Trade Finance Companies are using New-Age Technologies to bring Disruption

Pushkar Mukewar, <br> Co-founder and Co-CEO, <br> Drip CapitalAdopting new-age technologies and developments is crucial for the growth and success of economies. The digital-first ecosystem that developed countries are now having to opt for is outlining a framework very different from any other business environment of the past.

As high-growth nations like India embrace technology to structure their buying and selling behavior, a great number of past processes are being transitioned and modernized into the new “digital age”. Trade finance companies are at the forefront of this transition. Gone are the days when traditional institutions were the only means to raise finance for domestic and/or international business transactions. Technology-driven finance providers NBFCs or otherwise -- are increasingly stepping up to offer alternative solutions to businesses in need. Not only does this help local businesses tap into international markets it also holds the promise of Indian companies developing and adapting best technology practices worldwide and even getting ahead of their global peers.

With technology have come a plethora of options for various functions and business segments, from tech-enabled payment avenues and financing options to new-age risk mitigation methods and provisions for information. The introduction of virtual assistants to automate client servicing is also being experimented with and could be yet another key development in the future of sustainable trade finance companies.

The digitization of trade processes is enabling a massive flow of goods worldwide as global trade is exploding. Advanced analytics is ensuring better decision-making and emboldening trading partners. From enhancing supply chain efficiency to improving transparency and enhancing trust, new-age technology adoption is improving the financial health of world trade. Let’s take a look at some of the key ‘movers and shakers’ of this new age of fintech:

Paperless Trading
Trade finance companies are increasingly helping traders opt for paperless means for invoice factoring, raising credit, and receivables factoring. An all-electronic process ensures minimum leakage, reduces processing time (a huge benefit in the modern-day rapid trade environment), and helps financers reach out to customers across geographical and sectoral boundaries.

The new crop of trade finance companies is driving a transformational change from hard
paper invoicing to more transparent e-receipts that exporters can now furnish to financiers and use to ensure payments from importers. These companies’ automated risk assessment models allow easy access to finance and eliminate the hassle of paperwork and bureaucracy while creating a seamless borrowing experience for their clients.

Trade finance companies are increasingly building native capabilities with propriety technology and algorithms that enable them to transact digitally. The import or export of products is rapidly moving to a paperless format internationally it’s logical that financing for the same follows the same path to transparency. This, in turn, encourages trade partners to interact with global stakeholders and expand their reach. The end goal, of course, is seamless international trade, conducted via a fully-digitized supply chain framework, and trade finance firms have a huge role to play in this.

Companies are also offering online sign-ups to check eligibility and get a quote. If eligible, no physical signature is needed; an e-signature suffices, and the trader can get money in their account within as little as 72 hours. Additionally, all the tracking of invoices and payments can be done online with full transparency, unlike old obtuse paper-based methods.

Ledger Technology (Blockchain)
Blockchain is one of the most widely discussed new technologies being touted as a potential game-changer by trade finance companies. Blockchain can help traders track orders, find the right trade partners and avoid mistakes such as payment repeats or miscalculations. A trade transaction processed on a blockchain-enabled platform, by virtue of the technology, is inherently transparent, trackable and unique.

Ease-of-use and cost-saving powered by the efficiency of blockchain technology trump over the archaic methods of trade that often posed a threat to any increase in opportunities. The creation of a digital identity for goods in transactions, such as labeling goods for supply chain transparency and traceability, is a huge benefit of blockchain inclusion in trade, that cannot be overstated.

Artificial Intelligence
Mitigating money-laundering and other risks is essential for an effective trade cycle. The use of artificial intelligence ensures just that. Traders’ concerns on the privacy of shared data as well as payments are being taken care of by advanced AI tools. A great amount of developmental work worldwide is ensuring new techniques are constantly being developed and deployed.

A progressive change in bills estimates and predicting a trading firm’s working requirements via AI will change the way trade takes place worldwide. AI can also offer valuable insights into an exporter/importer’s business behavior, helping other stakeholders like financial institutions make more informed decisions without relying on traditional instruments like bank statements. This, in turn, opens up new avenues and methods for offering financing, especially to SMEs.

Data has the ability to help institutions predict what traders should export, how to improve ways to raise working credit, how financers can securely provide financing to serious stakeholders, how to smoothen the supply chain cycle, and ensure accurate and assured payment cycles and discounting methods. Data and technology truly are the revolution that the trading world has been waiting for.

With experimentation and change the order of the day, the adoption of new and evolving technologies on an ongoing basis will be crucial for conferring tactical competitive advantages to businesses seeking to serve the trade ecosystem. These are early days for trade financing, especially in India. A large tech-driven opportunity awaits, and firms must explore it at the earliest.