The Rise of Collaboration in a Divided World

FEATUREDARTICLES:

TheevolutionofSupplyChainFinance:Frombankstodistribution

5commonmythsaboutcarbonaccounting:Isitreallyworthit?

HowMRPAsarepavingthewayforcollaborationinTradeFinance

ISSUE18

RYANHOLLAR-GREGORY ManagingDirectorandHead ofDistribution,SupplyChain Finance MUFG

FreepikCompanyS.L. Canva ADDRESS 201HaverstockHill SecondFloor London NW34QG

TELEPHONE +44(0)2071181027

©TradeFinanceTalksisownedandproducedbyTFGPublishingLtd(t/aTradeFinanceGlobal) Copyright©2022 AllRights Reserved.Nopartofthispublicationmaybereproducedinwhole orpartwithoutpermissionfromthepublisher Theviewsexpressed inTradeFinanceTalksarethoseoftherespectivecontributorsand arenotnecessarilysharedbyTradeFinanceGlobal

AlthoughTradeFinanceTalkshasmadeeveryefforttoensure theaccuracyofthispublication,neitheritnoranycontributorcan acceptanylegalresponsibilitywhatsoeverfortheconsequences thatmayarisefromanyopinionsoradvicegiven Thispublication isnotasubstituteforanyprofessionaladvice

ANDREWROBERTS HeadofEMEA RightShip

SARAHMURROW CEO AllianzTradeUK&Ireland

CONTENTS

Fragmented,butnotbroken:Theinternationaltradeworldin2023

TheevolutionofSupplyChainFinance:Frombankstodistribution

Istradeandreceivablesfinancethenewhomeforprivatecredit?

Decodingcross-borderpayments:Frominitiationtosettlement

5commonmythsaboutcarbonaccounting:Isitreallyworthit?

HowcansuretycarriersalignwithESG?

Fromstarboardsurprisestoportsideperils:Inherentrisksintheshippingindustry

HowMRPAsarepavingthewayforcollaborationinTradeFinance

Rethinkingcorrespondentbanking:Therealimplicationsofde-risking

Thetimeisnowtounlockthefutureofcross-borderpayments

ThegamechangerinOpenBanking:B2Bintegration

Levelingupexporters:HowtheExport-ImportBankoftheUnitedStatessupports Americancompaniesandtheiroverseascustomers

Internationalexpansion:Leveragingtradecreditinsuranceinapost-Brexit, post-pandemicworld

ADBReport:Tradefinancegapgrowsto$25t,andsustainabilityremainsakeystrategy

Bridgingthetradefinancegap:Absa'sdigitaljourneyinAfrica

Q&A:Visa'sVeronicaFernandezonmovingfromtraditionaltoseamless consumerexperienceswithembeddedfinance

Interoperability:thewayforwardtodevelopdigitaltrade!

Future-proofingtradefinance:ThedigitaltransformationjourneywithClearEye

Navigatingthefutureofdigitalpayments:Efficiency,security,andcompliance

Industrycollaborationisacatalystfortrulydigitaltrade

Thefutureofdigitaltradefinance:Anin-depthQ&AwithSurecomp

1 FOREWORD

1.1

Fragmented,butnot broken:Theinternational tradeworldin2023

Theneedforcollectiveactionhasneverbeen morecritical,andwhySibosrepresentssuchan importantchancefortheindustrytocome togethertosharelessons,ideas,andsolutions.

Theinternationaltradeworld isinherentlyspreadapart Thereare7continents,and 195countries,with360million squarekilometres(139million squaremiles)ofoceanand38 timezonesspanningtheglobe.

Withallofthebarriersthatexist, theindustrysimplycannot physicallycometogethervery often Butonceayear,Sibos allowsustodoexactlythat

Thisyear,theconferenceis embracingthisveryidea.We arecollectivelytacklingthe themeof“Collaborativefinance inafragmentedworld”,andit isatimelythemeaswell Theworldisstillpiecingitself togetherfollowingtheCOVID-19

disruptions,acollective breakdownintheglobalsupply chain,geopoliticalturmoil inalmosteverycornerofthe world,andthestartofaviolent warinUkraine.

TheAsianDevelopmentBank releasedareportshowingthat thetradefinancegaphas increasedfrom$17trillionto $25trillion Despitethebest effortsbytheindustry,thegap continuestowiden,withno clearplanforhowtoreverse thetrend.

2024mightbringaseismic shifttotheglobalsystemas well Upwardsof31countries arehavingpresidential,prime minister,orchancellorelections

DEEPESHPATEL EditorialDirector TradeFinanceGlobal(TFG)

BRIANCANUP AssistantEditor TradeFinanceGlobal(TFG)

inthenextyear,upto31ifyou counttheUK’selectionin January2025

That’swhytheneedfor collectiveactionhasnever beenmorecritical,andwhy Sibosrepresentssuchan importantchanceforthe industrytocometogetherto sharelessons,ideas,and solutions

Eventhoughtheworldseems togodownmultipledivergent paths,therealityisn’tasbleak asitmayseem.Theindustryis increasinglycomingtogetherto findnewsolutionstonew problems

Astraditionallenderspullback inthefaceofrisinginterest ratesandeconomic uncertainty,alternativesources offundingareemerging,and supplychainfinancehas movedbeyondtheconfinesof traditionalbankingmodels

Cross-borderpayments,atopic thatwillundoubtedlygarner attentionatSibos,havealso undergoneaseismicshift The complexitiesthatonce hinderedbusinessesare graduallybeingreplacedby streamlined,transparent

systems.Thistransformation isatestamenttotheindustry's collaborativeeffortstodecode andsimplifytheintricaciesof globalpayments

Theurgencyofclimatechange isatopicthatnoonecan ignore.Butthisurgencyhas sparkedcollectiveactionwithin thetradefinanceindustry,from expandingcarbonaccounting toaligningsuretywithESG efforts

Climatechangeisn’ttheonly aspectofESGthatisbringing peopletogether TFG hostedan“LGTBQ+inTrade, Treasury&Payments”tobring upasubjectthatisignoredfar tooofteninourindustry.People intheLGBTQ+community, specificallyininternational trade,areforcedfartoooften tohidewhotheyare,forfearof losingtheirjobs Butthispanel broughttogethersomeofthe leadingfiguresinTTP,offering insightsandpersonalstories thatwecanalllearnfrom.

Andfinally,theelephantinthe roomhasbeenandwillbefor theforeseeablefuture,the emergingdigitalfrontier Itis thedrivingforcebehindmany oftheinternationaltrade

developmentsin2023andwill bethemaintopicofdiscussion atSibos2023

Thetransitiontodigital platformsisacollectivejourney, requiringconcertedeffortsfrom allstakeholderstobridgegaps inconsumerexperiences, interoperability,andsecurity

Andthistransformationhas started TheUKrecentlypassed oneofthemostimpactful piecesoflegislationinrecent memoryforinternationaltrade. On20September,theElectronic TradeDocumentsActwill becomelaw,creatingaclear pathwayforindustry-wide digitaltransformation

Asyoudelveintothisedition, consideritacalltoaction a precursortothecollaborative dialoguesthatwilltakecentre stageatSibos2023 The challengeswefaceare monumental,buttheyare notinsurmountable.

Asalways,TFGwouldliketo thankallofoursponsors andindustrypartnersfortheir thoughtleadershipand collaborationinputting togetherthecontentthat drivesthismagazine.

2.1

heevolutionofSupply ChainFinance: rombankstodistribution

epopularityofSCFprogrammesamong vestorsstartedtoriseintandemwithglobal interestrates,drivenbythefactthattheseare short-term,uncommitted,self-liquidating assetsthatallowaninvestortoridetherisein rates.

Overthepastseveralmonths, corporateshaveincreasingly beenaskingfordetailsona bank’sdistributioncapabilities whendecidingwhichfinancial firmtoworkwith.

Althoughreceivablesand payablesfinancingprovidesan alternativesourceofliquidityto companieswhileallowingthem toimprovetheircashflow metrics,sometimesthese programscanvarygreatlyin size–anywherefrom$10million to$10billion

Whentheprogrammes becomethatlargeandno singlebankhasthecreditlines tosupportthem,distribution becomesavaluabletool.

Distributionprovidesseveral benefitsforparticipatingbanks andcorporations Distributionof supplychainfinance(SCF)and workingcapitalassetsallows onebanktoleadaprogram andworkwithotherbanksas participatinglendersinthe program

Additionally,distribution allowsbankstoleadalarge programmethatmayexceed availablelimits,collectfees fromdistribution,andenhance returnsonaprogramme.

Forthecorporates,thebenefits includehavingonepoint-ofcontactbanktointeractwithon theprogrammeregarding documentationorquestions, usingdistributiontoshare walletsharewiththeirbank group,andhavingtheability toremoveoraddbanksasthe programmesizechanges

EvolutionoftheSCF

investorbase

Whendistributionstrategies firstappearedintheearly 2000s,theinvestorbasewas onlybanks.Overtime,asset managers,hedgefunds, insurancecompanies,and othernon-bankentitiesstarted tolookatthesupplychainas anassetclassandinvestin theseprogrammes

RYANHOLLAR-GREGORY

ManagingDirectorandHead ofDistribution,SupplyChain Finance MUFG

Currently,themarkethas bifurcatedintothebankand non-bankmarketsegments withminimaloverlap.Typically, banksaremoreinterestedin investmentgradecorporates, andthenon-bankshavebeen moreinterestedinthehigher yieldingnon-investmentgrade options.

Inthelastthreetofiveyears, morenon-bankshaveentered SCFandtheworkingcapital market

Theseassetmanagersand hedgefundstypicallysource theirdealsfromfinancial technology(fintech)firms, banks,ordirectlyfrom lower-ratedcorporates

Historicallytheoperational intensityassociatedwith purchasingandmanaginga largenumberofinvoiceskept non-banksoutofthemarket, butfintechshavestartedto providetechnologythatallows non-bankstoeffectively monitorandmanagealarge numberofinvoices

Whythesuddeninterest insupplychainfinance?

ThepopularityofSCF programmesamonginvestors startedtoriseintandemwith globalinterestrates,drivenby thefactthattheseareshortterm,uncommitted,selfliquidatingassetsthatallowan investortoridetheriseinrates

Tenyearsago,therewere almostnonon-bankinvestors interestedinSCF.Today,some ofthelargestassetmanagers, insurancecompanies,and hedgefundshavefunds dedicatedtoSCFandworking capitalassets Inadditionto theaforementionedbenefits,

ThefutureofSCF distribution

theriseoftechnologyto accommodateoperational needs,andthehistoricallylow defaultrateswithinSCFhave contributedtotheassetclass’s popularity.Asthemarket becomesmoretransparent, standardised,andeasierto access,weexpecttheinvestor basetogrowalongwith increasedadoptionbya diversegroupofcorporations. Weseeseveralfactorsthat willimpactthefutureofthe SCFmarket.

TheFinancialAccounting StandardsBoard's(FASB)new supplierfinanceregulationswill requirethatcompanies discloseiftheyhaveaSCF programmeinplace.

Theeffectofthisincreased transparencyisstilltobe determined,however,more corporationsmayimplement SCFprogrammesbecausethey willnowhavevisibilityintotheir competitorsthathavealready implementedthem.

Secondly,banksthatsell asignificantamountofSCF areusingsimilarparticipation agreementsanddistribution processes.Thiswillmakeit easierforinvestorstosignup andbuyfromseveraldifferent banks

Lastly,moreinnovative legalstructures–suchas IrrevocablePayment Undertaking(IPU)andDrafts (i.e.BillsofExchange)–are makingiteasierandmore efficienttooriginateSCF programsinvarious jurisdictions

Acatalystforgrowthforthe distributionandorigination ofSCFwillbemore standardisationand transparency

Banksthathaveexperienced anddedicateddistribution teamswillbeabletocapitalise onthegrowthofthemarket andbeinapositiontoinfluence thedevelopmentoftheinvestor market

ManagingDirector,GlobalHead ofTrade&ReceivablesFinance TradeFinanceGlobal(TFG)

Istradeandreceivables financethenewhomefor privatecredit?

AsTFGcontinuestoevolve,wearecommitted tobridgingthegapbetweendemandand capitalrequirements,therebyintroducingmore effectiveandtransparentfinancingsolutions

Thefinanciallandscapehas undergoneaseismicshiftin recentyears.Fromzeroor negativeinterestratestothe COVID-19pandemicand geopoliticaltensions,theworld hasseenitall Amidstthis backdrop,theroleofprivate credithasevolvedsignificantly.

Thequestionnowis,hastrade andreceivablesfinance becomethenewhomefor privatecredit?

returns,astraditionaldeposits wereofferingzerooreven negativeinterestrates

Fastforwardtotoday,and thescenariohaschanged dramatically.Theinfluxof cheapcapitalfromzeroboundratesandpandemicerastimulusledtoalooser investmentstandard Theindustryknewthiswould notlast,andrecentmarket trendshaveshownthisera hasended.

Twoyearsago,treasurers andfinancialdirectorswere scramblingtofindinvestment avenuesthatcouldyield

Risinginflation,stemmingfrom thequantitativeeasingpolicies andsupplychainproblemshas ledmanycentralbanksto increaseinterestrates

MARKABRAMS

Theshiftinglandscape

TheUSFederalReservehasset ratesata22-yearhigh,at5.255.5%,andtheBankofEngland hassettheratesat5.25%,with expectationsofanotherhalfpointriseinthefuture In August,TheCentralBankofthe RepublicofTürkiyeincreased ratesto25%.

Allofthesefactorshaveled toareasonableconcernthat theglobaleconomieswillsee varyinglevelsofdeclineinthe nextfewyears

Inotherwords,thisisnota regionalshift,itisamajorshift intheglobalmarket.Andthis hasledtoamorecautioned, reasonedapproachto investments

Peoplearenowlookingfor sensible,low-riskavenues toparktheircapital.

Inthisevolvinglandscape, privatecredithasemerged asaviableoption Itinvolves fundingrealassetsinaworld wheretheyarenotlisted, offeringauniqueproposition forinvestors.

AtTradeFinanceGlobal(TFG), wehaveobservedagrowing interestfrominstitutional capital,particularlyintradeand receivablesfinance

Tradeandreceivables finance:Alow-risk alternative

Tradeandreceivablesfinance linesaretypicallylow-risk, self-liquidatingfacilities.They involvefinancingthesupply chain,buyingatonepriceand sellingatahigherone,typically withinashortdurationof90to 180days.

Weareincreasinglystartingto seeaninterestintradefinance asanassetclass,andthis makessensegiventhe directionofthemarket Inour view,thisismainlybecause pricingtracksunderlyingrates (whicharerising),alongwith thepositivemargincomponent; representinganattractiveasset vs USTreasuries,asan example

Tradefinanceasanassetclass ishighlyscalableandoffers

strongreturns Itisnotlinkedto certainmarketfluctuationsbut istiedtoreal,livetrades.

Thishasledtoincreased interestfrommid-market banksandinstitutional investorslookingtodiversify theirportfolios.

GovernmentsandExport CreditAgencies(ECAs)are alsoencouraginginvestments intradefinancetostimulate economicactivity Thishasled tonewplayersenteringthe market,whoareattractedby thenewstructuresof guaranteesthatarepresenting themselves.

Butitisn’tasblackandwhiteas simplyinvestingintrade finance

Tradefinanceinvolvesahigher levelofcomplexitydueto variousfactorslikedifferent jurisdictions,sectors,andmore nichetopics,likeissuesof perishability However,itoffers aleveloftransparencythatis oftenmissinginotherasset classes.Understandingthe

specificitiesofthetrade,and demandsofborrowersare crucialfordetermininghow theyintendtoutilisethecapital, andwherecapitalisbeing deployed

TFG'sevolvingrole: IntroducingTFG DistributionFinance

Historically,TFGhasbeenthe largesttradeandreceivables originator,connectinglenders withbuyers,usingourdeep industryknowledge.

However,thegrowingdemand forcapitalinthetradeand receivablesfinancingspace hasledustoevolveourrole Wesawagapinthemarket andrealisedthatitneededa new,innovativesolution.

EnterTFGDistributionFinance.

Thisnewprojectwillhelpbuild assetbooksforexistingand newfunders Thisallowsusto matchthespecific requirementsofborrowerswith therightkindofcapital,thereby creatingawin-winsituationfor allpartiesinvolved

Thoughmanypeopleare startingtoacknowledgethe potentialofinvestingcapital intotradefinance,itcanbe adifficulttaskwithouta dedicatedteam.TFG

Distributionistheemerging solutiontothisproblem

UsingTFGDistributionFinance, largelenderscanputtheir capitaltousewithouttheneed tocreateadedicatedteamof tradefinanceexperts.Lenders willseepositivereturns,and SMEscanaccessnewcapital

Capitalrequirements: Bridgingthegap

Oneofthebiggestchallenges inthetradefinancemarketis themismatchbetweenwhat capitalexistsandcurrent demand

TFGDistributionFinance aimstobridgethisgapby understandingthegranular requirementsofbothborrowers andlenders.Thisisessentialfor scalingtradeandreceivables financeandbringingnew liquidityintothemarket

Theeconomicuncertainties ofrecentyearshaveledto arenewedfocusonsensible, low-riskinvestments.

Tradeandreceivablesfinance offersapromisingavenuefor privatecredit,providing scalability,diversification, andalow-riskprofile.AsTFG continuestoevolve,weare committedtobridgingthegap betweendemandandcapital requirements,thereby introducingmoreeffectiveand transparentfinancingsolutions

Inaworldwhereeconomic stabilityisfarfromguaranteed, tradeandreceivablesfinance offersanewandpromising avenueforprivatecredit It's notjustaboutfinancinggoods flowingacrossborders;it's aboutcreatingamorestable andtransparentfinancial ecosystemforallstakeholders involved.

2.3

Decodingcross-border payments:Frominitiation tosettlement

Internationalwiresareasecureandrelatively simplewaytosendlarge-valuetransactions internationally,asSWIFTdoesnotlimitthe paymentamount.However,wirestaketimeto clearandsettle,andtherearefeesinvolved.

Anybusinessparticipating ininternationalcommerce normallyneedstomake paymentsinforeigncurrencies tosuppliers/sellersoverseasfor goodsand/orservicessourced fromothercountries.

Telecommunications)playsin facilitatingsuchtransactions

HeadquarteredinBelgium, SWIFTisaglobalmemberownedcooperativeofc.11,000 financialinstitutionsspanning over200countriesand territories,andistheworld’s leadingproviderofsecure financialmessagingservices

Internationalwire transfers

Therearemanydifferent methodsofsendingmoney globally Transferringmoney electronicallyisbyfarthe dominantmethod,although somepaper-basedcashways topaystillexist(e.g.cheque, bankdraft,moneyorder). Aninternationalwiretransfer (hereinafter,“international wire”)isacross-border serviceofferedbybanksfor transferringfundsoveran electronicnetworkfromabank accountinonecountryto anotherbankaccountina differentcountry

Internationalwiresare practicallysynonymouswith SWIFTtransfersduetothe pivotalroletheSWIFTnetwork (SocietyforWorldwide InterbankFinancial

Internationalwiresusingthe SWIFTnetworkarethemost commonmethodworldwideto transferfundsfromonebank orfinancialinstitution(FI)to another

Thereisacommon misunderstandingabout whatSWIFTdoes.Itisneither aclearingnorasettlement network.SWIFTisafinancial messagingsystemwhichsends globalpaymentordersinitiated byfinancialinstitutionstobe processedbyaclearingor settlementsystem.

Sendinganinternationalwire involvestwodifferentprocesses –clearingandsettlement

STANCOLE Advisor UNITEGlobalAS

Clearing

Internationalwiresareinitiated inonecountryandsettlein another Whenabank’s personalorbusinesscustomer initiatesaninternationalwire–viaonlinebanking,anapp,by phoneorin-personata branch–theyneedtoprovide informationaboutthepayment destinationandrecipientbased onSWIFTmessagingstandards, ie acommonlanguagefor paymentdataacrosstheglobe

Thesender’sbankensures sufficientfundsareavailablein thesender’saccounttocover thepaymentandapplicable fees,debitsthecorresponding amountfromthataccountand initiatesthefundstransfer bymessagingapayment instruction/ordertothe recipient’sbankviathe SWIFTnetwork.

Clearingcoversthetransfer andconfirmationofpayment informationbetweenthe sendingandreceivingbanks.

Whenthereceivingbank receivestheSWIFTmessage withalltherequired information,itdepositsthe paymentamountintothe recipient’saccountusingits reservefunds.Atthispoint,the paymenthasbeencleared,and theclearingphaseis completed

Nophysicalmoneyis transferredbetweenthetwo bankswhenconductingan internationalwire.Onlythe paymentinformationincluded intheSWIFTmessageis passedbetweenthebanks

Settlementisthefinalstep inmakingapaymentand involvescollectingthefundsfor thepaymentorderprocessed duringtheclearingphase.

Bankscanbegintheexchange offundstosettleapayment rightafterclearinghastaken place(fundsdepositedinthe recipient’saccount)orlater. Oncethesettlementhas occurred,thepaymentis complete.

Paymentscanbesettledeither onanetorgrossbasis

Settlement:Netvsgross Netsettlement:

Whenbanksaggregate transactions(debitsand credits)throughoutthedayand settleinbulk,bysending afinalsettlementwireatthe endoftheday.

Whenindividualpaymentsare processedandsettledinstantly basedonindividualtransaction datareceivedinreal-time

Unlikeclearing,onlya settlementnetworkcan facilitatesettlement.The clearingsystemthathas handledatransaction,eg CHIPS,willsendthepayment informationtoasettlement networktosettleit,eg Fedwire Interbanksettlementsystems arerunbycentralbanks.If bothtransactingbankshave asettlementaccountwiththe centralbankinthecountry,the centralbankdirectlydebitsthe sendingbank’saccountand creditsthereceivingbank’s account(bothincentralbank money).

Oncethefundshavebeen transferredtothereceiving bank’saccount,thesettlement phasehasbeenexecutedand theinternationalwire completed.

Akeydifferenceisthatclearing determinesthecommitment ofthefundsandsettlement ishowbanksdothefunds reconciliationwitheachother.

Settlementinvolvesthe exchangingoffundsbetween thesendingandreceiving banks,whileclearingnormally endswithoutmovementof fundsbetweenthebanks.

Timingisanotherdifference.

Theclearingprocesstakes placefast,andistypically finishedwithinminutes,

whereasthetimingof settlementismoreflexible, asthepaymentrecipientcan alreadyaccessthefundsin theiraccountbytheendofthe clearingphase

Otherconsiderations

Internationalwiresareasecure andrelativelysimplewayto sendlarge-valuetransactions internationally,asSWIFTdoes notlimitthepaymentamount However,wirestaketimeto clearandsettle,andthereare feesinvolved.

Shouldthebankofthesender notprovidethecurrencyfor payment,orifitlacksadirect

accountconnectionwiththe recipient'sbank,theuseof intermediarybanksin correspondentbankingwill benecessary

Thislengthensthepayment chainandaddstimeandcost. AninternationalSWIFTwirecan touch2to5banksonrouteto therecipient,andmaytakeup to5businessdaystoclearand settleforlow-volumepayments inexoticcurrenciesinvolving additionalintermediariesalong theway.

Internationalwirescanbe expensive Sendingbanks typicallychargeaflatservice feeforissuingwires,usually$10

to$50pertransaction.

Whenintermediarybanksare involved,eachcanalsolifttheir ownfees,unknowntothe senderinadvance

Moreover,therecipient’sbank maydeductafeeforreceiving theincomingtransfer(“benededuct”),usuallybetween$10 and$20butashighas$40in somemarkets Highercost makesinternationalwires suitablemostlyforlargervalue cross-bordertransfersbut uneconomicalforlowervalue, masspayments.

Nowadays,thereare alternativestointernational SWIFTtransfersforsending commercialpayments cross-border

New,innovativefinancial marketinfrastructures(FMI) areemergingthatreimagine thebusinessofmovingvalue acrossborders,whichcan enablelow-costreal-time paymentswithinstant settlementonaglobalscale

5commonmythsabout carbonaccounting:Isit reallyworthit?

Totweakanoldproverb,thebesttimetostart measuringemissionswas20yearsago.The secondbesttimeisnow,asregulationtightens andmoreopportunitiesintradefinanceand productdifferentiationemerge.

Whileagrowingportionof theindustrystartstoseizethe opportunitiesofmeasuring andmanagingemissions, manycommoditytradersstill hesitate Whyundertakethe complexprocessofcarbon accounting,ifit’shard,ifit’s notalegalrequirement,and ifitonlydrawsattentiontotheir high-carbonproductsrather thantheircompetitors?

Therearefivecommonreasons forwhysomeperceivecarbon accountingasnotworththe effort.

Butifweaddressthemone byone,itbecomesclearthat carbonaccountingiscrucial forfuture-proofingsupply chainsandunlockingrewards fromcustomersandbanks Moreover,today’stechnology canmakethecomplexparts ofmeasuringemissions surprisinglyeasy

Myth1: There’snomandate, solet’sjustwait

“Wedon’thavetoreport emissions,solet’snotwaste timeormoneymeasuring them Untilregulatorsand legislatorsforceuswith incentivesorpenalties, carbonaccountingisabad

ADAMHEARNE

CEO

CarbonChain

investment”Thereality: Carbonregulationisalready hereandspreading. Companiesinanumberof jurisdictionsare(orwillsoon be)legallyrequiredtoreport theiremissions,including Canada,Chile,NewZealand, Japan,theUK,Australia,US, Singapore,China,Franceand Switzerland.

Ontopofthat,thenewEU CorporateSustainability ReportingDirective(CSRD)is settoquadruplethenumber ofcompaniessubjectto mandatorycarbondisclosure.

Some60%oftheworld’s emissionscomefromglobal tradesupplychains So, commoditytraderswhohaven’t yetfelttheshocksofcarbon pricingandreportingruleswill soonbeunabletoescape them.

Shipsarenowsubjectto InternationalMaritime

Organizationcarbonreporting andratingrules,whilethe upcomingEUCarbonBorder AdjustmentMechanismwill forceimporterstoreportand payapriceonhigh-polluting imports Bidenrecently announcedthattheUSwill requireallmajorFederal supplierstodisclose greenhousegas(GHG) emissionsandsetsciencebasedtargets.

Therewillbewinnersand losers Companiesthatgettheir houseinordernowcanensure properandsmoothcompliance whennewregulationshit. Carbonaccountingnotonly enablestraderstomeasurethe impactofcarbonpricing schemes,butcanhelplower costs,byidentifyingand modellinghowtoreducepriced emissions.

Thetimetostartisnow.Over halfoftheworld’scompanies bymarketcaparealready

gettingaheadandvoluntarily measuringandreportingtheir emissionsthroughCDP.

Myth2:Toolongto complete;toohardto getright

“Carbondataisinshortsupply. Sometimes,wecan’teventrace alloursuppliersandproduct origins We’veheardthere’s hugeroomforerrorwhen followingaverage-based methods,sowhat’sthepoint?”

Thereality:Carbonaccounting isindeedachallengefor unpreparedbusinesses, especiallyforcalculating supplychainorScope3 emissions,whicharethemost significantsourceofatypical business’semissionsand carbonrisks sometimes asmuchas90%

Suppliersoftendon’tmeasure ordisclosetheircarbon information,andthescant informationreportedcanbe incomplete,unverifiedand hardtocompare.

However,businessesdon't needtolookfarfortheright tools Carbonaccountingcan becompletedaccuratelyand ontimeusingtheGHG Protocol'sgloballyaccepted methodsforvariouscarbon footprints,includingsupply chainemissionsestimation whenprimarydataismissing TheycanalsoutiliseCDP’s provenmechanismfor requestingsupplierdisclosure.

Manycommoditytraders andproducersareturning tospecialistsoftwareand machinelearningtofillassetlevelcarbondatagaps,allthe wayfromsourcetoshipment Forexample,thyssenkrupp MaterialsServicesEastern Europehasadoptedadigital carbontrackingsolutionto measureemissionsacross itsmetalssupplychainsand createstandardsforsupplier transparency

Theprocessofgetting carbonaccountingrightisan investment,butonetostart assoonaspossibleandto keepimproving.ThenewISSB SustainabilityDisclosure Standardsprovidecompanies withagraceperiodofoneyear tostartreportingtheirScope3 emissions,acknowledgingthat thesearethehardestto accountfor.

“Weneedtofocusonserving ourcustomers,generating valueforstakeholders,and accessingtradefinance,not onoptionaladd-ons Especially notinatimeofsupplychain disruption”

Thereality:Business expectationsarechanging. Moreandmorecustomersare requestingthecarbonintensity oftheirpurchases,andare findingwaystosourcelowercarbonproductsinorderto meettheirownnet-zerotargets andregulatoryrequirements.

81%offinancialinstitutions assesstheirportfolio’s exposuretoclimate-related risks,and77%arerequesting climate-relatedinformation

fromtheirclients.Buildingtrust inbusinesshasneverbeen moreimportant Itmeansbeing abletosharethecarbon footprintoftheproductsyou tradeandsourcinglowercarbonoptionstosupport customers’sustainabilitygoals, likeinthecaseofmetalstrader ConcordResourcesLimitedand leadingaluminiumrollingmill NicheFusinaRolledProducts (Fusina)

Whenitcomestotradefinance, buildingstrongpartnerships withbanksinvolvesresponding to,orpreempting,requestsfor carbonreporting Thiscan unlockimmediatebenefitslike interestratediscountsand sustainability-linkedloans (SLLs).

Forexample,SocieteGenerale hassignedmajordealswith twoleadingmetalscommodity merchants,topilotaccess toSLLstiedtoemissionsreductionKPIs

“Theprevailingstandards aren’tdecidedyet Wedon’t havetimetonavigatethe myriadofreportingstandards withalltheiracronyms.If they’renotuniform,thenwe’ll beduplicatingwork,and customerswon’tbeableto easilycompareourdata withcompetitors”

Thereality:Untilrecently,the existenceofmultiplecarbon reportingstandardsand frameworkshasbeenblamed forsomeindustryinertia

However,therehaslong beenonemaingo-toglobal standardforcarbonaccounting (theGHGProtocol)whichisthe keyreportingframeworks (TCFD,CDP,SASB,GRI)align with,evenifcompaniesvary inwhich

Myth3:Wefocuson stakeholders,not nice-to-haves

Myth4:There’sno singlestandard:it’san alphabetsoup!

frameworkstheyfollowand howcomprehensivelythey report.Therealityisthata futureupdatetoareporting standardisn’tgoingto materiallychangewhatis requiredwhenitcomesto reporting Allthedata collection,verification,baseline settingandtargetsettingwill allbeverysimilar,sodon’t usethatasanexcuse togetstarted.

Effortsnowtomoveearly willnotbeinvain

That’swhytherecent publicationoftheISSB standards,whichaimtounify allothers,isabigsteptowards aglobalbaselinefor sustainability-andclimaterelatedfinancialdisclosure

ourportfolioismetals anyway.”Thereality:Unless theyquantifytheirtrade emissionsfromendtoend, commoditytraders(andtheir financiers)don’ttrulyknow theirhigh-carbongoods Therecanbehugevariations inso-called‘high’carbon productemissions;atonneof aluminiumcanbebetween320tonnesofcarbondioxide equivalentpertonneof aluminiumincarbonintensity Oronecopperrefinerymight emitlessthananother,butit mightsourcefroma significantlymorecarbonintensivemine.

2026,andsharingyourproduct orcorporatecarbonfootprint, evenifitishigh,isbetterthan itbeingexposed.

Thecarbonfootprintingprocess allowstraderstofindwaysto loweremissionsandmanage theimpactsofcarbonpricing (forexamplebyscreening suppliersandratingassets againstindustrybenchmarks liketheIMOCarbonIntensity IndicatorandthePoseidon Principles)

It’salsothemostfundamental toolforavoidingthekindof greenwashingthat’scaused bymakinglow-carbonclaims withoutverifiabledata.

“Weknowoilcontributes moretoglobalwarmingthan aluminium,butwe’renot responsibleforwhat happensafterwesellit,orfor ourcustomers’choices Divingdeeperintotheexact emissionswilljustexposeusto reputationalrisk,andmostof

Sometradersfearthatopting forthemostrobust methodologyoutofthe recommendedoptionswillonly makeacompetitor’sproduct lookunfairlylower-carbonif thatcompetitortakesaweaker approach.

However,reputationalconcerns aboutcarbondisclosurepalein significancenexttothedanger offailingtoidentifycarbonrelatedrisksaheadoftime. Environmentalriskscouldcost supplychains$120billionby

Countingcarbonputs youincontrol

Totweakanoldproverb,the besttimetostartmeasuring emissionswas20yearsago Thesecondbesttimeisnow, asregulationtightensand moreopportunitiesintrade financeandproduct differentiationemerge. Today,toolsareavailablethat makeitpossibletoaccurately andpainlesslyaccountforand reporttradeemissions,while pinpointingcarbonrisks.

Putitthisway:forevery businessthatdelays,another competitorisreadytoseizethe emergingfinancialincentives andmeetcustomerdemand forlow-carbonproducts

Myth5:Wealreadyknow ourhigh-carbongoods

Howcansuretycarriers alignwithESG?

Suretycarriershaveauniqueopportunityto supportthegreentransition,growemerging industries,andpromotesustainablefinancing practices.However,challengesmustbe addressed.

Suretybondsplayavitalrole inmanagingrisksacrossmajor projectsbyprovidingfinancial guaranteesthatensure delivery,andmitigateagainst potentiallosses Astheworld acceleratesitsfocustoward sustainability,thesurety industrymustkeepupand makeapositivecontributionto financingamoresustainable andresilientworld.

Whilstthereisgrowing recognitionacrosstheindustry oftheneedforsustainable practices,formanysurety carriers,doingsoposes

challenges Theindustry's abilitytoadaptanddevelop suitablebondproductswill bepivotalinsupporting sustainablefinancing andachievingtheUN’s Environmental,Social,and Governance(ESG)goals

Carriersneedtogenuinely supportsustainableand emergingindustries,promote corporateinvestmentinnetzerodecarbonisation,and embedESGpracticestoensure thesuretybondindustry maintainsarelevantvalue propositionintothefuture.

GILLESGOAOC

SuretyBusinessManagerEMEA& APAC,SubjectMatterExpert

Tinubu

Toincreasetransparencyand boostenvironmentalandsocial responsibilityacrossthe financeindustry,theEuropean Union’sSustainableFinance DisclosureRegulation(SFDR) mandatesESGdisclosure obligationsforassetmanagers andotherfinancialmarket participants

AsofMarch2021,banks, insurers,investmentfirms,and otherfinancialinstitutionsmust reportsustainableinvestment practicesinastandardised formatsoinvestorscanmake informeddecisions NoncompliancewiththeSFDRcan haveadverseconsequences, suchasdisciplinaryactionfrom localfinancialauthorities,and negativesignallingtocurrent andprospectiveclientsand investors

Giventhatapproximately50% ofsuretybondsareforthe financingofmajorconstruction projectssuchasrail,road,and marineinfrastructure,thereis aclearneedfortheindustryto supportsustainable infrastructure.Theconstruction industryismovingtowardsnetzero,focusingonlow-carbon materials,circularbuilding methods,wastereduction,and regulatorycompliance Surety carriersmustadapttosupport thesechanges.

Adaptingandaligningsurety underwritingpracticeswill meanshiftingfocusfromthe traditionalassessmentof financialstatements,to assessingprojectsthrough aholisticlens,considering factorssuchasclimate resilience,andtheviabilityof innovativetechnologies.

sustainableandresilient projectsthatcanwithstand futureenvironmental challenges.

Somecarriersaresetting targetsforresponsible underwritingandinvestment, andhaveannouncedfuture planstophaseoutcoveragefor certainactivitiessuchasfossil fuelsprojects.

Balancing innovationrisks

Withsuretycarriersaimingfor zerolosses,theystillshow hesitationtowardsfinancing renewableprojectssuchas solarenergyorwindfarms

Theirreluctancetoissuebonds forprojectsinemerging industriesorthoseinvolving innovativetechnologiesstems fromthedifficultyinassessing theassociatedrisks.

Itismoreimportantthanever thatsuretycarriersintroduce productsthataretailoredto helptheirexistingclients pursuemoresustainable initiatives.

Forsometimenow,surety carriershaverecognised climatechangeasamajorrisk thatwillimpacttheir underwritingpractices.They increasinglyincorporateESG intoriskassessmentsand recognisethestrengthof

Contrastingly,inestablished sectorswheresuccessis proven,carrierscanconfidently calculatetheriskthrough historicaldataandexperience. Often,newerindustriesinvolve start-upsthatinvestin transformativetechnology,but lackatrackrecord Thiscauses carrierstohesitatetoissue bonds,makingitdifficultfor projectstogoaheadwithout exposuretorisk.

Withoutaccesstobonds,these innovatorsresorttousingtheir availablecapital,andtakeon largerrisks–inturn,limiting theirabilitytogrowandrealise thefullpotentialandimpactof theirinnovations.

Emergingindustriesalsocome withtheriskofdelays,which canbelengthy,resultingin contractorbankruptcies

OnesuchexampleistheEDF nuclearreactorinFlamanville innorth-westernFrance,which startedconstructionin2007 buthasyettobecompleted.

Theprojectwasexpectedto takefouryearsandcost€3 billion However,arangeof issueshavecauseddelays ofoveradecade,withEDF currentlyexpectingnuclearfuel loadingtobescheduledinearly 2024,withcostscontinuing tomount

Inamorepositivesign,some progressisoccurringas renewableenergybecomes moremainstreamandis increasinglybackedbylarger corporations Whilstthis encouragessuretycarriersto participate,progressisslower thanthepacerequiredtomeet transitiongoals.

Asinnovationextendsbeyond solarandwindfarmstonew industries,thecycleofriskand uncertaintywillalsocontinue togrow

Toaddressthis,suretycarriers mustadapttheirunderwriting approachtoincludeabetter understandingofthebusiness modelsandrisksassociated withemergingindustries

Onemajorchallengelies inestablishingacommon understandingacrossthe industryofsustainability.

Differentstakeholdershave varyingdefinitions,making itchallengingtoapply aconsistentapproach

Aggregatingvarioussources ofdataandimprovingaccess toinformationthrough digitisationformoreaccurate informationcangivecarriers theinformationtheyneedto assesssustainabilityandrisks moreaccurately

Collaboratingwithexternal experts,suchasengineersand industry-specificconsultants, canalsohelpassessviability.

Theemergenceofcarbon creditmarketshascreated opportunitiesforsurety companiestoissuebonds thatcovercarboncredits, supportingcompaniesintheir decarbonisationefforts.

Companiesarestrivingto meettheirnet-zerotargets, necessitatingthepurchaseof carboncredits.Weseethis incompaniessuchasTotal Energiesandotherpetroleum giantswhoarebuyingcarbon creditstodemonstratetheir commitmenttoreducing emissions

Issuingbondstocoverthese creditscouldensure accountabilityandprovidea securefinancialmechanismto supportdecarbonisation.Whilst suchbondsdonotyetexist, increasingdemandforcarbon creditscouldsecureanew marketforthesuretyindustry toplayacrucialrolein providingthenecessary financialguaranteestoensure marketintegrity.

Whilstsuretybondscan supportthegreentransition, carriersmustgobeyondsimply shiftingsupportfromcoalto renewableenergyprojects,and assesstheirownoperations Majorsuretyplayerslike Atradiusareproactively aligningwithESGprinciples.

Newcarbonmarkets

Theyareimplementingpolicies toachievenet-zerotargets, adoptingdigitalizationto reducepaperusage,and enhancingefficiency.

Bydigitalisingtheirinternal processes,suretybondcarriers cantransitiontoe-bonds, eliminatingtraditionalpaper bonds,whichstillaccountfor around95%ofbonds worldwide.

Theseeffortssignalthe industry’sgrowingcommitment tosustainabilityand demonstratethepotentialfor suretycarrierstoadaptand aligntheirpracticeswith sustainability.Notonlydoes digitalisationreflectamore sustainableapproach,butit comeswithorganisational

benefitssuchasspeed, efficiency,accuracy,and competitiveness.

Whilsttheenvironmental aspectofESGhasdrawn attention,acomprehensive approachthatincludessocial andgovernancefactorsisalso important.However,thesurety industryisnotcurrentlya frontrunnerinthisarea,and moreworkisneeded.

Encouragingemployee engagementcancontribute tothesocialgoalsofESG,and whilstmanycarriersengagein thesepractices,theycanalso considerhowtobettersupport thesocialaspectsofthe projectstheyunderwrite

Thiswouldgosomewayto addressinggrowingpressure fromemployeeswhowant toworkforcompaniesthat prioritiseallESGfactors,aswell asexternalpressuresfrom banks,clients,andstakeholders

Suretycanplayavitalrolein financingandsupportingnet zeroinseveralways,withthe futureofsuretyintertwinedwith sustainabilityprinciples

Carriershaveanopportunity tosupporttheirclients’ decarbonisationefforts,while alsoadaptingtheirown practicestoalignwith sustainabilitygoals By introducingnewbondproducts thatpromotedecarbonisation, andbyinvestinginemerging industries,suretycarriers cancontributetoamore sustainablefuture.

However,tofullyembrace sustainability,theymust overcomechallengesin assessingprojectrisks,change theirunderwritingperspectives, anddiversifydatasources.By doingso,thesuretyindustry canplayavitalrolein supportingthetransition

2.6

Fromstarboardsurprisesto portsideperils:Inherent risksintheshipping industry

Atamacrolevel,shippingisataninflection pointwherecircumstancesareelevatingthe potentialrisksfortraders.

90%ofworldtrade–frombulk rawcommoditiestobreakbulk andfinishedgoods–ismoved onapproximately60,000 tradingships,crewedbyabout 1.5millionseafarers.Tomost traders,thepotentialrisks associatedwithanyoneof thesevesselsisanunknown Howcanyouensurethatthe shipsyou’reevaluatingfor supplychainactivityareatan acceptablestandard?Howcan youmitigatethepotentialrisks associatedwithocean-bound vessels? Atamacrolevel,shippingis ataninflectionpointwhere circumstancesareelevating thepotentialrisksfortraders. Onesuchriskistheincreasing averageageoftheglobalfleet Thistrendisdrivenbyanumber offactors,includinghesitancy toordernewvesselswhile newtechnologiesarebeing developed.Additionally,an increaseinvesselvalueis associatedwithprolonged operationallifetimes

Volatilemarketconditions canalsoimpact

themaintenanceregimesof ships,reducingthequalityand reliabilityofassetsasvessels canbetradedharderinbullish marketsandmaintainedmore conservativelyinbearish markets.

Inadditiontothesefactors, COVID-19changedthereality ofshipping During2020and 2021,seafarerskeptglobal trademoving.Theywerenot, however,properlyrecognised askeyworkersand“nocrew change”clausescombined withlocalportandglobaltravel restrictionsrestrictedtheability torepatriatecrew

Thisresultedinmanyseafarers servingwellinexcessof12 monthsonboardvessels withoutrelief.Travelrestrictions duringthepandemicalso limitedtheabilityofshorestaff andthird-partyorganisations toundertakeroutine inspectionsofvessels.

Anumberofshipownersfound thecostofmaintainingtheir vesselswastoogreat,sothey optedtoabandonthemand theircrewswithoutanyfurther consideration

Overviewofrisksin shipping

Assuch,2022sawthe highestnumberofseafarer abandonmentcasesever recorded.

Theseissueshavebeenfurther compoundedbytheongoing Russia-Ukrainewar,andmany experiencedseafarersare leavingtheindustryasaresult. Thisincreasestheworkloadon remainingcrews,givingriseto agreaterriskofincidents,and threateningthecontinuityofthe industry

Thisisatatimewhenthe industryneedsaninfluxof talenttomeetindustry

demand,managerisksfrom newfuelsandtechnologies,and maintainpacewitharapidly changingworld.

Recenttrendsand inherentrisks

Thispictureofheightenedrisk isreflectedinthedatafrom incidentsandportstatecontrol deficienciesanddetentions whichshowanobservable increase

In2022,4,604incidentswere registeredbyRightShip,withdry bulkvessels,cargovessels,and chemicaltankershaving

thehighestincidentnumbers Incidentsoccurredonyoung andoldvessels,with46 incidentsinthepasttwoyears occurringonvesselsonlyoneyear-old Ofthese46,25%of theincidentswereRightShip CategoryB,thesecond-most severekindofincident (includesinjury,significant vesseldamage,severe structuraldamage,explosion, fire,flooding,etc)

Tragicallywithinthese4,604 incidents,193liveswerelost,113 crewmembersreported missing,and86seafarers sufferedseriousinjuries.

Impactofincidentson tradersandtrade:the microview

Timeisacriticalfactorfor mosttraders,whichmeans importantdecisionsonvessels canbemadewithverylimited informationathand

Shipscanoftenbechosen basedontheircompliance withminimumrequirements suchasbeingregistered underaflagstate,classified byaclassificationsociety, andadequatelyinsured

Someoperatorsmightalso prefernewerships.However,

thesecriteriaonlyprovidea verynarrowperspectiveof aship'sassociatedrisks

Poorqualitytonnage,poor operationalqualityanda historyofincidentscan generateabroadrangeof potentialrisksandimpactsfor traderswhichcanresultin significantconsequential damage.

Intheexamplebelow,wehave twovessels.Bothvesselsare ofasimilarage,andbothare flagged,classed,andinsured Yetthegapinquality betweenthetwovessels–andtherefore

thedifferenceinpotentialrisk–isvast

Therangeofconditionsand risksthatcanimpactavessel isbroad:fromsimplereduced maintenance,whichcanlimit theperformancecapabilityof vessels;tounplanned machinerybreakdownand stoppages,whichcancause significantsupplychain disruption;toevenmoreserious incidentssuchasgroundings, fires,explosions,andother significantevents,whichcan resultinseriousenvironmental impactor lossoflife

Theresultingpotentialimpacts onatraderrangefrom inconvenienttosevere:from delays,performanceclaims, andmisseddeadlines,to breachofcontractualsaleand purchaseprovisions,damage toorlossofcargo,lossof avessel,significantpecuniary costs,andreputationalimpact

ThereisalsoanadditionalESG dimensionthatcanimpacta trader’spotentialriskscenario, withGHGemissionsand

extensivesocialrisksinvolving seafarerscomingintoplay, whicharebecoming increasinglycommonwiththe introductionofnewsupply chainsocialduediligence legislation

Thefrequencyofthese incidentscansurprisethose notwell-versedinmaritimerisk: RightShipdatashowsthat 10.4%ofvesselsfacesome sortofdetentionatportsand terminals,wheretheaverage

durationofdetentionis5.4 days Thesedetentionscanbe theresultofhullandmachinery damage(whichaccountsfor nearly18%ofallincidents recordedbyRightShip)and disruptionoroperational incidentshavethepotentialto causesignificantimpactonthe broadersupplychain–aswe sawinanextremeexamplewith theEverGivenintheSuez Canal.

RightShip’svisionisazeroharmmaritimeindustry.Over 22years,wehavehelped charterersandtradersgain greaterassuranceofthe vesselsusedintheirsupply chainactivitiesthrough,inter alia,duediligenceprocesses thatgobeyondbasic compliancewithstatutoryand regulatoryrequirements.

TheRightShipVesselTrade Checkisadigitalsolutionused bytraders,tradefinance institutions,andinsurers,to gainaninstantevaluationof avesselagainstasuiteof customisableduediligence criteriathatexceedbasic statutoryandregulatory requirements

andincludesadditionalcriteria suchasevaluationofClass SurveyStatusreports,and incidentsreportsforsuitable preventativemeasuresforall recentincidentsorevents.

RightShip’sdatashowsthatthe detentionratiodropsto8.5%for vesselswhichhavebeenvetted byRightShip’sOperationsteam, againstthosewhichhavenot beenvetted(11.3%detention ratio)

Theduediligenceprocessalso evaluatespotentialESGrisks, includingenvironmentalrisks andtheextensivesocialrisks thatcanbepartofshipping (suchascrewwelfareand seafarerabandonment) Even asidefrommoralreasons,such riskscanimpacttraders becauseofahigherpotential forincidents,asindustrydata

showsastrongconnection betweencrewwelfareand incidentlikelihood.

Third-partyduediligence shouldbeconsideredan essentialpartofatrader’s process.Forourpart,asan ESG-focusseddigitalmaritime platform,RightShipprovides flexibleandcontinuoussupport fortradersbasedonqualitative data-driveninsights Understandingandreducing therisksassociatedwithvessels benefitsnotjustthetrader, butallinvolvedinthe transportationofoceanboundcargo.

throughvesseltrade checkandvetting

ManagingDirector,GlobalHead ofTrade&ReceivablesFinance TradeFinanceGlobal(TFG)

2.7

HowMRPAsarePavingthe WayforCollaborationin TradeFinance

ThestandardisationofMRPAsplaysanotable roleinreducingthetradefinancegapand promotinginclusionwithintheindustry.MRPAs provideastandardisedmethodoftransferring risk,makingiteasierforparticipantstoevaluate andjointransactions.

Thetradefinanceindustry offersadiverserangeof instruments,structures,and mechanisms,allaimed attransformingtrade opportunitiesintotangible realities Onesuchmechanism employedbyfinancial institutionsistheutilisation ofMasterRiskParticipation Agreements(MRPAs).

Theseagreementsenable activeriskparticipation, allowingfinancialinstitutions toeffectivelymanageand distributerisks,safeguarding theinterestsofallparties involvedwhilepromotinga resilientinternationaltrade ecosystem

MarkAbrams,Managing Director,GlobalHeadofTrade &ReceivablesFinanceatTrade FinanceGlobal,spokewith GeoffreyWynne,Partnerand headofSullivan'sTrade& ExportFinanceGroup,toexplore theevolution,significance,and futureprospectsofMRPAs

RiskParticipationAgreements (RPAs)areameansofsharing riskintradefinance transactions,whichoriginated primarilybetweenbanks These agreementsenablefinancial institutionstotransferaportion oftheirtransactionalriskto otherpartieswhilemaintaining

GEOFFWYNNE

MARKABRAMS

Partner Sullivan

acustomer-facingrole.As Wynneexplained,"Whenabank wantedtostayforwardfacing tothecustomerwhileit transferredpartoftheriskof thattransactiontoanother party,participation agreementswereagreat wayofdoingit."

Inaddition,Wynnehighlighted thetwomaintypesofrisk participation:fundedand unfunded

Infundedriskparticipation,he noted,"Fundedriskparticipation iswheretheselleroftheriskis fundedbytheparticipanton dayoneandthenpaysthe moneybackwhenit'spaid back"

Thistypeofparticipation ensuresthattheparticipantis directlyinvolvedinfinancing thetransactionfromthe beginning Ontheotherhand, unfundedriskparticipation coverstheriskwithout immediatefunding.The participantisobligatedtopay onlyintheeventofadefault,

earningareturnforassuming therisk.Thistypeof participationallowsforrisk transferwithouttheneedfor upfrontfunding

Furthermore,theneedfor standardisationinrisk participationagreements becameapparentwhen variousbanksindependently draftedtheirownsetof agreements Thelackof consistencycoupledwiththe complexnatureoftrade financepromptedagroupof bankstotakeactionand initiateastandardisation process

Thiscollaborativeeffortledto theintroductionofMRPAs, includingthewidelyrecognised BAFTMRPAs,in2008.The standardisationofMRPAshas establishedanindustry-wide frameworkforbanksandtheir counterpartiesintheglobal tradefinancemarket It simplifiedtradefinance transactions,streamlined negotiations,andenhanced transparency.

Thechallengesand considerationswhen engaginginMRPAs

recognisethestrengthof sustainableandresilient projectsthatcanwithstand futureenvironmental challenges

Somecarriersaresetting targetsforresponsible underwritingandinvestment, andhaveannouncedfuture planstophaseoutcoveragefor certainactivitiessuchasfossil fuelsprojects

DealingwithMRPAsinvolves navigatingchallengesand considerationsthatrequire strikingabalancebetweenthe interestsofboththesellerand participantwhileadheringto regulatoryandcompliance obligations

Wynneemphasisedthis balance,stating,"Wetriedto balancethepositionbetween theselleroftheparticipation andtheparticipant Theseller saystotheparticipant:here areallthedocuments,ifyou acceptmyoffer,thenyou're inthetransaction"

Evidently,companiesshould carefullyreviewtheprovided documentation,assesstheirrisk exposure,andalignthetermsof theMRPAwiththeirobjectives andriskappetite

Alongsidetheneedforbalance, regulatoryandcompliance considerationscomeintoplay. Thecoreobjectiveistoensure theeffectivetransferofrisk fromthesellertothe participant Wynnepointed out,"Fromaregulatoryand legalpointofview,theidea istomakesurethattherisk istransferredfromtheseller

totheparticipant"Sellersseek assurancethattheriskis successfullytransferred, whetherthroughsellingor funding,toremoveitfromtheir books.

Conversely,participantswant toascertaintheirrightstothe underlyingtransactionand understandtheirobligations, particularlyiftheyarefunded. ItisessentialtoaligntheMRPA withregulatoryrequirements, ensuringtransparency, accountability,andclear delineationofrightsand responsibilitiesforall involvedparties

Unlockingtradefinance opportunities:Theimpact ofMRPAsonthetrade financegapanddriving inclusion

ThestandardisationofMRPAs playsanotableroleinreducing thetradefinancegapand promotinginclusionwithin theindustry.MRPAsprovide astandardisedmethodof transferringrisk,makingit easierforparticipantsto evaluateandjointransactions AsWynnesaid,"You'vegota standardwayoftransferring risk Consequently,itmakeslife

aloteasier"TheuseofBAFTbasedMRPAsasanindustrystandardframeworkhas enhancedtransparencyand facilitatedmoreefficient participationintradefinance transactions,"Sincethe transactionwillbebasedon BAFT,theparticipantalready hasaprettygoodideaofhow it'sgoingtobecomeinvolved init,"Wynneadded.

Besidesfacilitatingrisktransfer, MRPAsopendoorsfornon-bank originatorsandinvestorsto enterthetradefinancemarket BysigninganMRPA,these entitiesgaindirectrights

andincreasedconfidencein theirparticipation

Wynneunderscoredthe simplicityofthisapproach, stating,"IfyousignthisMRPA, youaregettingdirectrights againstthepartypaying Itis thatsimple"

Theinclusionofguaranteesor creditinsurancefurther mitigatescreditrisksand reinforcesconfidenceamong non-bankoriginatorsand investors Moreover,MRPAs demonstrateversatilityin accommodatingdifferent marketparticipants While

originallydesignedasatwowaydocumentforsellersand participants,Wynneexplained thatthecurrentusageoften involvesone-wayagreements tailoredtospecificneeds

Henoted,"Alotoftheworkwe donowisoneway,whichis exactlyright."Thisadaptability allowsforvariationsin structuresandarrangements, offeringflexibilitytomeetthe diverserequirementsofmarket participants.

Lastly,theadoptionofMRPAs promotesaccessibilityfor smallerbuyersandsellers whohavehistoricallyfaced challengesinaccessingtrade financeinstruments AsWynne stated,"Ifyoureallywanttobe inthismarketplaceandare preparedtosignapromissory notethatsaysyouwillpayin90 days'time,whileyoucanget thefundingtothesellerinten days,there'sarbitrage,and there'sthemarketplace"

Throughstreamliningthe fundingprocessandexpediting accesstofunds,MRPAscreate athrivingmarketplacethat welcomesparticipantsofall sizes

ThefutureofMRPAs: Addressinginvestor needsandevolving dynamics

ThefutureofMRPAsinthe tradefinancelandscapeis propelledbythecommitment tomaintaintherelevanceand accessibilityofMRPAsforawide arrayofmarketparticipants Reflectingontheevolving dynamicsofMRPAs,Wynne pointedouttheimportance ofrefinementsandupdates,

suchastheremovalofLIBOR.

However,heemphasisedthat thekeyconsiderationliesin therelationshipbetweensellers andparticipants,traditionally dominatedbybanks.Tofoster inclusivityandexpandaccess totradefinancethrough participation,addressing investorconcerns,suchas cumbersomedocumentation, becomesparamount Wynneexpressedhis confidence,stating,"Therewill bechangestomeetthe investor'sneeds That'swhere Iseethisgoing"

3.1

Thepowerofallies: navigatingLGBTQ+ inclusionintrade,treasury, andpayments

Thispowerthatalliesbringisatestament totheirabilitytoofferunwaveringsupport. Fromwearingsymbolicitemslikerainbow lanyardstoattendingevents,alliesshowup visibly,creatingapowerfulshowofsolidarity, whichcanmakeanimpactfuldifferencefor somecommunitymembers.

Theinternationaltrade, treasury,andpaymentsspace isaboutremovingbarriers, bridgingdivides,andfinding commongroundtokeepthe worldconnected.

Attheheartofitall,there'sa humanelement:unseenbut everpresent

Creatinganinclusive environmentonamacroscale requiresthecreationof environmentsforaninclusive society Onamicroscale, everydaypeoplemustcome first

Afirstfortheindustry,Trade FinanceGlobal(TFG)has partneredwithseveralmajor organisationsinthetrade, treasury,andpaymentsspace tocometogetherandspeak openlyaboutanoften overlookedyetinvaluable segmentintheindustry:the LGBTQ+community.

LGBTQ+isanabbreviation forlesbian,gay,bisexual, transgender,queeror questioning,andmore.These termsareusedtodescribea person 'ssexualorientationor genderidentity.

Awomanwhoseenduring physical,romantic,and/or emotionalattractionisto otherwomen

Theadjectivedescribespeople whoseenduringphysical, romantic,and/oremotional attractionsaretopeopleofthe samesex.

Apersonwhocanform enduringphysical,romantic, and/oremotionalattractions tothoseofthesamegenderor morethanonegender.People mayexperiencethisattraction indifferingwaysanddegrees overtheirlifetime

CARTERHOFFMAN

DEEPESHPATEL

ResearchAssistant TradeFinanceGlobal(TFG)

EditorialDirector TradeFinanceGlobal(TFG)

Anumbrellatermforpeople whosegenderidentityand/or genderexpressiondiffersfrom whatistypicallyassociated withthesextheywereassigned atbirth Peopleunderthe transgenderumbrellamay describethemselvesusingone ormoreofawidevarietyof terms includingtransgender ornonbinary

Queer

Anadjectiveusedbysome peoplewhosesexual orientationisnotexclusively heterosexualorstraight This umbrellatermincludespeople whohavenonbinary,genderfluid,orgendernonconforming identities

Transgender Questioning

Sometimes,whentheQisseen attheendofLGBT,itcanalso meanquestioning Thisterm describessomeonewhois questioningtheirsexual orientationorgenderidentity

Source:https://gaycenter.org/ community/lgbtq/

TFG’sDeepeshPatelspoke withindustryexpertsCatherine Lang-Anderson,PartneratAllen &Overy;NatashaCondon, GlobalHeadofTradeSalesat JPMorgan;RobertoLeva,Trade andSupplyChainFinance RelationshipManageratthe AsianDevelopmentBank; RogiervanLammeren, ManagingDirectorHeadof TradeandWorkingCapital ProductsatLloydsBank,and AlanKoenigsberg,SVPVisa CommercialSolutionsatVisa

Overthecourseofthe discussion,theimportanceof allyshiparoseasavitalwayto

breakdownbarriers,find commonground,andpropel LGBTQ+inclusionacrossthe sector Anallyisapersonwhostands insolidaritywithLGBTQ+people, particularlywhenthey themselvesdonotidentify asLGBTQ+

Allyship:Abridgeto inclusivity

Alliesarevitalacrossallparts ofdiversity,equalityand inclusion(DEI),promoting inclusivity,equality,andsocial change

Theymaytakevariouskinds ofaction Theseinclude: educatingthemselvesand othersaboutLGBTQ+issues, usingtheirprivilegetoamplify marginalisedvoices, challengingdiscriminatory behaviour,andworkingto createsaferandmore acceptingenvironmentsfor LGBTQ+individuals.

vanLammerensaid,“It'sreally theallieswhobridgethegap betweenthewiderorganisation orindustryandthesmaller groupsofindividualswithin itwhoareactivelytryingto deliverchange.Havingpeople arounduswhocaninfluence widergroupsofpeoplereally makesadifferencebetween doinganokayjobordoinga reallygreatjobwhenitcomes todiversity,equality,and inclusion.”

Thispowerthatalliesbringis atestamenttotheirabilityto offerunwaveringsupport From wearingsymbolicitemslike rainbowlanyardstoattending events,alliesshowupvisibly, creatingapowerfulshowof solidarity,whichcanmakean impactfuldifferenceforsome communitymembers.

Condonsaid,“Everytimeyou meetsomeonewelcoming, maybethey'rewearingthat rainbowlanyard,youdon't needtoworryabouthaving

thatconversationorcensoring thepronounyouuseto describeyourpartner You know,it'sgoingtobeokay”

Oneofthepowerfulaspects ofallyshipisthatitisopento anyone:allittakesistheright mindsetandawillingnessto supportthosearoundyou

Lang-Andersonsaid,“Beingan allyispartiallyabouteducating yourselfandknowingthatyou’ll alwaysneedtobeopenand eagertolearn.It'simportantnot toletalackofcomplete knowledgeholdyoubackfrom tryingtovisiblyshowsupport Peoplewillalwaysbehappyto helpyouwhentheycansee yourcommitmenttobeing supportive.”

Sometimes,however,oneofthe bestthingsthatanallycando isprovidespacewhenitis needed

Lang-Andersonadded,“Abig learningpointinmyjourneyas anallyhasbeenknowingwhen tostepback.Somepeoplemay notbeoutatworkoroutinall partsoftheirlives,andit'sreally importanttorespectthatspace aswell”

Alliesinthework environment

Peopleareattheheartofany greatorganisation,andwhen theyfeeltheirbest,they performattheirbest,making aninclusiveandsupportive environmentcriticalfor businesssuccess.

“Alliesareessentialtomake apersonfeelateaseinawork environment Beingunableto relyoncolleaguesasallies wouldbeashardasgoing throughyourpersonallife

withoutfriendsorfamily,”Leva said It’saverybadsituation thatdoesnotallowyoutogive 100% That'showimportant theroleofanallyisinan organisation,”headded.

Butit'smorethanjusthelping othersexcelatwork;embracing allyshipisapowerfultoolfor self-developmenttohelpthe allythemselfgrowandthrivein otherareas

Levaadded,“Embracingthe attitudeofanallyalsoallows someonetogrowtheirlevelof empathyoverall,whichreally goesbeyondjusthelpingthe LGBTQ+communityandcan helpapersongrowandthrive intheirrole.Especiallywhen thatroleinvolvesdealingwith peoplefromdifferent backgroundsorlifesituations.”

Theconceptofallyshipdoes notstopatthewallsofyour organisation Therecanbe countlessopportunities, particularlyforleadersinany industry,tousetheir professionalskillstopromote inclusivityinothersettings

Koenigsbergsaid,“Imade aNewYear'sresolutionone yearthatIwantedtostart givingback,andI'vesince joinedtwononprofitboards.

Betweenopportunitieslike theseandyourdayjob, sometimesmagichappens, andyoucanbringallthat together.

Maybethenonprofitcancome intothecompanyforalunch andlearn,orthecompanycan sponsoragaladinnerevent Allofthatsendsaverypositive messageaboutyourown personalcommitment.”

Throughsharedexperiences, supportiveactions,andgenuine engagement,allyshipcandrive meaningfulchangeandmake theworldoftrade,treasury,and paymentsamoreinclusiveand welcomingspaceforeveryone.

Condonsaid,“It'sanadmirable thingtoadvocateforyourself, butpeoplewhofightforothers whenthere'snopersonal benefittothem,thosepeople arespecial.”

Inarealmwherefinancial institutionsareoften

associatedwithnumbersand transactions,itisimportantto rememberthattrueprogress transcendsbalancesheets

Allyshipemergesasabeacon ofhopeandtransformation, capableofweavinginclusivity intothefabricofthetrade, treasury,andpayments industry

Asthediscourseonallyship gainsmomentum,itisclear thattheroadtoinclusivity beginswithopen conversations,empathetic actions,andacollective commitmenttofostering positivechange

StonewallLGBTQ+Allies Programme: Acomprehensiveprogramby Stonewallthatoffersin-depth trainingandunderstandingto fosterLGBTQ+inclusionin workplaces:

https://wwwstonewallorguk/st onewall-lgbtq-allies-andtrans-alliesprogrammes/lgbtq-alliesprogramme

HowtobeanLGBTQ+allyImperialCollegeLondon: HowtobeanLGBTQ+allyImperialCollegeLondon:A resourcefulguidefromImperial

CollegeLondonthatprovides insightsandactionablesteps onbeinganeffectiveLGBTQ+ ally,emphasizingthe importanceofcreatingan inclusiveenvironment: https://www.imperial.ac.uk/equ ality/resources/lgbtqequality/how-to-be-an-lgbtqally/

https://wwwwileycom/enus/Allies+and+Advocates:+Cre ating+an+Inclusive+and+Equita ble+Culture-p-9781119772934

AlliesandAdvocates:Creating anInclusiveandEquitable Culture: AbookbyAmberCabralthat offerspracticalstrategies andreal-worldexamplesto promoteinclusionanddiversity, guidingreadersonhowto transitionfromdiscriminatory behaviorstobuilding meaningfulconnectionsacross diversebackgrounds: https://outrightinternational. org/

LGBTQFreedomFund: Afund thatactivelypaysbailtosecure thesafetyandlibertyofLGBTQ individualsinjailand immigrationdetention,while alsoaddressingthe disproportionatelyhighrateof jailingonLGBTQindividualsdue toacombinationof discriminationandpoverty: https://www.lgbtqfund.org/

NationalCenterfor TransgenderEquality: Aleadingadvocacy organizationfocusedon advancingtherightsand well-beingoftransgender individualsintheU.S.,offering resources,knowledge,and actionopportunitiesonvarious issuesaffectingthe transgendercommunity: https://transequalityorg/

Alliesinthework environment

FounderandCEO Elucidate Writer TradeFinanceGlobal(TFG)

3.2

Rethinkingcorrespondent banking:Thereal implicationsofde-risking

De-riskingdisproportionatelyimpacts developingeconomies.Particularlyvulnerable arethecommunitiesthatrelyontheseservices toaccessfinancialresourcesanddollarliquidity fromthedevelopingworldtosustaintheir populations.

Forages,correspondent bankinghasplayedavitalrole intheglobalpaymentssystem Throughcorrespondent bankingrelationships,banks gainaccesstoadiverserange offinancialproductsacross variousjurisdictionsenabling themtooffercross-border paymentsolutionsandservices totheircustomers

Nonetheless,inrecentyears majorbanksaroundtheworld havebeenterminatingtheir long-standingcorrespondent bankingrelationships This phenomenon,commonly knownas‘de-risking’,is fundamentallyreshapingthe globalfinancialservices market.

Whilepredominantlypursued withtheintentionofmitigating riskexposureforfinancial institutionsamidstgrowing regulatorypressures,the consequencesofde-risking extendbeyondthebanking sector.Manycountriesare threatenedbythelossoftheir connectivitytotheglobal financialsystem Forsmaller

developingcountries,de-risking isnotjustabankingconcern, butaconsiderabletradeissue endangeringtheirbasichuman needs.

Todelvedeeperintothekey driversofde-riskinganditsreal

SHANERIEDEL

TAMMYALI

Unveilingthecatalysts behindde-risking

impactonglobaltradeand developingmarkets,Trade FinanceGlobal’s(TFG)Deepesh PatelspokewithShaneRiedel, FounderandCEOatElucidate TheongoingUkraine-Russia conflicthasmagnifiedthe globalregulatoryfocusonthe financialservicessector, particularlyinareasoffinancial crimes,anti-moneylaundering (AML),andcounter-terrorist financing(CTF)regulations.In response,financialinstitutions havenotablycutbacktheirrisk appetite.

Althoughthedecliningrisk appetiteandtheintensifying AML/CTFscrutinyareoften perceivedasthemainmotives behindde-risking,the underlyingfactorsaremuch morecomplex.FromRiedel's perspective,de-riskingreflects

reflectsareactiontothe multifacetedcommercial realitiesintoday'sfinancial markets

AsRiedelpointedout,"Deriskingisjustaresponsetothe commercialrealitiesofthe market.Theinstancesof genuinede-riskingdueto financialcrimeorcompliance reasons,representan astonishinglysmallpercentage oftheoverallexitsobservedin themarket."

Inaddition,Riedelclarifiedthat theprimaryreasonbehindderiskingliesincommercial decisionsthatarecentred aroundthecostsofregulatory compliance,saying,"Inmost instances,thereasonthat banksareconsolidatingtheir portfoliosisacommercial decision,basedonthecostof regulatorycompliance" Whilstacknowledgingthe significanceofenhancing

complianceframeworks, Riedelcautionedagainst focusingsolelyon implementingadditional compliancemeasures. Rather,hesuggestedexploring thesystemicfactorsthathinder banksfromeffectively evaluatingthecommercial aspectsoftheircorrespondent bankingrelationships

Aimingformorecost-effective partnershipsorinclusive distributionofrisksand costsacrossthemarket,he explained,"Weneedtolook atthesystemicreasonswhy bankscan'tmakethe commercialelementswork andhowtochangethat."

De-riskingdisproportionately impactsdevelopingeconomies. Particularlyvulnerablearethe communitiesthatrelyonthese servicestoaccessfinancial resourcesanddollarliquidity fromthedevelopingworldto sustaintheirpopulations.

Asdollarliquiditydeclines, thechallengeobviously demonstratesthereal intersectionoffinancialmarket dynamicsandbasicsocietal needs

Underscoringthefragilityof sucheconomiesandthe strugglesfacedbythese nationsandtheirSMEs,Riedel added,"Inthesemarkets,fewer opportunitiesarebeingcreated forSMEswhocouldotherwise havebeenmoreinvolvedifthe tradefinancegapwasbetter bridgedorifmoreopportunities forinternationaltradewas availabletothem"

Theeconomicimpactof de-risking

Anotheroftenoverlooked impactofde-riskingisits potentialtotrigger undergroundtransactions Theclosureofbankaccounts mayforceorganisationsand individualstoresorttocash transactions,effectively creatinganenvironmentthat precludesthegoalsof AML/CTFregulations

Riedelnotes,"Whatweare seeingistheevolutionof shadowbanking,entitiesthat arelessregulatedandless transparent.Theimpactofderiskinghasgenerallybeento notonlyremoveorreduce opportunitybutalsotoreduce transparencyinthemarket" Theriseofshadowbankingand theinadvertentpromotionof untraceabletransactions representsastarkparadoxin theglobaleffortstomaintaina securefinancialecosystem

Balancingriskand accessibility

Whiledigitisationhasled tosignificantprogressin correspondentbanking, particularlyinthepayments andtradesectors,operational, compliance,andrisk managementprocesses remainstagnant.

Riedelhighlightedthatwhile thepaymentsandtrade sectorshavesuccessfully integrateddigitisation,risk managementstillreliesheavily onmanualprocesses,suchas manualKnowYourCustomer (KYC)checks,qualitative assessments,andgovernance procedures.

Heexplained,"Themoment yougettotheoperations, complianceandrisksideofthe house,theprocessesarethe

sametodayastheywere10-15 yearsago"Thisdisparitycalls fortheadoptionofdigitisation andautomationintothe compliancedomain,reducing manualprocessesand achievingabalance betweenriskassessment andoperationalefficiency

Riedelasserted,"Theonlyway toaddressthisisbybringing digitisationandautomationto thecommercialside."

Furthermore,partnershipshave thepotentialtoachievea balancebetweenriskand accessibility Riedelillustrated

thispotentialwithareal-world exampleofthecollaboration betweenElucidateand DowJones

Thispartnershipallowsfinancial institutionstoaccessquantified andobjectiveriskscoring, supportingtheircompliance strategies Riedelsaid,"We cantakesomeofthemost cumbersome,qualitative processesandstarttoput valuesagainstthem.”

Similarly,variousfinancial instrumentssuchasLettersof Credit(LCs),canbenefitfrom suchadata-drivenapproach

Riedelpointedouthowthis approachcantransformthe traditionalLCprocesses, stating,"Weenablebanksto pre-qualifythoselettersof creditbydeterminingthe riskinessoftheoriginating bank."

Thisrisk-basedapproach helpsbankstoaccelerate theirdecision-makingprocess andenhancesoperational efficiencywithout compromisingduediligence.

Thefutureof correspondentbanking

Withdisruptivemarketentrants suchasdigitalcurrenciesand theintroductionofmulticurrencypaymentplatforms fuelingcompetitionand sparkinginnovativesolutions, thecorrespondentbanking sectorislikelygearingupfor atransformationalchange

Moreover,thecorrespondent bankingindustryiscontinuously adoptingstrategicaggregation modelsandnestingmultiple layersofaggregationto

enhanceoperationalefficiency, albeitwithaddedcomplexity

Asthemarketnavigates complexlayersofpayment clearing,andwheremultiple banksareengagedinasingle transaction,theroleofdata andstandardisationcannotbe overstated

AsRiedelstressed,"Therole ofdataandstandardisation becomesevenmoreimportant toavoidthechaosofnumerous rejectedpaymentsand ultimatelymorede-risking"

3.3

Thetimeisnowtounlock thefutureofcross-border payments

Asglobalconnectivityincreasesandpeople continuetoworkinternationaljobs,the paymentsindustrymustadaptandgrow alongsidethedemand.Itisonthepayments industrytomatchthisgrowingdemandand makecross-borderpaymentsasseamlessas possible.

Cross-borderpaymentscan playaspecialroleforpeople andbusinessesaroundthe world Theyallowustosend moneytoourlovedones,book aholidayofalifetime,orstart abusinessinanothercountry

However,cross-border paymentshavetraditionally beenslow,expensive,and opaque Forindividuals,this couldmeanpayinghighfees andwaitingdaysorevenweeks fortheirmoneytoarrive

Forabusiness,itcouldmean losingoutonanopportunity togrowandexpandintoanew market Andfortheglobal economy,itcandragontrade andinvestment

Forbanks,itcanmean experiencingsignificantdelays andfeesoncross-border payments.

Whilethebankingsystemat facevaluecanbeseenas responsibleforthese

inefficiencies,itisnotentirelyits fault Banksfacesignificant regulatoryandcompliance hurdlesthatcanhindertheir abilitytocreatesmoother processes.

Thechallengesofcrossborderpayments

Thoughwebelievethatcrossborderpaymentsshouldbe easyandaccessibleforall,we understandthereareinherent roadblocks Today’sworldis smallerandmoreconnected thaneverbefore,butthe realityisthattheinternational financialsystemsunderpinning thisglobalcommunitystillhave theirspeedbumps

Therearemanychallenges,but wewanttohighlightthetop threethathinderprogressin cross-borderpayments: complexcomplianceand regulations,legacy infrastructure,andlackof transparency

Complexcomplianceand regulations

Cross-borderpaymentsare subjecttovariousregulationsin differentcountries,making itdifficultforthetraditional financialsystemtodeliverrapid cross-borderpayments.The sheernumberofhoopsthat needtobejumpedthrough addscomplexityandtime penalties

Inmanycountries,businesses arerequiredtoobtainalicense beforetheycansendorreceive cross-borderpayments.These canvarysignificantlyin difficultytoacquire Inother countries,businessesmaybe requiredtoreportallcrossborderpaymentstothe

government Andinsome countries,theremaybelimits ontheamountofmoneythat canbesentorreceivedcrossborder.

Thislevelofregulatory complexitydoesn’thelp anyone Itcancreatesignificant delaysintheprocessand impactabank’sabilitytoserve itsclient’sneeds.

We’reheretohelpeasesome ofthesepains Banksthatuse oursolutionswillexperiencefar fewerpainpointsduringcrossbordertransactions.

Asbanksexperienceamore seamlesspaymentsprocess,so willtheircustomers,creatinga better,faster,andmorereliable systemforall

Manyofthetechnologies designedforcross-border paymentsthatareinplace todaywerecreateddecades ago

Theselegacyinfrastructuresstill existbecausetheystorevital data,andalteringorupdating themcanintroduceenormous risks Insituationslikethis,banks haveanobligationtoberisk averse andprotectthesystemfor theirclients-ifitain’tbroke,why riskit?

Nevertheless,asother contemporarytechnological offeringscontinuetoadvance, theinefficienciesinthese legacysystemsbecomemore

pronouncedbycomparison. AccordingtoaRapydreportin 2023,nearly40%ofbusinesses experienceddelaysofmore thanfivedaysforsendingor receivingcross-border payments.

Whilemulti-daydelaysmay havebeenacceptableyears agowhentheselegacysystems wereconceived,themodern customerexpectsmorefrom theirbankandis notshyaboutaskingforit.

Banksarehesitanttodisregard theselegacyinfrastructures, anditmakessense Butasthe paymentsindustrycontinuesto progress,theindustryisfinding waystointegratenew technologiesintosystems.

Lackoftransparency

Thefeesandcharges associatedwithcross-border paymentscanbeopaqueand difficulttounderstand, potentiallyleadingto unexpectedsurprises.

Thevaryingriskappetitesof intermediarybankscanleadto unexpectedchallengesinthe moneytransferprocess While theoriginatorbankmayhave noissueinitiatingthetransfer, factorssuchastheclient's nameorotherdetailsmay causecomplicationswith anotherbankalongtheway

Thiscanleavethecustomer uninformedaboutanyproblem untiltheyseekanswersfrom theiroriginatorbankregarding thedelayedarrivaloftheir funds.

Inaddition,thefeesassociated withcross-borderpayments canvarydependingonthetime ofday,thecurrencyused,

andthecountryoforiginand destination Thiscancause customerstoreceivealarger finalbillthantheyexpected, andonlytheirbanktodirect anydispleasuretowards.

Whiletheymaybelegitimate reasons,customerscannotsee thebehind-the-scenes operationsandinsteadonly experiencelongdelaysin sendingremittancestotheir familieswhileseeing considerablefeesappliedto theirhard-earnedmoney

TheWorldBank’sRemittance PricesWorldwideQ12023report showsthattheaveragecostof sendingremittancesgloballyis 6.24%,whichis3.4%abovethe UN’sSDGgoals.

Thisisamajorchallengein cross-borderpaymentsbutis onethattheindustryneedsto dealwithinternally.

Itshouldbeagoalforallofus tomaketheseissuesathingof thepast Weareconfidentthat theinnovativemindsinthe industry,combinedwith growingtechnological inventions,willalleviate theseproblems.

Thereareindeednumerous challengesfacingthecrossborderpaymentsindustry,but thatshouldn’tputadamperon ourexpectationsforthefuture In2023,weareseeingmore demandthaneverbefore.As globalconnectivityincreases andpeoplecontinueto workinternationaljobs,the paymentsindustrymustadapt andgrowalongsidethe demand.

Itisonthepaymentsindustry tomatchthisgrowingdemand andmakecross-border paymentsasseamlessas possible

Luckily,therearedeveloping technologiesthatwillhelp fosterthisgrowthandhelpthe industrymeetthedemand andalleviatemanyofthe challengeswealready discussed

Butwemustkeepinmindthat thereisnoonemagicsolution, insteadmanyoftheemerging technologieswillplayarolein easingthecurrentchallenges

Plentyofchallengesbut plentyofopportunities

StablecoinsandCentralBank DigitalCurrencies(CBDCs) areemergingasoneofthe potentialtoolstocombatthe currentchallengesfacing cross-borderpayments.While therearestillmanyunknowns, andtheycertainlywillnotbe anall-encompassingpanacea, thisgrowthininterest representsawidespreaddesire toseekoutanddevelop solutionsthatcaneasethelife ofallglobalusers.

Therearemultiple technologicaladvancesthat canhelpmovetheneedleon cross-borderpayments,butit maybethatnoneofthemare sufficientontheirown It requiresanentireecosystemof developmentandintegration.

Visa’sapproachto cross-borderpayments

Visaiscommittedtoadvancing thefutureofcross-border payments Weareworkingwith partnersworldwidetodevelop newtechnologiesandsolutions thatwillmakecross-border paymentsfaster,cheaper,and moretransparent.

Weaimtocreateaworldwhere cross-borderpaymentsareas easyandconvenientas domesticpayments Thiscan benefiteveryoneinvolved,from individualsandbusinessesto theglobaleconomy.

whichhavebeenatthe forefrontofofferingcompetitive cross-bordertransactions Theiragilityandinnovative approachhassetthemapart, enablingthemtoswiftly addresstheneedsofthe modernconsumer.

However,thejourneyhasn't beenassmoothforlarger institutionalplayers These entitiesareensnaredbyaweb ofregulatory,financial,and technicalchallenges.

It'sessentialtounderstandthat thesechallengesaren'talways aresultoftheirinefficienciesor reluctancetoadapt For instance,asystemically importantbank(SIB)operates underadifferentriskframework thanaburgeoningfintech startup.

ThestakesarehigherforSIBs, andtheirriskappetiteis understandablymore conservative.Forthisreason, thetraditionaltradefinance sectorwillnotmoveasfastas manyfintechs,andtheworld doesnotexpectthiseither

Yet,thedemandisclear: consumerswantpaymentsthat arefaster,moreaffordable,and transparent.So,howcan traditionalfinancialinstitutions meettheseexpectations withoutcompromisingtheir inherentriskparameters?The solutioncouldliein collaboration

Bypartneringwithexpertswho haveafootinbothworlds, traditionalfinancialinstitutions canleveragethebestofboth

sametime,webringthe credibility,trustworthiness,and reliabilitythatestablished financialinstitutionscan provide

Byoutsourcingchallengestous, traditionalplayerscanremain relevantinthisever-evolving financiallandscape,delivering onconsumerexpectations whilemaintainingtheircore principles

Thelandscapeoffinancial serviceshasundergone asignificanttransformationin recentyears Thisevolutionis evidentintheriseofneobanks,

AtVisa,webridgethisgap, offeringthedynamism,speed, andinnovativeproblem-solving capabilitiesofastartup.Atthe

As-IsDisclaimer

Casestudies,comparisons,statistics, researchandrecommendationsare provided“ASIS”andintendedfor informationalpurposesonlyand shouldnotberelieduponfor operational,marketing,legal, technical,tax,financialorother advice VisaInc neithermakesany warrantyorrepresentationastothe completenessoraccuracyofthe informationwithinthisdocument,nor assumesanyliabilityorresponsibility thatmayresultfromrelianceonsuch information TheInformation containedhereinisnotintendedas investmentorlegaladvice,and readersareencouragedtoseekthe adviceofacompetentprofessional wheresuchadviceisrequired

BestPracticeDisclaimer

Casestudies,comparisons,statistics, researchandrecommendationsare provided“ASIS”andintendedfor informationalpurposesonlyand shouldnotberelieduponfor operational,marketing,legal, technical,tax,financialorother advice VisaInc neithermakesany warrantyorrepresentationastothe completenessoraccuracyofthe informationwithinthisdocument,nor assumesanyliabilityorresponsibility thatmayresultfromrelianceonsuch information TheInformation containedhereinisnotintendedas investmentorlegaladvice,and readersareencouragedtoseekthe adviceofacompetentprofessional wheresuchadviceisrequired

Thefutureofcrossborderpayments: Faster,cheaper,and moretransparent

3.4

ThegamechangerinOpen Banking:B2Bintegration

Openbankingisshakingupthefinancial industryandrevolutionisingthewaybanks sharedatawitheachother,aswellaswiththird partiessuchasappdevelopers,fintechsand otherfinancialserviceproviders.

Asweknow,openbankingisa phenomenonthatissweeping theworld Itistransforming financialservicesjustasmuch asthemigrationfromthe closedNokiatotheopen smartphonetransformed telecoms.Leveragingthe creativityofthirdparties (puttingappsontopofbanks) willunleashunprecedented innovationinpayments,loans, userinterfaces,insurance, complianceandmuchmore.

Initially,peopleweresolely consideringopenbankingwith anemphasisonconsumers andtheadvantagesinretail Naturally,thiswasalreadya significantbreakthrough,as bankcustomerserviceswere enhanced.

ButsinceB2Bcanattractthe mostmoney,thefocusquickly turnedtohelpingthecorporate treasurer,theSME,andtheB2B space.Thevolumesand marginsinB2Barebigger, corporatecustomersare preparedtopaywellfor efficiencygains,and incumbentshaveservedsome sectors(eg SMEs,which actuallytypicallymakeup90% ofmosteconomies) ratherpoorly.

Thus,thereishugepotential inimprovingefficienciesand gaininghighrewardsfor solvingthem

Thekeyquestionnowis:where dowestand,how“openedup” arethefinancialandcorporate servicesreally,andhowcan oneleveragethepowerofdata, openinnovationandnew legislativeandtechnological developmentsforthebenefit ofall?

Theeconomicimpactof de-risking

Openbankingisshakingup thefinancialindustryand revolutionisingthewaybanks sharedatawitheachother,as wellaswiththirdpartiessuch asappdevelopers,fintechs andotherfinancialservice providers

Itbeganwithpaymentsbut isnowspreadingacrossthe entirespectrumoffinancial services,knownas“Open Finance.”Thisisaphenomenon occurringsimultaneouslywith theliberalisationofvarious industries,includingtelecoms, health,energy,IoTdevices,and governmentservices,underthe umbrellaof“OpenX”Thiswill

HARRYSMORENBERG

MICHAELSALMONY

CEO&Founder SCC&Transactives

CEO&Founder PaymentsInnovationConsulting

enablethefusionofdata inwaysthatareentirely unprecedented

Initially,accesstofunctionsand dataatbankswasrealisedby innovativethirdpartiesin anentirelymarket-drivenway. However,regulatorssaw theneedtomakethisvery successful,butinformal andpotentiallyunsafe, developmentmorestructured, safeandpervasive.

Forthispurpose,regulators requiredthatallbanksmust openup,thatstandard technicalinterfaces(APIs)be utilised,thatonlylicensedthird partiesmayaccesscustomers’ data,andthatthismayonlybe donewithexplicituserconsent, amongotherstipulations.

ThisAPIrevolutionisunlocking thedataandmakingbanking functions(eg initiationof payments)availablevianonbankthirdpartiessuchas fintechs,paytechs,insurtechs, etc.

Thiseliminatesantiquatedand insecuremethodssuchas screen-scrapingand,inthe B2Brealm,permitsthesecure linkingofERPsystemsand accountingsoftwareto automatetreasuryandtrade.

Thisleadstoimprovedrealtimeoverviewsoffunds, enhancedmanagementof cashflows,moreaccurate liquiditypredictions,better accesstofinancingforSMEs,an improvedorder-to-paycycle, reducedcomplianceand reportingcosts,andmuch more

Openbanking:the naturalfitforB2B

Wecanthusseethatopen banking’sdatasharingbenefits areanaturalfitforB2B payments,treasuryandtrade withtopicssuchas

Accelerationofdata collectionandanalytics, collectionofnecessarydata inreal-time, aggregationofbank accountdataintoasingle accountingportal,enabling automated,reconciliation oftheentiredatasetrather thandoingitpiecemeal, simplificationofissuing invoices/processingB2B payments,

acceleratingpaymentsvia APIstoenableaccounting platformsbyissuing invoiceswithintegrated paymentinstructionsand acceptancecapabilities, reducingprocessingfeesof B2Bpaymentstonearly zerowithAPIsthatintegrate paymentdatatominimise cardprocessingfeesfor thirdparties, Turbo-chargethe deploymentofplatforms andecosystemswhere financialservicesare embeddedtoprovide holisticsolutions, andmuchmore

Itisgreattoacknowledgethe significantpotentialofopen bankingwithinourindustry,but wealsoneedtounderstandthe currentlandscape.

Whatdoweseeinreality?

Sadly,thereisstillmuch progresstobemadeacrossthe board,specificallyhavingtodo with:

Poor implementation/fragmentation/unconnectedsilos, lagginginthinkingand development(safe-keeping traditionalincomestreams), legacyprocessesand traditionalback-office systems,

uncertaintyabout opportunitiesandrisks

Thuswebelieveitisimperative thatkeyexpertscometogether toseethepotentialinB2B,to seethescaleoftheglobal revolutioninOpenBanking, OpenFinanceandOpenX,and tolearnfrombest-of-breed developmentsaroundthe world

Comeandjoinuson20th NovemberinTokyo!

3.5

Levellingupexporters:How theExport-ImportBankof theUnitedStatessupports Americancompaniesand theiroverseascustomers

EXIM’sMinorityandWomen-OwnedBusiness Division(MWOB)workstoeducatecompanies thatareownedbyminorities,women,veterans, peoplewithdisabilities,andtheLGBTQ+ community,alongwithruralandstartup businesses,aboutEXIM’sprogramsandhelp guidethemthroughtheapplicationprocess.

Today,manyexporters–large,medium,andsmall–struggletosecurethefinancing theyneedtocompete internationally.Often, companiesfindthemselves inapositionwhereprivate financingaloneisnotanoption ThatiswheretheExport-Import BankoftheUnitedStates(EXIM), America’sofficialexportcredit agency,issteppinginwithits powerfultoolstohelpaddress thegapsinfinancingU.S. exports.

Withamissionofsupporting Americanjobsbyfacilitating US exports,EXIMhelps companiesacrossnearlyall sectorswithexportfinance solutionsdesignedtohelpthem succeed,grow,andwin.Our mandateallowsustoauthorise transactionsofallsizes,fromas smallasafewthousanddollars todealsworthhundreds ofmillions.

Sinceourestablishment89 yearsago,EXIMhasplayed acriticalroleinfostering economicopportunityforU.S. companiesandforpartner nationsthatAmerican companiesdobusinesswith aroundtheworld Weofferdirectloans,loan guaranteesandinsurance products,backedbythefull faithandcreditoftheUnited States,tosupporttheexportof U.S.goodsandservices.Those productscandirectlytranslate toexportgrowth

Onecustomer,anArizonabasedengineeringfirmwho beganusingEXIM’sworking capitalloanguaranteein2005, hasnowexportedatotalof$55 millioningoodsandservices, increasedtheirrevenue,and expandedintomultiple marketsworldwide

RETAJOLEWIS PresidentandChair Export-ImportBankofthe UnitedStates

EXIMhasseveralcongressional mandates,whichfocuson providingfinancingtosmall businesses,supporting exporterslookingtodo businessacrosssub-Saharan Africaandpromoting transformationalexports acrossvarioussectors, includingtelecommunications andrenewableenergy.

Ouragency’scommitmentto sub-SaharanAfricarunsdeep, andthatiswhyourworkis centredonsupportingUS exporters,bothlargeandsmall, lookingtodobusinessaround theworld.Today,EXIMisopen forbusinessinmostcountriesin sub-SaharanAfricaandhas authorisednumerous transactionsinthisregion acrossawidevarietyofsectors

OnJune1,EXIM’sBoardof Directorsapprovedahistoric $900milliontransactionthat willbuildtwosolarenergy powerplantsinAngola,the agency’slargestrenewable energyprojecttodate

Overthepast20years,EXIMhas supportednearly$20billionfor projectswithAfricannations. Astheagencycontinuesto advancethiscoremandate andexpandeffortsthroughout theregion,thecentralgoal shouldbetocreatenew opportunitieswithAfricaforU.S. exporters.

AtEXIM,werecognisethe criticalrolethatsmall businessesplayinshoringup supplychainsandpromoting economicgrowthglobally On average,nearly90%ofthe transactionsEXIMprocesses, and30%oftheagency’stotal portfoliosupportsmall businesses

Duringthelastfiscalyear,87% ofEXIMtransactionsdirectly benefitedU.S.smallbusiness exporters,and33%oftotal directexportvaluesupported wasforsmallbusinesses

Informedbythe recommendationsofEXIM’s CouncilonSmallBusiness, whichprovidesfeedbackon waystheagencycanhelpfind newopportunitiesforU.S. exporterswhilestrivingto externalisetherisksassociated withdoingbusiness internationally,weworkto providequalityproductsthat willbolsterU.S.smallbusiness exporters.

Inadditiontoadvancingthe agency’scentralmandates,we recognisethatprioritisingand advancingwomenandgender equityintradefinanceis critical.EXIMisdedicating significanttimeandresources toensurethatwomen-owned businesseshavethetoolsthey needtogrowandthrive throughexporting

Adirectresultofsomeofthat workcanbeseenbylookingat awoman-ownedrubberband manufacturerbasedin Arkansas AnEXIMexportcredit insurancepolicyholdersince 2007,thecompanyhasnow exportedover$22millionto morethan60countries

Further,EXIM’sMinorityand Women-OwnedBusiness

Division(MWOB)worksto educatecompaniesthatare ownedbyminorities,women, veterans,peoplewith disabilities,andtheLGBTQ+ community,alongwithrural andstartupbusinesses,about EXIM’sprogramsandhelpguide themthroughtheapplication process

Thedivisionalsoworksclosely withorganisationsthathave awomen-ownedorminority tradefocustocreate opportunitiesforMWOB businesses TheMWOBdivision, incombinationwithEXIM’s comprehensiveproductsand services,canplayastrongrole inhelpingallentrepreneurs realisetheirfullpotential EXIMunderstandsthereis nosinglesolutiontothe challengesthatmanyUS businessesface.Andthat iswhyweprovideholistic financingsolutionsthat weknowarehelpingUS companiescompete

Throughavarietyofproducts, services,andspecialised divisionsdesignedtoaddress theproblemsthatdifferent exportersareconfrontedwith, EXIMisuniquelypositionedto helpensurethatUS exporters andtheircustomersoverseas havethetoolstheyneedtonot onlycompeteintheglobal marketplacebuttowinaswell.

3.6

Internationalexpansion: Leveragingtradecredit insuranceinapost-Brexit, post-pandemicworld

SarahMurrowexplainshowtradecredit insurancecanhelpUKcompaniesgrowexport revenuessafelyatatimeofheightenedcredit risk

Thisisanexcitingtimeforthe UK,adaptingtoanewpostBrexitworld,reachingoutto newmarketsandrelationships, andfindinganewroleinthe globaleconomy

UKcompanieshavealsoshown themselvestobesurprisingly resilientinmaintainingexport orderbooks,despitesome significantheadwinds

AccordingtoourrecentAllianz TradeGlobalSurvey2023,UK exportersremaincautiously optimisticaboutexport revenues,with83%expecting growthinexportturnoverin 2023,thehighestofallthe sevencountriescoveredby thesurvey

Thatsaid,we‘reina challengingeconomicand globaltradeenvironment. Overhalfofrespondentstothe surveyexpectamoderate increaseinexportturnoverof between2%and5%aftertwo yearsofdouble-digitgrowth

Butaswemoveintonextyear therearefewercloudsonthe horizon.Better-than-expected

inflationfiguresforJuneare hopefullyanearlysignthat inflationisabating,andafter mutedGDPgrowthof+02%this yearand+05%in2024,we expectUKgrowthtorecoverto 16%in2025

SARAHMURROW CEO AllianzTradeUK&Ireland

WhereareUKexporters lookingtoexpand?

TheGlobalSurveyrevealedthat UKcompaniesaremorelikely tooptimiseexistingexport markets,althoughmanyare intendingtoexplorenew territories

Justoverhalf(51%)of corporatesplantogainfurther marketshareinexisting markets,while49%wantto diversifyandtargetnew countries

Post-Brexit,UKbusinessesare takingamoreopenapproach, andareseekingnewtrade opportunitiesandrelationships.

TheUKistakingamuchmore openview,activelylookingto supportexportersthroughnew traderelationshipsand reciprocalcommitments.

Howisthecreditrisk landscapeshapingup?

We’reclearlyinaperiodof heightenedcreditrisk.Some 43%ofUKexportersexpectan increaseintheriskofnonpaymentin2023,abigjump from27%lastyear Thisisinline withouroutlookforglobal insolvencies,whichweexpect tosurgeby21%in2023and afurther4%in2024.IntheUK, thebusinessinsolvenciesare expectedtoincrease16%this year,fallingbackto9%in2024 astheenvironmentimproves

Aloomingdebtchallengeis alsoonthehorizon.Thefull impactofhigherinterestrates onthecostoffinancinghas yettotricklethroughtothe economicenvironment Companieslargeandsmallwill havesignificantlevelsofdebt maturingincomingyears

that’llneedtoberefinancedat muchhigherrates.Theimpact ofhigherborrowingcostswillhit highlyleveragedcompanies andfragileSMEsthehardest,in particularincountrieslikeItaly andSpain,puttingadditional pressureonmarginsand insolvencies

Whatchallengesdo businessesfacewhen exportinginthisclimate?

Exportingtonewmarketsand sectorscanbedaunting,even atthebestoftimes.Businesses maybeunfamiliarwith businesspartners,payment termsandcreditrisks,aswellas debtcollectionframeworksand insolvencyrights.Inmany countries,thebankruptcy processiscomplexandmany businessesdon’thavethe appetiteorexpertisetopursue debtsinthesemarkets

Enteringnewexportmarketsor sectorswillalsooftenrequire companiestoextend favourablecredittonew customers.However,we’veseen inthecurrentenvironmentthat customersaretakinglongerto pay HalfofUKexporterstoldus thattheyexpectthelengthof exportpaymenttermsto increase,morethandoublein 2022andwellaboveaverage (42%)forallcountriesin2023. AllianzTrade’sanalysisalso foundthatDaySales Outstanding(DSO)in2022 increasedby+5daysto59 days.

Withcurrentdelaysinreceiving paymentsandhigherfinancing costs,manybusinessesarein effectbecominginvoluntary banks Butwhencompanies stretchreceivables,itcanstrain cashflowandaffectworking capital–andthisiswhere

tradecreditinsurancecanhelp Ifacustomerislatetopay,or becomesinsolvent,westepin tocollectdebtsowedand indemnifythelosstoour customer

Cantradecredit insurancehelpUK businessesgrowexports?

OneofthereasonsI’vebeenin creditinsurancefor20years isbecauseit’ssuchadynamic product.It’shighlyversatileand applicableateverystageofthe economiccycle,andit’sofhuge valuetobusinessesofallsizes–frommicro-SMEsto multinationals

Itgivesbusinessesthe confidencetoenterintoopen creditagreementswithnew customers,orenternew marketsandsectors We’ve operatedinthesecountriesand sectorsfordecadesandhavea physicalpresenceintheselocal marketsthatcansupportour customers.

Evenwherecompaniesare lookingtoconsolidategrowthin existingexportmarkets,trade creditinsurancecanhelpoffset increasedlevelsofcredit exposure,especiallyforSMEs thattendtoconcentrateona smallnumberofcritical customers

Manybusinessesalsousetrade creditinsurancetosupplement theircreditriskassessment Withover70,000clientsand monitoringallsectorsin160 pluscountries,wealsogive exportersaccesstoinformation andinsightstheywouldn’t otherwisehave Forexample, ifacustomerexperienceslate payment,wecanidentify potentialcashflowproblems andalertothercustomers

supplyingthatsamecompany accordinglytohelpthemavoid acreditloss.

Caninsurancealsohelp withfinancing?

Theotherkeyreasonthat ourcustomersbuycredit insuranceistoaccess financing Byprotectingtrade receivableswithtradecredit insurance,exporterscan oftentimesaccesshigher amountsoffunding,or potentiallyaccessfunding atbetterterms.

IntheUK,paymenttermsare stillthepreferredoptionfor exporters Interestingly,we foundthatmoreUKcompanies

areturningtoBuyNow,Pay Laterschemestofinancetheir exports,whichcouldunlock tradefinancingforSMEsthat werepreviouslyshyingaway fromglobaltrade.

BuyNow,PayLateris particularlyrelevantfor e-commerce,andisakeyarea ofproductdevelopmentfor AllianzTrade.Forcompanies pursuingadigitaldistribution model,wenowofferanAPIpoweredplug-inproductthat canfacilitateandinsure transactionsonacase-bycasebasis Wealsoprovidea tradecreditinsurancesolution tofinancialinstitutionsandBuy Now,PayLaterproviders workingwithonlineretailers.

Caninsurancealsohelp withfinancing?

AllianzTraderecently partneredwithe-commerce paymentsplatformTwoand tradefinancebankSantander Corporate&Investment Banking(CIB),toprovide thefirstglobalB2BBuyNow, PayLatersolutionforlarge multinationalcorporates: E-CommerceCreditInsurance. Despitecurrentchallenges, therearealwaysopportunities outthereforUKexporters–they’llalwaysfindgoodbuyers ingoodmarketsandsectors However,businessesneedto beequippedwiththeright informationinordertofocus

theireffortsandmitigatethe risks.That’swhywelaunched TradeMatch,anonlinetool thathelpsexportersidentify countriesorsectorsofferingthe bestexportopportunities OurgoalistogiveUK businessesconfidencein tomorrow,despiteuncertain economictimes Post-Brexit theUKisre-establishingtrade relationships,andwecan provideUKbusinesseswith confidencetoexportthrough ourpredictivecredit intelligence,ourglobalreach, andboots-on-the-ground resources

3.7

ADBReport: Tradefinancegapgrows to$2.5t,andsustainability remainsakeystrategy

Tradeisapowerfultoolofeconomicgrowth, development,povertyreductionandprosperity. Muchofitcannothappenwithoutadequate, timely,andaffordablefinancing.TheADBTrade FinanceGapSurveyprovidesabarometerofthe stateofthemarketandexploressolutionsas wellasemergingdevelopmentsthatcanhelp drivetradefinancingtowhereitismostneeded.

ADB’sflagshipTradeFinance GapsSurveyreturnsforits eighthedition,confirming expectationsthattheglobal tradefinancegap–unmet demandfortradefinancing–hasworsened,reaching$2.5 trillion,anincreaseof47%since thelaststock-takingwhich peggedthegapat$17trillion in2020

Thegapnowrepresentsabout 10%ofglobalmerchandise trade,andcontinuesto adverselyaffectsmalland medium-sizedbusinesses aroundtheworld Geopoliticalandtradetensions, theRussianinvasionofUkraine, andfactorssuchasinflationary pressurecoupledwithinterest rateincreasesallcombineto contributetotheworseningof thetradefinancegap Familiar factorssuchasfinancialcrime (anti-moneylaunderingand

counteringthefinancingof terrorism)compliance,along withcustomerand counterpartyduediligence (KnowYourCustomer,orKYC) requirementscontinuetobe reportedasobstaclestothe provisionoftradefinancing forSMEs.

Thisyear'ssurveyshedslighton novelaspectsthatholdspecial relevancegiventhepresent marketconditions.These includetheemergenceof innovativefinancingmethods likeDeepTierSupplyChain Finance(DTSCF),designed toextendliquiditytothemost distantpartsofglobalsupply chains Thereportalso highlightsthepotentialof green,eco-friendly,and sustainablefinancetoreduce thetradefinancegap.76%of respondingfirmsexpressed interestinexploringsuch innovations

STEVENBECK

Head,TradeandSupplyChain FinanceProgram AsianDevelopmentBank

Initsinauguralexaminationof sustainabletrade,financing, andEnvironmental,Socialand Governance(ESG)factors,the ADB'ssurveyunveiledthe followingstatistics:

82%ofrespondentbanks considerESGand sustainabilityasstrategic imperatives.

74%ofthesebankshave planstotransitiontowards ESG-alignedand sustainablefinancing

Inasimilarvein,70%of firmsparticipatinginthe surveybelievethataligning withESGcriteriacould enhancetheiraccessto tradefinancing

Thisdatareflectsabroad senseofpriorityandoptimism regardingESGconsiderations withinthetradefinancing landscape.

Thedigitalisationoftrade, includingthroughdigital documentsandimproved processesandinteroperability, islikewiseseenasapotentially importantfactorshapingthe market,with73%offirms expressingoptimismthat meaningfuldigitalisation canenablesignificant improvementsinefficiency

Over63%ofbankssee significantvaluein digitalisation,particularly aroundregulatorycompliance andimprovedunderstanding ofandengagementwithSME clients Bothgroups,however, acknowledgethatthecostand complexityarounddigitising tradeposesasignificant challenge.

Atthesametime,keyfindings fromsurveyrespondentssignal thatawareness-raisingand advocacyeffortsmaybe generatingpositiveimpact, withlinkagesbetweentrade, financing,digitisation, sustainability,andsustainable financepresentingaseriesof areasthathavethepotentialto narrowthetradefinancinggap, particularlygivenalignment inperspectiveontheseissues betweenbanksandtheir clients

The2023surveyindicatesthat theremaybesomenotable developmentsintheviewsof businessesaroundthestate oftheirsupplychains.

Whilepolicymakers,multilateral institutionsandothersremain concernedaboutsupplychain resilienceandtransparency, surveyrespondentsseemto beindicatingthattheirsupply chainshavereboundedwell fromrecentcrises

Approximately12%of respondingfirmsindicated thattheyareconcerned aboutvisibilityinsupplychain operationsandonly14%offirms areconcernedaboutsupply chainresiliency Thisfindingis notableandbearsmonitoring

Ablueprintforbetter tradefinancing

AswithpasteditionsoftheADB survey,someconsiderationis giventopotentialsolutions aimedatnarrowingthetrade financinggap.

Thiseditionfocusesona fewcategoriesofsolutions, proposingthatwecollectively worktocreatemorefinancing capacitybydevelopingtrade financefurtherasaninvestable assetclass.Additionally,the significantinterestin–and potentialof–DTSCFshould motivatefocusondeveloping thisformoffinancing,including allnecessaryenabling conditionssuchaslegal frameworksandtheactionsof variousstakeholdergroups.

Thetransformativeattention aroundESGandsustainability shouldalsobethesubjectof proactiveattention,in particular,toassurethatESG andsustainabletrade,andall relatedmarketandregulatory requirementsservetoattract morecapitalinsupportoftrade finance–andnotevolveto becomeanexacerbatingfactor tothegapbecauseappropriate measureswerenottakento aligntradeandfinancingwith ESGandsustainability requirements

Digitalisation,inparticular, supportoftheADB-funded DigitalStandardsInitiative (DSI),canalsohelpnarrowthe tradefinancinggap.

Furthermore,progresshasbeen madeinseveralregions towardsadoptingdigitaltrade practices

Thisisnotablydueto governmentsaligningwith theUNCITRALModelLawon

ElectronicTransferableRecords (MLETR),atrendthatshouldbe bothencouragedand accelerated.

Finally,tradefinancinghas provenitsefficacyintimesof crisis,includingduringCOVID-19 ,andincountry-specificcrises suchastherecentonewhich eruptedinSriLanka. Theimperativetoassure adequateaccesstotimely tradefinancingintimesof local,regional,orglobalcrisis isclear,anditsvaluein maintainingcontrolofthetrade financegapisclear.

Intheend,theimportanceof tracking–andmitigating–theglobalunmetdemandfor tradefinancinghopefullyhelps ensurewedonotlose economicvalue,areableto continuetodrivetrade-based internationaldevelopment,and canregaingroundintradebasedpovertyreductionfrom theprogressreversedby COVID-19

Tradeisapowerfultool ofeconomicgrowth, development,poverty reductionandprosperity. Muchofitcannothappen withoutadequate,timely,and affordablefinancing

TheADBTradeFinanceGap Surveyprovidesabarometer ofthestateofthemarketand exploressolutionsaswellas emergingdevelopmentsthat canhelpdrivetradefinancing towhereitismostneeded

4.1

Bridgingthetradefinance gap:Absa'sdigitaljourney inAfrica

Inaworldmarkedbycomplexchallengesand dynamicshifts,Africa'stradelandscapehas provenresilient,drivenbydetermined economiesandaburgeoningtradespirit. Despitehurdlesposedbyglobalgeopolitical shifts,inflation,andsupplyconstraints,Africa's steadfastcommitmenttoeconomicgrowth throughtraderemainsunwavering.

Inthewakeofthepandemic, theglobaleconomyhasseena confluenceofchallenges, includinggeopoliticalrisks, interestratechanges,and commoditypricefluctuations.

TheAfricantradelandscape hasnavigateditsowncomplex journeythroughmarket

turbulenceandvolatility,with risinginflationandsupply limitationsposinghurdles Despitethis,thecontinent standsresilient,propelledby someoftheworld'sfastestgrowingeconomies,withtrade emergingasacrucialdriverof economicgrowthandrecovery

MICHELLEKNOWLES ManagingDirector:Headof TradeandWorkingCapital Product ABSA

InSub-SaharanAfrica,this year’sgrowthprojectionof3.6% -despiteaglobalslowdownunderscorestheresilienceof theeconomiesinthatregion.

Africa'saggregatecross-border trade,thoughmodestinrecent decadesat2-3%ofglobal trade,isgraduallyevolving, withintra-regionaltradenow accountingfor17%ofAfrica's exports.

Thisdeterminationtobolster economictiesdoesnotstopat Africa’sshores Europeremains aprominenttradepartner, closelyfollowedbyChina,and theMiddleEastandAfrica (MEA)arewitnessingincreased flows,indicativeofabroader uptickinbilateraltradeactivity

Despitetheclearimportanceof trade,limitedaccesstotrade financingcontinuestoloom largeforsmallandmediumsizedbusinessesacrossAfrica, hinderingtheirgrowthand potential Thiscomplexissueis influencedbymanyfactors, includingthecostsassociated,

withtradefinanceinstruments, perceptionsofrisk,data challenges,andregulatory hurdles.

Whilethecontinent’strade financegapwasnarrowing pre-pandemic,shrinkingfrom $120billiontoaround$81 billion,subsequentgeopolitical uncertaintiesinregionslike UkraineandTaiwan,coupled withbroadermacroeconomic dynamics,havesinceledto awideningofthisgap Spirallinginputcostsand supplychainbottlenecksfurther exacerbatedthesituation.

Inthiscontext,thedigitalisation oftradefinanceemergesas abeaconofhope,holding promisesforbanksandSMEs alike Byautomatingand streamliningtradefinance processes,digitaltoolscan significantlyreducecosts, fosterinclusivity,andenhance theavailabilityoffinancingfor Africanbusinesses

Throughallofthis,wecansee thetransformativepotentialof digitaltradesolutions,whichis helpingAbsaBank'sconcerted effortstobridgethisgapand empowerbusinessesthrough technologicalinnovationand collaboration

Thejourneytodigital innovation

HeadquarteredinSouthAfrica andfullyoperationalinten Africanmarkets,weare attunedtothecriticalnature ofexpandingaccesstotrade financebyenhancingitsdigital capabilities.

Thetransformationalpotential oftechnologyinbridgingthe Africantradefinancegapis undeniable Tradefinance,

asaconvergenceofphysical, information,andfinancialflows, standsuniquelypositionedto benefitfromdigitalinnovation.

TheCOVID-19lockdowns servedasaninitialcatalystfor theadoptionofdigitaltrade financesolutions,disrupting traditionalpaper-driven processesthathinderedswift accesstofinance.Overthe courseofthepandemic,Absa witnessedasubstantialuptake intheadoptionofourdigital tradesolutionsacrossthe continent

Whileinnovativetechnologies arereadilyavailable,their efficacyhingesuponregulatory andlegalreforms,making widespreadcollaboration amongpolicymakers,banks, financialinstitutions,and developmentfinance institutions(DFIs)paramountsomethingthatAbsaisactively involvedwith.

InitiativesliketheAfrican ContinentalFreeTradeArea (AfCFTA)provideafurther avenueforcollaborationand establishingstandardstailored toAfricantradewhileremaining alignedwithglobalstandards. AfCFTA,underpinnedbyrobust politicalmomentum,offers aprimeopportunityto dismantlebarrierstoregional trade,withdigitalisationas acornerstone.

Ongoingeffortswithinthe AfCFTAframeworkactively addresspolicy recommendations,regulatory adjustments,andthe establishmentofdigital standards,fosteringan environmentconducive todigitaltrade.

Combiningglobaland locallenses

Whenexploringtherealmof tradetech,itbecomesevident thatadualperspective-both globalandlocal-isessential tofosteringcomprehensive andimpactfulgrowth

Integratingagloballens ensurestheimprovement ofregionalvaluechainsand bolstersseamlessintegration intothebroaderglobalvalue chains Thisapproach acknowledgesthe interconnectednessof economiesandthebenefits ofcollaborationacrossborders. However,itisequallyimperative toadoptalocallens, recognisingthenuanced intricaciesofemerging marketsthatdemandtailormadesolutionsandadeep understandingoflocal dynamics.

Notably,EastAfricahas exhibitedrobustmomentumin tradedigitisation,intertwining paymentcapabilitiesand unveilingdigitalplatformsthat empowersmallbusinessesto expandtheirtradehorizons.

ThetriumphofinitiativeslikeMPESAinmobilemoney underscoresthepotencyof localisedapproaches Initiatives liketheAfricaTradeGateway, pioneeredbyAfreximbank, furtherexemplifythe commitmenttodrivingdigital transformation.

Africa'sinnovationlandscape intradedigitisationisvibrant, yetsuccesshingesonfostering acollaborativeenvironment foreffectiveeconomic transformation.

Whenitcomestotrade digitalisation, collaborationiskey

Absa’sapproachtodigitalising tradeisrootedinamultifacetedstrategy,reflectingour commitmenttoinnovationand seamlessintegrationacross thecomplexlandscapeof platforms,standards,and players

Centraltoourstrategyis aclientportalbuiltonopensourcearchitecture.Thisportal empowersthebankto seamlesslyintegratewith variousecosystemsthrough ApplicationProgramming Interfaces(APIs),ensuringit canconnectwithstrategic partnersandsystems efficiently.

Moreover,Absaisharnessing thepowerofbigdataand artificialintelligence(AI)to optimisekeyprocesses By leveragingthesetechnologies,

wearenotonlystayingahead ofincreasingregulatory demandsbutalsoautomating checklistprocesses,leadingto loweroverallclientcosts

Ourpartnershipwith Traydstream,apioneeringAI platforminthetradespace, isagreatexampleofour innovationjourney This collaborationhasenabledAbsa toautomatecrucialsteps withinthetradelifecycle, transforminglabour-intensive document-checkingprocesses intostreamlineddigital workflows

Thesolutionwentlivein December2022andis anticipatedtodeliver substantialbenefits.With estimatedwaittimesof 2-5daysreducedto10-15 minutesperstage,enhanced accuracy,andimprovedclient experiences,theresultingcost reductionisprojectedatan impressive60-70%.

Moreover,ourcommitmentto creatingconnectedandtrusted ecosystemsisembodiedbyour statusasthefirstAfricanbank tojointheContourNetwork.This decentralisedtechnology platformunifiesbanks, corporations,andecosystem partners,fosteringtheseamless flowofreliabledataacross globaltraderoutes

aligningwithAbsa's commitmenttofosteringajust andsustainableeconomy

Asanotableexample,Absa's sustainablefinancingsolutions aregearedtowardssupporting SMEs,includingwomenand youth,whoconstitutea significantportionofthe economy

Thiscommitmentismirroredin Absa'semphasisonaddressing environmentalandsocial imperatives,especiallygiven thecontinent'spriorityto alleviatepovertyanddrive economicgrowthinlinewith theUnitedNationsDeclaration onFinancingforDevelopment

Oneofourcentralfocusesis empoweringSMEswithmore inclusiveaccesstofinance, exemplifiedbyinitiativeslike theSupplierFinancingsolution, whichdirectlyinfluencessupply chainsandalignswith sustainabilityprinciples

Throughthisdigitalplatform, corporatebuyerscan acceleratethepayment collectionoftradereceivables fortheirsuppliers,offering instantliquidity

AsAbsacontinuesourjourney asacatalystforpositive change,theconvergenceof tradetechnologiesandESG principlespavethewayfor impactfulandsustainable transformationacross economiesandsocieties.

Pioneeringprogressin tradefinance

Inaworldmarkedbycomplex challengesanddynamic shifts,Africa'stradelandscape hasprovenresilient,drivenby determinedeconomiesanda burgeoningtradespirit.Despite hurdlesposedbyglobal geopoliticalshifts,inflation, andsupplyconstraints,Africa's steadfastcommitmentto economicgrowththrough traderemainsunwavering.

AbsaBank'sapproachto digitalisingtradefinance emergesasabeaconof hopeinthefaceofthese challenges Byharnessing thetransformativepower oftechnology,Absastands committedtobridgingthe tradefinancegapthat hampersSMEs'growth potential

AsAbsanavigatestheintricate tradefinancelandscape,its comprehensivestrategy underscoresitsdedicationto drivingdigitisation,automation, andintegrationthatultimately empowerssmoother,more efficient,cost-effective,and moresustainabletrade processes. Digitaltradetechnologiesalso holdsignificantbenefitsfrom anenvironmental,social,and governance(ESG)perspective,

Thisapproachnotonlybolsters thesustainabilityofsuppliers' financialwell-beingbutalso contributestoamorerobust andresilientsupplychainfor corporatebuyers

Tradedigitalisationis alsogreatforESG

Aswecontinuesourjourney asacatalystforimpactful change,thesynthesisoftrade technologies,innovation,and ESGprinciplespaintsa promisingpictureforthe continent'sfuture

www.tradefinanceglobal.com

4.2

Q&A:Visa'sVeronica Fernandezonmovingfrom traditionaltoseamless consumerexperienceswith embeddedfinance

Financialinstitutionscanredefinetheirgo-tomarketstrategyandleverageembedded financetodistributeservicesbeyondtheirown capabilitiesandchannels.Complementary partnershipswithplatformsthatprovideaccess tocustomerbasesornewindustryverticalscan becomeastrongleverforfinancialinstitutions toscalenon-directchannelsandacquirenew customers.

Therehasbeenadynamicshift inthefinancialecosystem happeningforseveralyears nowthatmanyofusarenot awareof.Andthat’sexactlythe point

Embeddedfinanceistheterm referringtotheintegrationof financialservicesandproducts directlyintothenon-financial platforms,applications,or servicesthatpeoplealready useintheirdailylives

Insteadofaccessingfinancial offeringsthroughtraditional standalonechannels, embeddedfinancebrings theseservicesdirectlytothe consumerwithintheirexisting interactions

Tolearnaboutthishidden,but vitalaspectoffinance,Trade FinanceGlobal’sBrianCanup

(BC)spoketoVeronica

Fernandez(VF),SeniorVice PresidentandRegionalHeadof VisaCommercialSolutionsfor NorthAmericaatVisa.

BC:Veronica,thanksforjoining us!Couldyoupleasegive abriefintroductionforour readers?Whoareyou,and whatisyourbackground?

VF:MynameisVeronica

Fernandez.ImanageVisa

CommercialSolutionsforNorth America

VisaCommercialSolutions encompassessmallbusiness debitandcredit,ourlarge middlemarketbusiness,our governmentbusiness,andour B2Bfintechpartnerships business

VERONICAFERNANDEZ SeniorVicePresident andRegionalHeadofVisa CommercialSolutionsfor NorthAmerica

Visa

BRIANCANUP AssistantEditor TradeFinanceGlobal(TFG)

Beforethisrole,Ispentabout fouryearsonthemerchant sideofourbusiness,whereI oversawtheteamresponsible formanagingoure-commerce andmarketplacecustomer card-on-filerelationships Inthatrole,Iexperiencedalot ofwhatwashappeningin embeddedfinanceonthe consumersidewithride-share apps,marketplaces,etc.

Thoseseamlessexperiences arewhatbusinessesofallsizes arelookingfortoday

likeconsumers–theyare demandingfaster,more seamlessandefficientdigital paymentexperiences.That’s reallywhat’sdrivingembedded financetoday–whetheryou’re aconsumerlookingtopayfor gasusingyourvehicleora businesstryingtopayyour supplierwithavirtualcard whileonbusinesstravel.

Anothertrenddriving innovationandadvancement intheembeddedfinancespace isthegrowingtiesbetween fintechsandfinancial institutions.

BC:Whatweresomeofthekey changesthatledtothisrapid developmentandadoptionof embeddedfinance?

VF:Whetheryou’reaconsumer orabusinessowner,we’reall lookingtobeabletodothings inoneplace–andpayments arenodifferent.Thinkofour personallives;we’veall experiencedaless-thanideal websitewherewe’reredirected inordertocompleteone seeminglysimpletask It’san experiencewroughtwith friction

BC:Yourpreviousroleshave clearlygivenyouadetailed understandingofthisarea Withthisinmind,couldyou describesomeofthemacro trendsthataredriving embeddedfinancenowin 2023?

VF:WhenIthinkabouttheworld ofembeddedfinance,what’s interestingtomeis thatwe’veactuallybeen embeddingfinanceformany, manyyears.Takeforexample, theretailandtravelmerchants, whoarenotbanks,butuse solutionslikeprivatelabelcards toofferfinancialservicesas oneoftheearliestformsof embeddedfinance.

Butwhatwe’veseenunfoldin recentyearscomingoutofthe pandemic,isarapidlyevolving digitaleconomywhichis necessitatingtheneedforeven moreembeddedfinanceand streamlinedpaymentsolutions.

Thatshiftissomethingwe liketorefertoasthe consumerisationofB2B payments B2Bclientsarejust

Financialinstitutionswantto offeradifferentiatedproduct, andtheywanttogettomarket faster Weseethemmoreopen topartnerwithfintech’sthanto buildasolutionfromscratch, Andfintech’swantthescalea financialinstitutioncanbring them.

APIinfrastructurehasbeena gamechangerdrivingthe growthofembeddedfinance WiththeadventofAPI’s,they havemadeitmucheasierto integrateandprovidefeatures quickly,Itdrivesthat connectivity.

Macrotrendsin embeddedfinance

BC:Howhaveconsumer expectationsshiftedinterms offinancialservicesandhowis embeddedfinancehelpingto meetthem?

VF:Today’sconsumersexpect aubiquitousdigitalexperience innearlyeverythingtheydo. Embeddedfinancehasbeen makingthosepayment experiencesseamless,and it'stransformingthingslike distributionandaccess.

Letmehighlightoneexample ofembeddedfinancethat takesdistributionandaccessto newlevels,streamliningboth sidesofatransaction–rideshareapps Onthe consumerside,youcanrequest andpayforaridefromdirectly withininanapp.Andonthe driver’sside,driver’scanbe paidtotheircardofchoice enablingthemtoaccesstheir payattheendofashiftversus waitingforatraditionalpay cycle.

Anothercommonexampleis usingyourmobilebankingapp toquicklysendmoneyasagift orweddingpresenttoafriend orcousinanywhereintheworld, directlytotheirdebit orvirtualcard.

Embeddedfinanceblends thosefinancialservices seamlesslyintocustomers' dailyactivitiesandinteractions withbusinesses

Yes,consumerexpectations haveshifted,butembedded financeishelpingmeetthose expectations.

Andfromabusiness perspective,usingembedded financeorpaymentscreatesa

stickiercustomer Simplyput, ahappycustomerwillbeloyal, whichwilldrivelong-term revenuetothebusiness.

BC:Whataresomeofthe challengesthatbusinessesand consumersfacewhenadopting embeddedfinance?Some companiesmaystruggle withtheintricaciesofdigital adoption.Howaretheyableto implementembeddedfinance?

VF:Someofthebusiness challengesweseeinclude integrationproblems,theneed forprogrammanagement support,andquestionsabout building,selling,andservicing financialproducts.These challengescandemand substantialinvestmentin technologyandresources However,therearecompanies thatofferserviceslikeprogram management.

Fromabusinesschallenge standpoint,dataprivacyand securityareparamount Embeddingfinancialservices intonon-financialplatforms canheightendataprivacyand securityconcerns.

Anotherchallengethatmustbe addressediscustomerloyalty andtrust Doyouhavethetype ofcustomerthatwilltrustyou withtheirfinancialservices?

Itmightbechallengingfor customerstomakethatleap versusworkingwithtraditional financialinstitutions,butIdo thinkthatcustomersareable totakebiggerchancesandget outoftheircomfortzoneif you 'reabletoprovidethemwith aseamlessexperience.

Makingsuretheexperience iseasyandflawlessismost important

BC:Howcanfinancial institutionsbenefitfrom partneringwithcertainbrands andfintechs?Butmaybelookat thismorefromthebrand'spoint ofview;howdoesthat partnershipwork?

VF:Financialinstitutionscan redefinetheirgo-to-market strategyandleverage embeddedfinancetodistribute servicesbeyondtheirown capabilitiesandchannels.

Complementarypartnerships withplatformsthatprovide accesstocustomerbasesor newindustryverticalscan

Thebenefitsofpartnering withfintechs

Buildingaubiquitous digitalexperience

becomeastrongleverfor financialinstitutionstoscale non-directchannelsand acquirenewcustomers.

Thesecollaborationsbetween fintechs,FIsanddistribution partnerscanhelptoofferbanks andmerchantsturnkeyservices fordeliveryofembedded financialproducts.

Visaisattheforefrontofthese partnerships,withaunique networkofnetworksstrategy todrivegrowth

ByexpandingVisa’sembedded financeofferingsand partneringwithfintechsand platformprovidersacrossthe valuechain,Visahelps businessesandfinancial providersadapttothisnew

realitywhileunlockingnew opportunitiestodrivegrowth inthedigitaleconomy.

Casestudies-embedded payments

BC:Doyouhaveanycase studiesforsomeofthesetopics you’vementioned?

VF:Onerecentexampleiswith aEuropeancompanycalled Weaver whichislikeaplugand-playspecialist

Weaveracceleratesthe adoptionofembeddedfinance solutionsamongB2BSaaS companies.We'reworking closelywiththemonthe paymentsideasitrelatesto B2Bsoftwareasaservice (SaaS)

Thefutureofembedded finance

BC:Whatcanweanticipate forthefutureofembedded finance?Iknowtryingtopredict thefuturecanbeanimpossible task,butifyouhadtogiveyour best-educatedguess,whatwill thenextfivetotenyearslook like?

VF:Businesseswanttogrow theirofferings,offerdigital paymentsoptionsandincrease engagement,andconsumers wantproductsandservices thatareeasytounderstand, useandpayfor Digitalisreally thefuture,andthat'swhat's goingtocontinuetodrivethe momentum.

Oneexampleofwherewe’re seeingembeddedfinancetake offiswithinthefleetandfuel vertical Bothembedded paymentsanddigitalfleet cardscanplayacentralrole inthefuturedevelopmentof vehiclefleets,astheyhelpdrive organizationalefficiencies,and eliminatetime-consuming manualprocesses

Ourgoalistomakefleet managementmoredigitally accessible,enhance operationalefficiency,and removetime-consuming manualtasksthataren't feasibleinanomnichannel environmentlikeaphone

Ithinkwe'regoingtosee continuedcollaborationand innovationfromfinancial institutions,fromfintechs,and fromthenetworkstoaccelerate growthandinnovation

4.3

Interoperability:Theway forwardtodevelopdigital trade!

Thepathtoachievinginteroperabilityinvolves standardisingthemethodsbywhichmultiple technicalsolutionscanexchangedigitaltrade documents,asfacilitatedbythenewElectronic TradeDocumentsAct.

Overthelastcoupleofyears, wehaveseenanescalating developmentofdigitalising trade Fuelledbytheobvious benefits,suchasreduction offunding,courier,and administrationcosts,aswell asthesafetyandspeedof transferringtradedocuments digitally.

Inatradechain,thereareon averagebetween6and10 partiesend-to-end,ie Carrier tothePortauthorities, corporatesandbanksin variousgeographicallocations, withdifferenttasksand procedures,whichisone

reasonwhyithasbeen particularlychallengingto adheredigitallytoalldemands. Further,legislationhasbeen ablockertofullyexploringthe technicalcapabilities

Thedigitalisationdemandhas latelyalsobeenfuelledbyboth increasedfragmentationand localisationinglobaltrade andsupplychainsdueto geopoliticalevents,which considerablyincreasesthe complexity,costsandchanges ordiversionoftraditionaltrade corridors.

PATRIKZEKKAR CEO Enigio

Uniteconomicsstillrules

Todaythereareahandful ofinitiatives,platforms,and solutionsinthemarketoffering serviceswiththeaimto digitalisetrade.Therearealso severalprojectsinitiatedto standardisedocuments,data modelsandAPIs Itishighly unlikelythatonetechnical solutioncan,orwillabsorb themarketdemand.

Itisalsohighlyunlikelythat corporates,logisticservice providersand/orbankswill signuponallavailable solutionsandplatforms, asit’sneitherpracticallynor economicallysustainable.

Collaborationand cooperationcritical pre-requisites

Collaborationandpartnerships remainessentialconditions foradvancingthedigital transformationofthetrade industry Thisisparticularly relevantwhenaddressingthe fragmenteddocumentdata flowbetweenvariousparties andprocesses.

anddoesnotcreatethe credibilityandtrustneededin suchdigitaltransformation.

Operatingcertaintradeflows, corridors,andcommodities,or evendigitisingspecifictypesof tradedocumentsinaclosed environmentmaybefeasible now

Thetworequirementsfor buildingandoperatinga reliable,resilient,and sustainableglobaldigitaltrade system,areinteroperabilityand sustainablebusinessmodels Thesetworequirementsare undeniablyandstrongly interdependent.

Interoperabilityisnotonly apracticalconvenienceand aneconomicrequirementbut alsoareliableandresilient requirementinacriticalarea suchasglobaltrade

Stand-alone“closedgarden” arrangementswillhave vulnerabilityduetoweaker “back-bone”arrangements intheeventoftechnical disruptions

However,thisapproachwill neverharnessthefulladoption, potentialandgreatervalueof globaltradedigitalisation

Theneedforinteroperability betweenvarioustrade technologyinitiatives, platforms,andsolutionswill comewithacost acostthat issubstantiallylowerthanthe potentialgains

Therefore,themarketshouldbe preparedtoabsorbthesecosts inordertoreapthenumerous higherbenefitsandensurethe sustainabilityofadigitalglobal tradenetwork.Itisbotha benefitandarequirementthat shouldbereadilyaccepted

Historyhasstarkly demonstratedtheneedto operateinanopenand collaborativeorcooperative environment Ithasalsomade itabundantlyclearthatsuch anenvironmentnecessitates sustainablecollaborativeor cooperativebusinessmodels.

Severalrecentexamplesof ceasedtradedigitalisation initiativeshaveproventhat anon-sustainablebusiness modeldoesnotdothetrick,

Sustainablebusiness models

Interoperabilityand sustainablebusiness model

Clearindustrydemand

Figure1.1-OverviewofInternationalroamingtechnologyandoperations

Factbox1:Roamingreferstotheabilityforacellularcustomertoautomaticallymakeandreceive voicecalls,sendandreceivedata,oraccessotherservices,includinghomedataservices,when travellingoutsidethegeographicalcoverageareaofthehomenetwork,bymeansofusing avisitednetworkTheseamlessextensionofcoverageisenabledbyawholesaleroaming agreementbetweenamobileuser’shomeoperatorandthevisitedmobileoperatornetwork Theroamingagreementaddressesthetechnicalandcommercialcomponentsrequiredto enabletheservice

Telecommunications aheadoftrade

Tradeisnottheonlyindustry gonethroughthebusiness modeldevolvementinrelation toatechnicalinteroperability transformation

Ahistoricallysimilarand comparableexampleof evolvementhasbeenmadein thetelecomoperatornetwork sector.Thetelecomoperators havedevelopedaroaming businessmodelstructureto supporttheinteroperability betweennetworkswithregional andinternationaldataand voicecommunicationsforthe benefitoftheusersandthe economicefficiencyof societies Forthetelecomnetwork, interoperabilityalsogave “back-bone”arrangements, increasingreliabilityand resiliencesignificantly.

Agenerictransfer processthatfitsall

Thepathtoachieving interoperabilityinvolves standardisingthemethods bywhichmultipletechnical solutionscanexchangedigital tradedocuments,asfacilitated bythenewElectronicTrade DocumentsAct.Thisrefers specificallytolevel4 interoperability,asdetailed infactbox2.

Thereforewearedeveloping aproduction-readygeneric processforalegallycompliant switchingofelectronicoriginal mediumsbetweentwoor severaldifferentoriginal mediumsolutions.

Thisapproachwillachieve broaderandmorerapid industrypenetration comparedtootherisolated, closedinitiatives,thereby enhancingtherealisationof businessbenefitsforusers.It alsoprovidesastrong justificationforanewly developedbusinessmodel

Factbox2:–Interoperability levelsinthecontextof electronicoriginals.

Level1:HumantoHuman interoperability

Replacingpaperwithan electronicoriginalthatcan bepossessed,electronically signed,freelytransferable andsharedoverdigital channelsinsteadofusing physicalfreight Thiscreates amoresecuredocument, improvesspeedsignificantly andisaneasyfirststepfor electronictradedocuments whenthelawcomesinto force.

Level2:Common understandingofa standarddefineddata modelandAPI(e.g.FIATA, DSCA,BIMCOetc.)

Systemscancommunicate andshareinformationof datawithindocuments,but doesnotautomatically coversingularityand

possessabilityaccordingto thenewElectronicTrade DocumentsAct,papermay beneededstillforcertain usecases.

Level3:Commonsystem understandingand capabilitytousean underlyingelectronic originalmedium technology.

Transferofpossessionof anelectronicoriginal documentinitssingularity canbemadebetween differentpartiesusing differentsystems,butthe underlyingoriginalmedium technologyrepresenting thedigitalassetremain thesame.

Level4:Capabilityto transferanelectronic originalbetweendifferent originalmedium technologies.

Transferofasingular originalfromoneoriginal mediumtechnologyto anotheroriginalmedium technology.Acomparison couldbemovinganoriginal fromonephysicalpaper documenttoanother physicalpaperdocument withoutriskingdoublespend andtwoauthoritative originalsexistingatthe sametime.

4.4

Future-proofingtrade finance:Thedigital transformationjourney withClearEye

Intoday'sinterconnectedglobaleconomy, tradefinancereliesonadiverserangeof stakeholders,collectivelyempowering internationaltrade.Thecomplexityofthis ecosystem,combinedwiththenumerous entitiesinvolved,highlightstheimportanceof embracingtechnologytopromotecollaborative finance.

Transitioningfromdocuments topixels,fromcashtovirtual paymentgateways,andfrom localmarketstointernational ones,thesweeping transformationofglobaltrade intothedigitalworldis redesigningthetradefinance ecosystem Thealliance betweenClearEyeandJ.P. Morganrepresentsthe metamorphosisofthefuture oftradefinancedigitisation.

Astheindustryanticipatesthe upcomingSibos2023,themed 'Collaborativefinancein afragmentedworld,'TFG’s DeepeshPatelsatdownwith MariyaGeorge,CEO&CoFounderofClearEye,andTom Fitzgerald,JP Morgan's ManagingDirectorandGlobal HeadofTradeandWorking CapitalProductDelivery

MARIYAGEORGE

TOMFITZGERALD

CEO&Co-Founder ClearEye

ManagingDirectorandGlobal HeadofTradeandWorking CapitalProductDelivery JPMorgan

Gaininganadvantage throughdigitalisation

Thejourneyofthetradefinance industrytowardsdigital transformationhas encounteredadistinctlackof momentum Withinsolvencies ofvariousfintechcompanies makingheadlinesandthe rapidlyevolvingregulatory frameworksinfluencedby currentgeopoliticalevents, navigatingthedigital landscapehasproventobe aconsistentchallengeforthe industry

Recognisingtheneedfor transformativechange, ClearEyeandJP Morganhave joinedforceswitha revolutionaryvisionforthe

industry:tofuture-prooftrade financeoperations.George said,"Itallstartswiththebackofficeoperations.Thereare alotofchallengesintoday's back-officeoperations, includingtheconstantly changingregulatorychallenges andneeds,aswellastherising costs.”

Georgeofferedmore informationonClearEye’s flagshipplatform,ClearTrade, anditsrobustcapabilities, "ClearTradefocusesonthree components:Digitisation, compliance/trade-based moneylaunderingautomation, anddoc-examoperations automation’’Reinforcingthe valueofintegratingClearTrade andhowthealliancebolsters

JP Morgan'stradefinance objectives,Fitzgeraldsaid,"Our internalbusinesscasearound usingthisplatformincorporates upliftingourcompliance capabilities,reducing operationalcosts,andgetting leveragethroughapartner relationshipversuspurely relyingonin-houseIT resources.’’

Intoday'sinterconnected globaleconomy,tradefinance reliesonadiverserange ofstakeholders,collectively empoweringinternational trade.Thecomplexityofthis ecosystem,combinedwiththe numerousentitiesinvolved, highlightstheimportance ofembracingtechnologyto promotecollaborativefinance

EchoingClearEye'svisionfor technology-driven collaboration,Georgenoted, "Idon'tthinkthere'sabetter waytobringtheworldtogether thanthroughtechnology"

ButClearTrade'scapabilities extendbeyondtransaction processing.

"It'saplatformthatcanbring togetherthecomplianceteam, theoperationsteamtoaccess alltheseexternaldatasetsthat arerequiredtodoallthe compliancechecks,’’ sheelaborated.

Furthermore,consolidating complianceandtradefinance operationsintoasingle automatedsolutionis aremarkablesteptowards addressingoneofthemost notablechallengesfacingtrade financeoperations–fragmentation

Fromexportersinitiating transactionstobankshandling cross-borderexchanges,trade financeprocessesentail substantialleadtimes,typically lastingfordays ClearTradecan significantlyexpeditethese processes."Withtechnology advancements,’’George pointedout,"theleadtimesof tradefinanceprocessescan bereducedfromdaystohours That’sasignificantchange’’

Theplatform'sabilityto automatelabour-intensive manualcheckingprocesses includingtrade-basedmoney laundering(TBML)verifications, holdsthepotentialto revolutionisethepaceand efficiencyoftradefinance operations

Additionally,thealliancehas successfullyaddressedone ofthemostpersistent conundrumsinthedigital transformationoftradefinance: howtoadopttechnologywhile maintainingtrustinthe financialindustry.

Thisalliancedemonstratesthat strikingabalancebetweenthe twoisundoubtedlyachievable Despitetheinnovativenatureof thecollaboration,JP Morgan's coreprinciplesofvendor evaluationandrisk managementhavebeen integraltothealliance.

"Therelationshipsmighthave aslightlydifferentcontractual structure,butattheendofthe day,you'rerelyingonathird partythatneedstoprotectour business,ourclients,andour data Theconcerns,therules, andtherisksthatgointoa fintechalliancearenodifferent thanatraditionalvendor," Fitzgeraldunderscored.

Superchargingefficiency: Singleplatform,multiple features

Startinginthedomainof unstructureddataprocessing, ClearTradehasevolvedover theyearsintoabreakthrough solutionfortradefinance operationsandcompliance Highlightingtheplatform’s capabilities,Georgeputforth theseveralkeyfeaturesitoffers:

Automatednounextraction: ClearTradeautomatesnoun extraction,aprocessthat simplifiestheidentification ofsanctionedentitiesand contributestopotential efficiencygainsof 50%to70%.

Comprehensivecompliance checks:Withcompliance asapriority,ClearTrade integratesdatasetsfrom multiplesources,enabling comprehensivecheckssuch asvesselandcontainer tracking,BillofLading validation,andthe identificationofmilitary anddual-usegoods

Dynamicrulesengine: Theplatform'sdynamic rulesengineoffersusers theflexibilitytodefineand adjustrules,adaptingto evolvingregulationsand requirements

Modulardesign:Itsmodular designallowsfinancial institutionstotailortheir adoption,startingwith digitisationandcompliance beforeexpandingtoinclude documentexamination.

Fullauditability:Another powerfulfeatureisthe system'sfullauditability, ensuringtransparencyand accountabilityforevery transactionanduseraction.

Fromaregulatoryperspective, theplatform'sabilityto determinehigh-risk transactionsbydissecting numerousvariablesoffers arobustdigitalproductfor regulatorycompliance automation.

AccordingtoFitzgerald,"The ClearTradeplatformcanbe configuredtoconsidermany daaelementsthatyouseein currentG7tradesanctions, suchasRussianoilpricecaps.’’

Forgingahead:ClearEye's visionforthefuture

Digitisingtradefinance presentsanunprecedented opportunitytoreshapethe industry,makingitmore efficient,inclusive,and sustainable.Followingon theirpioneeringroleinthe digitisationoftradefinance operations,ClearEye’sfuture holdsmultipleopportunities toscale.

Georgeaffirmed,"Wewantto godeepandreallysolvethe tradefinanceoperations problem Therearedifferent producttypesandotherareas thatwewanttodiveinto.That's ourimmediatefocusarea.’’

Withasolidfoundationin digitisingtradefinance operations,thestrategic alliancebetweenJP Morgan& ClearEyeissettoinspireand future-prooftheindustry.

4.5

Navigatingthefutureof digitalpayments: Efficiency,security,and compliance

Asthedigitalpaymentlandscapecontinuesto evolve,collaborationandinnovationemergeas vitalstrategiesformanagingrisks.Industry stakeholdersmustcometogethertoshare insights,bestpractices,andemergingthreat intelligence.

Inaneramarkedby technologicaladvancement andrapiddigitisation,the landscapeoffinancial transactionshasundergone atransformativeshift.

Traditionalmodesofpayment, suchaschecksandphysical currency,havegivenwayto theconvenienceandefficiency ofdigitalpayments

AutomatedClearingHouse (ACH),wiretransfers,andcredit cardshavebecome thecornerstonesofmodern commerce,enablingseamless transactionsacrossborders andtimezones However,as thesedigitalpaymentmethods flourish,industrystakeholders

areincreasinglycognisantof theinherentrisksthatcome hand-in-handwiththis progress

TheDigitaladvantage: Efficiencyand accessibility

Digitalpaymentshave revolutionisedtheway businessesandconsumers conducttransactions,offering unparalleledconvenienceand speed ACHtransfersallowfor theautomaticmovementof fundsbetweenaccounts, streamliningprocesseslike payrollandbillpayments

DEEPASINHA VicePresidentofPayments &FinancialCrimes BAFT(BankersAssociationof Finance&Trade)

Wiretransfersexpedite internationaltransactions, eliminatingthetimeconsumingintermediaries oftraditionalcross-border commerce Creditcards,with theirwidespreadacceptance andinstantpayment capabilities,havebecomethe go-tochoiceforin-storeand onlinepurchases.

Beyondtheconvenience, thesedigitalmethodshave democratisedfinancialaccess Smallbusinessescannow competeonaglobalscale, reachingcustomersbeyond theirlocalmarkets.

Consumersbenefitfromthe flexibilitytomanagetheir finances,makepurchases, andpaybillswithafewclicks However,thesebenefitscome intertwinedwithpotentialrisks thatnecessitatecareful consideration.

Navigatingtherisks: Securityandfraud Theroleofregulations andcompliance

Theriseofdigitalpaymentshas alsogivenrisetoanarrayof cybersecuritychallenges.With transactionsoccurringinthe virtualrealm,thepotentialfor cyberattacks,databreaches, andfraudhasgrown exponentially

Whilesecuritybreaches predominatelyoccurwith merchantsconnectedto thenetworkratherthanthe paymentsystemsthemselves, maliciousactorsareconstantly seekingvulnerabilitiesin paymentsystemstogain unauthorisedaccessto sensitiveinformation, leadingtofinanciallossand reputationaldamageforboth businessesandconsumers

ACHtransactions,while efficient,canbesusceptibleto

accounttakeoversand unauthorisedwithdrawals. Wiretransfers,particularlyin internationalcontexts,may besubjecttofraudulent instructionsthatdivertfunds tothewrongdestinations

Creditcardfraudremains apersistentconcern,with cardholderinformation beingcompromisedviaretailer breaches.Astheserisksevolve, industrystakeholdersmust adoptcomprehensivesecurity measurestosafeguarddigital transactions

Recognisingthecriticalneed toaddressthesechallenges, regulatorybodieshave implementedmeasuresto protectdigitalpayment ecosystems

ThePaymentCardIndustry DataSecurityStandard (PCIDSS)providesrobust requirementsforsafeguarding creditanddebitcarddata, requiringencryption,regular securityassessments,and compliancereporting.

AlackofPCIcompliance bynon-bankentities(major retailers,mostprominently) hasbeentheproximate causeofmajordatabreaches, demonstratingthatasecure ecosystemrelieson compliancebyalldata handlers

TheEMVCo(Europay, Mastercard,andVisa Consortium)’sglobalcard andmobilepaymentsecurity standardsareamajorstep forwardinsecuringnew paymenttypesandhave reducedpaymentsfraud worldwide ThenewEMVSecure RemoteCommerce(SRC) standardisincreasinglyfound online,whereit’scalled“Click toPay”andleveragesa combinationofmethodsto securecard-not-present transactions

TheBankSecrecyActandAntiMoneyLaunderingregulations imposerobustduediligence practicesonfinancial institutions,mitigatingthe potentialmisuseofdigital paymentplatformsforillicit activities

Yet,achievingcomplianceis notaone-size-fits-allsolution. Industryparticipantsmusttailor theirsecurityprotocolstotheir specificoperational landscapes Robust authenticationmechanisms, multi-factoridentification, adoptionofthelatest standardsfrombodieslikethe

PCICouncilandEMVCo, andreal-timetransaction monitoringareamongthe strategiesthatcanfortifydigital paymentplatformsagainst threats.

Unevenregulationsbetween banksandnon-banking financialinstitutionsacrossthe globalpaymentsindustryarea problemthatneedstobe addressed.TheBAFTGlobal PaymentsIndustryCouncil, comprisedofseniorbankersin globalpayments,ispublishing acollaborativewhitepaper titled“UnevenRegulationsin Payments”,whichisamodel codeforhowtoremedythe unevenpaymentslandscape.

Itaddressestheuneven regulations’fourthemesand theirimplications:

1 RegulatoryOversight,

2 Extensionto Sponsorship–Indirect SchemeParticipation,

3 ConsistencyofKYC/CDD Requirements,

4.PermissibilityofCrossBorderActivity.

Theoverarchingprinciple shouldbetoavoidambiguity or“silent”rules,whichwillthen leadtodifferentinterpretations anddifficultenforcement The paperwillbepublishedlater thisyear

togethertoshareinsights,best practices,andemergingthreat intelligence.

Financialinstitutions,retailers, fintechstartups,cybersecurity experts,andregulatorybodies mustforgepartnershipsto createaunitedfrontagainst cyberthreats.

Furthermore,embracing technologicaladvancements suchasartificialintelligence (AI)andmachinelearningcan empowerpaymentplatforms todetectanomaliesand patternsthatindicate fraudulentactivities.Real-time frauddetectionalgorithmscan provideanadditionallayerof security,swiftlyidentifyingand blockingsuspicious transactions Theongoingdigitalpayment revolutionoffersahostof benefits,enablingbusinesses andconsumerstotransactwith unprecedentedease.However, theseadvantagesare accompaniedbyinherentrisks thatrequirestrategicvigilance andaction

Asthedigitalpayment landscapecontinuestoevolve, collaborationandinnovation emergeasvitalstrategiesfor managingrisks Industry stakeholdersmustcome

Securitybreaches,fraud, andcompliancechallenges underscoretheneedfor comprehensiverisk managementstrategies. Byimplementingrobust securitymeasures,adhering toregulations,fostering collaboration,andleveraging innovativetechnologies,the industrycannavigatethe intricatelandscapeofdigital paymentsandusherinanera ofsecureandseamless transactions

Collaborationand innovationasdefenders

4.6

Industrycollaboration isacatalystfortruly digitaltrade

Collaboratingwithcompaniesthatoffercloud solutionsandopenecosystemsgivesbanksthe agilityrequiredtodigitallytransformtheir operationsandseamlesslyimplement technologiesandthird-partyapplications,such asfordocumentcompliancechecking,AMLand KYCcompliance.

Frompayments,creditand lending,totradeandsupply chainfinance,theentire financialservicesindustryis beingdisrupted Regulatory requirements,industry standardsandthe environmental,social,and governance(ESG)agenda haveaccelerated.

Economicandmarketplace uncertainty,supplychain disruptions,andthepressure tomeetchangingcustomer demandshaveledtoa turbulentsituationfor financialservices.

Thankfully,innovationand newtechnologiesarequickly progressingfromindustry trendstoprovidebankswith real-worldusecasesthat enhancehowtheydobusiness. Thisisenablingthemtoreach newcustomersegments, remainagileenoughto navigatenewdemands, reduceeffortstocomplywith regulations,andimprove riskmanagement.

IAINMACLENNAN HeadofTradeand SupplyChainFinance Finastra

Aneweraoftech-driven tradefinance

Paperdocumentsandoriginal signaturesarecostly, unsustainable,canbeeasily duplicatedandarethemain causeoffrictionintrading The ModelLawonElectronic TransferableRecords(MLETR) providesaframeworkinterms ofthedigitisationofpaper documentation,pavingtheway fordigitised,real-timetrade andsettlementthatenables bankstoservemorecustomers throughstreamlinedand efficientprocesses.

NowthattheElectronicTrade DocumentsActisofficiallyan actoflawintheUK,other marketsareexpectedto quicklyfollowsuit.

Thisishopedtohave asignificantimpacton internationaltradebyreducing friction,makingiteasierand cheaperforcompaniestobuy andsellinternationallyand helpingtoreducefinancing gapsforMSMEs.

Byreducingbarrierstoentry, costsandfrictionintrade,and improvingaccessibilityand availabilityofliquidity, companiescangrowfaster andincreasetheirtrading

volumes Thesuccessofdigital tradewillbesupportedby–andinturnencouragethe increasedadoptionof–technologiessuchasAI,ML, theInternetofThings(IoT) anddistributedledger

Improvedaccesstodigital dataandtechnologiessuch asAIandMLenablebanksto automateandimprove processessuchascredit decisions Adoptingdigital identitiescanfurtherreducethe processingtimeandcostsfor complianceinloanprocessing

Thisisparticularly advantageousforMSMEs, whoseloanapplicationsare oftenrejectedintheKnow YourCustomer(KYC)orAnti MoneyLaundering(AML) phasebecausetheylack thenecessaryproofof identificationor‘institutional data’.

Additionally,distributedledger technologyandblockchain enableactorsinthesupply chaintoexchangeinformation securelyandquickly Documentsbecomelessprone toforgeryandaremore transparent,andsmart contractscanbeusedto automateandprocess transactionsinreal-time Utilisingadvanceddataand AI-drivenanalysisprovides bankswithaholistic,ondemandandstreamlinedview oftheircustomersandtheir business,whichcanbeusedto facilitatemorepersonalised servicestoimprovecustomer retentionandacquisition

Thisincludesmeetingthe highdemandforembedded, connectedandautomated financethroughIoT,aswellas supportingsustainability initiatives

AccordingtoFinastra’ssurvey incollaborationwithEast& Partners,threeoutoffourglobal banksplantoincreasetheir exposuretogreenlendingby morethan16%inthenext12-18 monthsormore

Throughincreasedproduct innovationanddataanalytics, bankscangenerateindustry andregionally-relevantESG KPIsandusethemtoaccurately assessthecredentialsof corporates

Greenlendingexposurechange

Theycanthenprovide incentivisedtradefinanceor otherloanofferstothosethat areconsidered“green”or “greening”

Akeystartingpointforbanksis ensuringthatmiddleandbackofficeprocessingsystemsare up-to-dateandsupportthe adoptionofnewprocesses, technologiesandimproved dataaccess

Forfinancialinstitutionsto effectivelysupportdigitaltrade andremaincompetitive, industrycollaborationis essential Finastra’sresearch revealsthreeinfourglobal banksareplanningtoconnect withanaverageofthree fintechsinthenext12-18 months.Thelargestproportion ofrespondentswanttoplug intoaplatformofintegrated fintechsolutions(56%),with only6%preferringtobuild capabilitiesin-house

Collaboratingwithcompanies thatoffercloudsolutionsand openecosystemsgivesbanks theagilityrequiredtodigitally transformtheiroperationsand seamlesslyimplement technologiesandthird-party applications,suchasfor documentcompliance checking,AMLandKYC compliance.

Digitalisationthrough ecosystemplay

Inadditiontoacquiringthe agilityneededtoswiftlyadapt tonewcustomer,industry, andregulatoryrequirements, partnershipscontributeto enhancedscalabilityand decreasedcapitaloverheads, aswellasareductioninthe timetovalue.

Despiteourincreasingly fragmentedworld,the internationaltradeecosystem isbecomingmoreopen, collaborativeandtransparent thaneverbefore

ThroughopenAPIsandopen finance,banksareableto embracenewtechnologies andconnectpreviously disconnected"digitalislands"to createatrulydigital, sustainableandinclusivetrade andsupplychainfinance industrythatiswell-equipped toadapttofuturedemands.

4.7

Thefutureofdigitaltrade finance:Anin-depthQ&A withSurecomp

Todrivefasterdigitalisationandadoptionof electronicdocumentsinglobaltrade,strong alliancesbetweenleadingcompaniesinglobal tradeareneeded.ThepartnershipofSurecomp andWaveBLisaprimeexampleofhowpowerful andsuccessfulsuchanalliancecanbe, revolutionisingtheglobaltradeindustryfor thebetter.

WiththepassingoftheUK’s ElectronicTradeDocumentsAct (ETDA),thedigitaltradeworldis changing Whilethisis welcomednewsfortheentire industry,italsomeansthatnew partnershipsandinnovations needtocometofruition.

Thelegalframeworkisnowa reality,theburdenisnowonthe industrytotakeadvantageof themoment

eciselywhat pandWaveBLare htheircollaboration. moreaboutthis tion,andtheirefforts digitaltrade,Trade lobal’sBrianCanup downwith ghardWeitzel(EBW), e-Presidentof Digitizationand Development, pandOferEinBar Business ent,WaveBL

BC:Let’sjumprightintothings. Canyougiveanoverviewofthe SurecompandWaveBL collaboration?

EBW:Webothsharethevision oftheneedforcollaborationto effectivelybringdigitisation benefitstothetrade community.Asoursolutions complementeachothernicely, oursharedcustomersbenefit fromanenricheduser experience

WhileusersonRIVOcan managethefullLetterofCredit (LC)lifecycle,withthe connectiontoWaveBL,theycan enjoygreatervaluefromthe deepintegrationoftheireBL intotheirLCflow Witha strongervalueproposition, thesolutionscanjointlyand individuallyprovidebetter businesscasestocorporates andbanks,enablingthemto havefasterROI

ENNO-BURGHARDWEITZEL SeniorVice-Presidentof Strategy,Digitizationand BusinessDevelopment Surecomp

OFEREINBAR VPBusinessDevelopment WaveBL

BRIANCANUP AssistantEditor TradeFinanceGlobal(TFG)

OEB:TheWaveBLplatformis usedregularlyfortheissuance ofelectronicBillsofLading,by severalofthelargestcontainer oceancarriers,issuing thousandsofelectronicBills ofLadingeverymonth The majorityoftradetransactions arebetweenanexporterand animporteranddonotrequire bankstobeinvolvedinthe tradedocumentationprocess

Astheadoptionofelectronic documentsbybanksisvery slowtosaytheleast,partnering withSurecomp,withits expertiseinthetradefinance world,wasonlyamatterof time

Surecompisaleadingexpert companyineverymatter concerningtradefinancewith aclearadvantagewiththeFI industries.Thejointsolutionwill allowbanksandcorporatesto getaccesstotheWaveBLBills ofLadingthroughthe SurecompRivoplatform

TheSurecompplatformwill integratetheWaveBLeBLinto

intothetradefinanceLCflow, creatingafullend-to-end streamofatransactionfor eachpartyinvolved Staytuned, asthenextstagewillcome soon!

BC:Thebignewsoftheyearis thepassageoftheETDAinthe UK.Howdoesthis landmarklegislationfitinwith SurecompandWaveBL’s partnership?

EBW:It’sthecoreofour partnership.Webothwantto fostertheadoptionofdigital documents.Whilenationallaw isstillenforcingpaper,bothof ourteamshavetospendalot oftimeconvincingtheparties thatgoingdigitalwith dedicatedsolutionsisan alternative.

Now,everyonecanrelyon nationallawinmoreandmore jurisdictions,namelytheUKand Singapore SoanyBLissued referencingSingaporeorUK law,nowcanbeissuedaseBL, whichsetsthelegalbasis.

WaveBLbringsthetechnical expertiseforreliableand scalabledigitalissuance,and theRIVOplatformenablesthe partiestomanagethewhole tradefinancetransactionwith allparties Seemslikewe’veall justwaitedfortheUKtobe thedigitalbooster

OEB:TheETDAgiveselectronic billsofladingandrelatedtrade documentsthesamelegal statusastheirpaper counterparts Thelandmark legislationmodernisesand overhaulsoutdatedlaws surroundingtheuseof electronictradedocuments ininternationaltrading.

ETDAmakescross-border andinternationaltrademore efficient,cost-effective,and environmentallysustainable ETDAispartoftheglobaleffort toharmoniseanddigitise globaltrade.BesidesETDA removingahugebarrierto tradedigitalisation,itactsas avoteofconfidencebythe highestauthorityregardingthe pathweareon

BC:Whataretheopportunities fortradedigitalisationintheUK (andbeyond),andhowcan businesses,bothlargeand small,takeadvantageofthem?

EBW:Wefullyembracethework oftheUKteamofexperts,from thelegislation,theICCandthe industry.Nowenablingany tradecontractandtitle documenttobefullydigital, istrulypivotalsinceamajor shareofallthetradecontracts outtherearebasedonthe UKlawalreadytoday.

Sonomorerulebooksare neededtoacceptdigital documentsinasmallclub withhighbarrierstojoin

Noweveryonehastheoption toadoptrapidlyacrossthe industry,andacrosscountries. Thiswillputsomehealthy competitivepressureonother countriestofollowquickly OnRIVO,partieswillbeableto issueandmanageany documentasdigitaloriginal, significantlyreducingthe barrierstotradeandmaking tradefinanceavailableto everyone.

OEB:TheUKisconsidereda majorhubforglobaltrade, leadingthelegislation worldwide.Thishasbeenthe casewithCOGSA1992,and nowwiththeETDA2023,taking MLETRafurtherstep.

AccordingtotheUK DepartmentforScience, InnovationandTechnology,the UKeconomyissettoseeover£1 billionboostoverthenext decade,withUKbusinesses enjoyinghugecostsavings.

TheUKETDAalsoactasthe cornerstonefordigitalising tradeacrosstheworld Global tradeisfacingnewregulatory requirementsandindustry standards.Environmental, social,andgovernance(ESG) complianceissuesarealso playingarole Inthese uncertaineconomictimes, supplychaindisruptionsand changingcustomerdemands arealsoleavingtheirmark.

However,theadoptionof electronictradedocuments acts,suchastheElectronic TradeDocumentsAct(ETDA), isexpectedtoreducefriction andfinancinggaps,makingit easierandcheaperfor companiestoengagein cross-bordertransactions. Itisnowthetimetorealise thesespokenbenefits

BC:Whataresomeofthe challengesthatcomewith digitalisingtradedocuments, andwhatisSurecompdoing toaddresstheseissues?

EBW:Itseemsthatthekey preconditionsforgoingdigital arethelegalfoundation,the technicalbasisandthe willingnessofthepartiesto change.We’vetouchedupon SingaporeandtheUK,the otherG7countriespledged toimplementMLETRintheir nationallawsby2025

Surecompareactivelyinvolved intheworkinggroupsin GermanyandFrance

Solet’sconsiderthisdone. Goingdigitalrequiresa technicalplatform,thatisopen, scalableandfitforpurpose,ie tradefinancespecific

Opennessiskeybecausethe tradecommunityissodiverse, twotradetransactionswill almostneverincludeidentical parties Andwithsomany partiesandtechnicalspeciality solutionsaround,themore openasolution,thegreater thevalueitcanprovidetothe community.

Oursuccessfulpartnershipand technicalsyncingwithWaveBL serveasanexcellent demonstrationofourstrategy inaction Additionally,there arevariousothersolutionsfor issuingelectronicBillsofLading (eBLs),andweplantointegrate withthosethatareopento

collaborationinthenextphase

Thiswillcreateageneric‘eBL valueproposition’,providing aservicewithoutforcingthe partiestolimittheirabilityto conducttheirownbusiness. Lastly,we’reengagingwiththe

expertsandpractitionersinthe industrytoshowcasethelevel ofmaturityandfunctional coverage.Sharingsuccess storiesisanecessitytosupport thechangejourney

BC:Doyouhaveacasestudy forthesuccessful implementationanduseof Surecomp’s RIVOplatform?

EBW:Beingadigital collaborationplatform,RIVO servescorporates,financial institutionsandfintechsalike. Hence,anycasestudycanonly representasmallfractionof RIVO’svalueproposition

But,let’slookatonecorporate, withacentralisedtreasury functionattheheadquarters.

Operatingglobally,they engagehundredsoftrade financeexpertsspreadacross 50+countriestosupporttheir salesteamsintheirproduct delivery.

Theirkeycriteriaforchoosing RIVOastheirtradefinance managementsolutionwereUX andreporting Withsomany colleaguesdealingwiththeir guarantees,stand-bysand commercialLCs,theyneeded asolutionthatiseasyto onboard,intuitiveinuseand providesstrong,yetflexible workflows

Beingapubliclylisted company,theyusedtohandle theirquarterlyfinancial reportingtotheirGroupFinance manually Now,theycan automatethisprocessusing ourbuilt-inBusiness Intelligence(BI)reportingtools

Thesefeaturesalonemade

RIVOanattractivechoice forthem.Furthermore,asa Software-as-a-Service(SaaS) solution,RIVOkeepsgetting bettereachquarterwithnew features Forinstance,we recentlycollaboratedwithICC Germanyonaproofofconcept forelectronicBillsofLading (eBLs),addingevenmorevalue forthecompany.

Weprovidedevidencethat alltradeparties,exporters, importers,aswellasthebanks, canfullymanageaWaveBLbill ofladingthroughRIVO Inthe nextphasewe’llextendthisto furthereBLissuers,invite shippingcompaniesand furtherparticipants.

So,withouthavingtolift afinger,thecompanywe featuredinourcasestudy cannowtakeadvantageof electronicBillsofLading(eBL) featuresandeasilytransition todigitalworkflowsfortheir LettersofCredit(LC) This experiencealsooffersvaluable insightsfromafintech perspective,makingita compellingcasestudyinthat regardaswell.

BC:Tradedigitalisationis gainingmoremainstream acceptancenow,withtheUK codifyingit,andnumerous otherjurisdictionsworkingon similarlaws.Whatarethe nextstepsthatwillmake tangibleprogresswithinthe internationaltradeindustry?

EBW:Pivotalplayersactually pushingittotheirday-to-day business Ifdigitisationis bringinganeconomicbenefit, eachpartyshouldsharethese benefitswithitscounterpartfor actuallygoingdigital.E.g. ashippingcompanycharging higherfeesfornon-eBLs,

abankwaivingthecourier chargesundereUCPLCs, andcorporatesgivingbetter paymenttermsifalldocuments aresentdigitally.Thequicker people experiencetangiblebenefits, thefasterthey'lladoptthe newtechnology

OEB:Todrivefaster digitalisationandadoptionof electronicdocumentsinglobal trade,strongalliancesbetween leadingcompaniesin globaltradeareneeded The partnershipofSurecompand WaveBLisaprimeexampleof howpowerfulandsuccessful suchanalliancecanbe, revolutionisingtheglobal tradeindustryforthebetter Digitaltransformationof internationaltradereduces thecostsofengagingin internationaltrade,connecting morebusinessesand consumersglobally.This requirespolicymakersto addresstheunstoppable digitisationoftrade documentation End-to-end tradedigitalisationrequires globalaccesstoreliable, affordable,andfast connectionstoclosethedigital divideaswellasalegal frameworkenablingsecure datatransmissionacross borders

Dataandprocessstandards forthesubmissionofshipping instructionsandissuanceofthe billofladinghavealreadybeen establishedthroughDCSAand acceptedbymanycontainer carriers,withmoretofollow Whatiscrucialtomoveahead istheworldwide,acrossthe board,adoptionofeBLsand relatedtradedocumentsusing platformssuchasWaveBL’s platform

12-14Sept2023

GlobalSME FinanceForum 2023

WTOPublic Forum2023

55thAnnual Meeting

Sibos2023

3rdAnnualGlobal TradeandSupply ChainSummit LondonIPWeek 6.0

EnergyTrading WeekEurope

WomeninAML &Sanctions Forum

Americas

ITFA49thAnnual Conference

ACI’s5thConferenceon U.S.-ChinaTrade Controls InternationalTrade &ProsperityWeek

TradeFinance InvestorDay2023

EuropeanBlockchain Convention

TradeFinanceGlobal(TFG)istheleadingB2Bfintechintradefinance.

TFG’sdata-ledoriginationplatformconnectscompanieswithinnovative tradeandreceivablesfinancesolutionsfromover300financialinstitutions.

Weassistspecialistcompaniestoscaletheirtradevolumes,bymatching themwithappropriatefinancingstructures–basedongeographies, products,sectorandtradecycles.Contactustofindoutmore.

TFGisaleadingproviderofeducationalresourcesoninternationaltradeand tradefinance-acrossapp,podcasts,videos,magazinesandresearch.

Attractingaround160kmonthlyreaders,ourpublicationshaveaglobal audiencein187countries.

Ourspecialistcontenthubsprovidefreeguides,thoughtleadershiparticles andfeaturesonInternationalTrade,LettersofCredit,Shipping&Logistics, Risk&Insurance,Treasury&FX,Blockchain&DLT,Legal,Receivablesand ExportFinance.

TFGarestrategicmediapartnersfortradeconferenceprovidersaroundthe world

TFGalsohoststheInternationalTradeProfessionalsProgrammewithLIBF, andfundstheAccelerateScholarship,agranttohelpstudentstopursuea careerintrade.OthersknowusthroughourAnnualInternationalTrade Awards,celebratingoutstandingplayersandcontributorsinthetrade ecosystem.

Throughtheseactivities,TFGisdemocratisingtradefinance.