pakistan Economic Corridor. Russia and Beijing agreed to build the Power of Siberia 2, a natural gas pipeline between the two countries, bringing 50 billion cubic metres of gas to China every year, doubling the 38 billion cubic metres capacity of the current Power of Siberia pipeline.

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Weeks explained that tariffs have caused “countries to completely rethink their strategic alignment when it comes to who their economic friends are”. He added that a side effect of uncertainty is that companies and countries had stopped dealing in terms of strategy “for the next year”, but now were broadly discussing “tactics for dealing with the next two weeks”.

But they are something we have to start getting used to. Governments are growing increasingly accustomed to the revenue tariffs generated, meaning we will unlikely see a sharp decline in tariff rates soon.

“​​Tariffs go up by the elevator and they come down by the stairs very, very slowly”, summarised Weeks.

5 Takeaways from the BAFT Global Annual Meeting 2025: The tug-of-war Between Localisation and Collaboration

Via Trade Finance Global by Glee Baniago

Navigating the trade finance landscape, with constant dodgeballs in the form of geopolitical tensions, regulatory requirements, and threatening technology, requires considerable agility. But this year’s BAFT Global Annual Meeting, in Washington, DC, revealed the considerable opportunity in times of turbulence.

These takeaways are drawn from the following sessions: 

  • ‘Beyond Buzzwords: Supporting a Fair and Inclusive Workplace’, featuring Shannon Manders, Editorial Director, GTR (moderator); Leigh Amaro, Head of North America, Swift; Priya Raghavan, Managing Director and Head, US & Canada Financial Institutions, BBVA; James Rausch, Managing Director, Head, Global Transaction Banking, Royal Bank of Canada; and Nick Smit, Head, Financial Institutions Americas, ING
  • ‘AI: Leading the Way in the Future of Finance’, featuring Manuela Veloso, Head of AI Research, JPMorgan; and Mike Katergaris, Head of North America Financial Institution Sales, JPMorgan
  • ‘Meaningful Collaboration for Enhancing the Client Experience in Supply Chain Finance (SCF)’, featuring Wouter Hazenberg, Managing Director – Head of VCF Supplier Finance North America, Rabobank; and Flav Pop, Director, Financial Partnerships, PrimeRevenue

1. Banks and fintechs are choosing collaboration over competition

The traditional rivalry between established banks and fintech disruptors is giving way to partnerships which leverage each other’s strengths; banks can typically provide deep client relationships and multi-currency funding capabilities, whilst fintechs handle complex supplier onboarding and electronic time drafts.

This shift reflects mounting client expectations for real-time analytics, automated payment execution, and comprehensive supply chain visibility, a demand so large it is impossible to solve alone. The approach is proving commercially successful: joint responses to client RFIs are becoming commonplace, with customers explicitly requesting collaborative solutions that neither party could deliver independently.

2. Geopolitical tensions are accelerating supply chain localisation

Samarium is a rare-earth metal used in military-grade magnets, and its supply is entirely controlled by China. This should serve as an emblem of the wider inefficiencies in the geopolitical ecosystem, where skyrocketing tariffs (from the US and in response) are forcing companies to rethink global dependencies.

The rhetoric around this is largely politicised. Returning to Samarium, the magnets which it produces are critical components in missiles, smart bombs, and fighter jets, making it clear that whoever controls such resources has a large stake in military capabilities and strategy. 

But rethinking has created new opportunities for trade finance providers. The renewable energy sector and the data centre supply chain particularly illustrate this shift. The rapid expansion of the data centre sector has led to streamlined procurement and modular construction, but has also exposed an over-reliance on a small pool of suppliers, contractors, and standardised components. As such, massive data centre projects exceeding two gigawatts require localised supply chains to ensure resilience. Tesla’s ‘Gigafactory Nevada’ battery facilities and in-house lithium refining operations represent the future that many corporates are moving towards.

3. Gender diversity in trade finance remains stubbornly poor despite business benefits

In GTR’s first comprehensive gender diversity survey, 47% of respondents reported women hold just 0-5% of C-suite positions in trade finance organisations; 45% of employees don’t know whether their organisation has gender pay parity policies, suggesting fundamental communication failures around diversity initiatives.

There’s a business case for inclusion which extends beyond the ethical one. McKinsey data shows that companies prioritising diversity achieve a 39% greater likelihood of outperforming peers on profitability. Yet the sector appears to have embraced technological partnerships more readily than workplace inclusion. As the industry transforms through artificial intelligence (AI) and embedded finance, diverse perspectives will become increasingly valuable.

4. Human-AI collaboration is essential, but scale demands AI-to-AI verification

The integration of AI across trade finance operations is moving beyond experimental phases into practical applications. Fintech providers are leading this adoption, using AI to optimise supplier onboarding programmes and enhance real-time analytics capabilities that clients increasingly demand.

Deep-tier supplier finance – extending credit down the supply chain to suppliers’ suppliers – exemplifies AI’s potential impact. While still in its infancy, this approach can unlock significant value by financing entities that might otherwise pay 6-7% interest rates. As AI capabilities mature and processes become increasingly automated, industry leaders predict this will enable financing of entire value chains more efficiently, making supply networks more resilient while reducing overall borrowing costs.

While banks have traditionally focused on data analysis and pattern recognition, AI agents can understand policies, execute rules, and take actions based on business knowledge, and could present a space to watch in the future. This could render the ‘human in the loop’ approach redundant when dealing with systems that can process hundreds of sources: ‘AI checking AI’ could be implemented, with humans performing random spot checks to build trust over time. 

This approach mirrors how we learned to trust GPS navigation systems like Waze. Banks need to develop systematic verification processes where different AI models cross-reference results, and humans validate randomly selected outputs to maintain quality control while leveraging AI’s scale advantages.

Whether agentic AI or otherwise, the competitive consequences of avoiding AI adoption could be fatal, all the while maintaining data security and regulatory compliance.

5. Accounting transparency requirements are unexpectedly boosting market adoption

The introduction of IFRS and FASB disclosure requirements for supplier finance programmes initially sparked industry concern about potential market contraction. Rating agencies like S&P began scrutinising programmes more closely, with blanket rules such as treating anything over 90 days as debt regardless of industry context.

However, the opposite effect has materialised. Increased transparency has actually attracted new corporates to consider supplier finance: the global supply chain finance market is projected to grow at a compound annual growth rate of 8.8% from 2022 (the year the new standards took effect) to 2031.

While some programmes with excessive payment terms or disproportionate balance sheet dependency have scaled back, the clearer regulatory framework has provided confidence for new entrants. Industry participants now argue for more nuanced rating agency approaches that consider sector-specific norms, recognising that 30-day terms suit perishable goods like dairy, whilst 360-day terms may be appropriate for capital equipment like wind turbines.