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Across the board, most industries are rushing to take advantage of digitisation and integrate artificial intelligence (AI) to improve efficiency and drive growth. In comparison, however, the uptake of digital solutions in trade seems to be moving glacially. This is particularly paradoxical because supply chain resilience is essential for the functioning of the global economy – and the lack thereof is extremely costly.

Banks are central to the rollout of trade finance solutions, and they are well aware of the problems that can arise from lagging behind in the race to digitisation. Trade finance software for financial solutions and developments within the area are monitored closely, with banks on the lookout for technological development that could drive the industry forward.

Mahika Ravi Shankar, Assistant Editor at Trade Finance Global (TFG), spoke to Surecomp’s Head of Global Solution Consulting Suchi Guharoy, to discuss digitisation in supply chains and how AI can be implemented to resolve bottlenecks and improve resilience.

Fragile supply chains in the banking industry

Supply chain management in the banking industry is complex, a result of the many stakeholders involved coupled with high levels of regulation, both locally and internationally. Banks are increasingly turning to digital solutions to improve efficiency, but this can leave them vulnerable to cyber-attacks and data breaches, especially when third-party vendors are involved. 

The COVID-19 pandemic brought these issues in stark relief and provided a wake-up call to just how much a disrupted supply chain can impact every area of the economy. In 2021, supply chain disruptions caused delays of nearly 12 times the long-term average, knocking off as much as 5% of global industrial production in the subsequent year. 

The impact of the pandemic on the speed of digitisation was striking. “Banks overnight realised the importance of investing in a digital infrastructure and to having robust cybersecurity measures to support the changes,” said Guharoy. Institutions realised the value of real-time data monitoring and its impact on supply chain transparency and started using it to forecast and mitigate risk across the entire ecosystem. 

However, the rapid increase in digitisation brought along new risks. Not only are banks more vulnerable to cybersecurity threats, rates of fraud and trade-based money laundering have also been increasing as a result of an increased reliance on digital transactions. 

With money laundering on the rise and an estimated 2-5% of global GDP being laundered every year, the complexity of international trade provides a perfect opportunity for criminals to exploit – especially when digital transactions are involved.  

Because of this complexity and the variety of regulations and agents involved in a trade, it is difficult to spot instances of money laundering and effectively fight against them. Banks are investing in advanced technologies to improve transparency and detect frauds more accurately, but as fraudsters also turn to more sophisticated technology like AI, keeping up is becoming increasingly difficult.

Digitalisation is the cure for long delays

The difficulty is compounded by the fact that many banks still use manual checks and controls to approve guarantees – a method subject to human error which can often lead to long delays. Banks take as much as five days on average to issue guarantees, and longer if documents are incomplete or there is a high volume of applications. The issue is compounded by the fact that the compliance checks are often carried out by small teams using outdated systems which are inefficient and prone to errors. 

Guharoy said, “The massive delays in issuing guarantees by banks directly disrupts businesses, especially companies that rely heavily on these guarantees to secure contracts or to fulfil their trade agreements.” 

These companies see their cash flow disrupted and can experience significant reputational damage due to the delays; so long are the delays that companies are forced to break off a contractual obligation, and the bank must also pay a hefty fine. Banks are investing heavily in solving these issues, using digitisation and enhanced communication to reduce delays. 

This ensuing digitalisation can do more than just reduce delays: digitisation and automation of the process make for a more streamlined experience for the business applying for a guarantee and increase efficiency on the bank’s side. Replacing paper-based communication with online real-time collaboration significantly reduces bureaucracy and simplifies the process – while also positively impacting the environment. 

AI: changing the game in communication and data 

AI’s impact on almost every industry is lauded for improving efficiency – but in international financing, its benefits go far beyond that. 

Just as criminals use AI to try to evade anti-money laundering regulations, banks have started using the tool to enforce them. Institutions are using AI to analyse a much broader range of data than was ever possible to identify fraudulent or high-risk transactions, flagging them more accurately than with traditional methods. 

The holistic view provided by AI helps mitigate risks related to fraud and money laundering and largely speeds up the evaluation of credit assessments, providing much more accurate results. 

AI also vastly improves communication, both supporting the customer during the application process and facilitating data sharing between every part of the trade finance ecosystem. With AI, data can be shared and analysed in seconds between every institution involved in a transaction, from banks to insurers to shipping companies. 

RIVO’s approach to the trade finance ecosystem

RIVO™, Surecomp’s flagship strategic platform, is using the benefits of AI and digitalisation to their full potential, revolutionising the way institutions handle their trade finance processing. The platform provides a full life-cycle management of a wide range of trade finance instruments, streamlining the user experience and making trade finance more accessible and efficient for all parties. 

“At the core of RIVO is the ability to foster real-time collaboration, and that’s crucial for all the parties and stakeholders in the trade finance process,” said Guharoy. RIVO’s mantra of ‘engage, connect, and enrich’ highlights its enormous potential as an enabler of secure trade finance transactions and more resilient supply chains. 

RIVO™, which has recently been selected by global commodities trading house EP Resources to handle the company’s trade finance operations, lets businesses share documents in real-time with banks and insurers, vastly reducing delays caused by paper documents and human error. 

By connecting organisations to the broader trade finance ecosystem, the process for companies is much faster and more intuitive. The use of AI to automate the guarantee issuance process is also crucial in both decreasing waiting time for guarantees and improving the detection of suspicious transactions. 

Environmental, sustainability, and governance (ESG) compliance can prove challenging for trade finance institutions. By automating the entire financing process, RIVO™ can make it easier for banks to implement ESG regulations and for companies to be transparent about their sustainability levels.

While digitisation has gained momentum in the trade finance world in recent years, there is still a long way to go. Banks and organisations need to implement automation and modernise their processes to keep up with the industry and comply with new regulations on e-documentation 

Guharoy said, “The industry will continue to shift towards an end-to-end digital trade finance solution: the world needs to come together to eliminate the delays and operational complexities that loom large amidst multiple stakeholders.”

Guharoy also predicts a strong focus on sustainability as banks increasingly focus on products that align with ESG principles, like green financing. The effect of innovation and automation in this, especially in the facilitated sharing of information for all trade finance institutions, will be invaluable and “allow everyone in the industry to thrive in the ever-evolving ecosystem of trade finance,” she said.