The latest edition of the annual ICC Trade Survey was recently released. We strongly recommend reading the report in depth.
Within this, and the next, blog we will address a number of the survey findings.
The survey gathered 255 responses from banks located in 98 countries. As mentioned in its analysis, the survey was designed to provide wide-ranging context and analysis, consideration of policy and advocacy activities linked to trade and finance, as well as specific commentary on the transformational developments in financial technology digitisation of trade and the role of non-banks in financing international commerce.
It is interesting to note that the largest share of participating banks were those with a trade operations presence in a number of countries, but within one geographic region. Correspondingly, more than a third of the correspondents were banks with 50 or less staff handling trade finance business.
The WTO, amongst others, estimate that as much as 80% of annual global merchandise trade is enabled through some form of trade financing. This can vary from traditional trade solutions such as documentary credits to innovative SCF solutions.
There is no doubt that the growth area is in SCF, although traditional trade finance still remains important, despite doomsayers predicting the disappearance of the documentary credit for some years. 78% of respondents affirm that traditional trade finance solutions will remain relevant and either show static growth or will grow. Only 21.9% predict a reduction in such solutions.
It is no shock that the prime identified reason for low growth relates to compliance and regulatory requirements, with over 50% of respondents stating this as an issue. At this stage, new technology from competition and the FinTech industry is not seen as a threat; possibly because many of the banks count such developments within their own portfolio of trade solutions.
Of interest is the fact that almost half of respondents had seen an increase in trade finance revenues with only a third reporting a decrease. As the report states, this is an encouraging and positive sign in light of still modest levels of trade growth and the absence of the commodity super-cycle that fuelled a significant portion of global economic activity, trade and trade financing.
Focus was then moved to the most important area of development and strategic focus for the trade finance industry over the next 12 months. 43.5% of respondents identified the key area as technology relating to digitalisation or FinTech/platform development. It is also worth highlighting that almost 18% still identify product development within the traditional trade finance field as paramount.
In respect to the area of greatest potential for growth and evolution in the financing of international trade, it is perhaps not surprising that almost 40% identified SCF, followed by almost 30% nominating digital and online trade.
Related to this finding is that over 37% of respondents see digital channels as a high priority for impacting sales and attracting significant growth, with a further 21.4 % stating that such an approach is under analysis and consideration.
However, almost 18% believe that the technology is ahead of the business. As to where the impact will first be seen, over 62% of respondents perceive that advanced Asia and Europe are the regions most likely to lead in terms of achieving truly digital trade flows.
https://iccwbo.org/publication/2017-rethinking-trade-finance/