2018 Trade Finance Highlights

For trade and receivables related financings, 2018 was a year of volatility and unexpected developments. From the explosion of digitalisation to sweeping regulatory changes and the growth of non-bank finance in the mid-cap space, 2018 was eventful. We take a look at top trade trends of 2018.

2018 marked a year of mergers, acquisitions and growth. We saw the IPO of alternative financier Funding Circle which, within 3 months of floatation, made the FTSE 250. Smaller mergers and acquisitions include:

• January 2018 – Investec acquires Amicus – £20m loan book

• January 2018 – Enra Group acquires Vantage Finance – undisclosed sum

• September 2018 – Klarna, a payments giant turned fintech bank, acquires Close Brothers Retail Finance (CBRF) – £66m loan book

• November 2018 – Cabot Square Capital takes a majority stake in MSP Capital – £150m loan book

LARGE NON-BANK PLAYERS PROVIDE TRADE SOLUTIONS

On the topic of commercial finance providers, 2018 also saw larger brands dipping their toes in the water to help service financing for mid-caps and SMEs. Most notably, we saw Maersk, IBM, GSBN and Accenture forming consortiums and even jumping on the bandwagon to offer trade finance to their clients. Large brands are now starting to leverage their customer base to maximise and diversify revenue streams.

In developing markets across Latin America and Africa, we’ve seen growth in trade volumes. More non-bank

funders and fintech platforms have risen, actively seeking to bridge the $1.5 USD trillion gap. The origination platform model, which has become popular in other areas of commercial debt and finance, has helped distribute trade risk amongst different liquidity providers. The opportunities in self liquidating, high yield debt are likely to continue to draw in additional funds and fintechs.

DIGITALISATION OF TRADE

At the start of 2018, we spoke about the cautious optimism in the industry for blockchain and distributed ledger technology (DLT) to facilitate trade. 12 months on, and looking back, we have certainly seen advances in both fintech and DLT, so we’ll address both.

The investment into trade finance fintech continued in 2018. One notable highlight in this space was SWIFT’s new gpi initiative, according to Andre Casterman, CMO at INTIX and Chair of the ITFA Fintech Committee. There was a clear move away from traditional messaging platforms such as SWIFT, ABEX or FTP, on the payments and treasury side, towards real-time data feeds. The SWIFT Global Payments Initiative (gpi) was launched in 2018 with 120 banks across 200 countries to facilitate track and trace functionality across cross-border transactions. As a result, SWIFT gpi now collects real-time payment data and provides a cloud-based end-to-end customer friendly view of payment information.