Global trade is going through a “paradigm shift” towards digitisation as a result of remote working during the coronavirus outbreak, say leading trade authorities in the UK.
Until recently, much international trade was conducted using paper letters of credit and bills of lading.
However remote working during the pandemic has made increased digitisation inevitable.
Secretary general for the UK branch of the International Chamber of Commerce (ICC), Chris Southworth, told today's Daily Update (2 April) that “digitisation will be central to how fast we are able to recover from the Covid-19 crisis.”
“We are all, in effect, taking part in a wholesale change in the way we work and it’s happening almost overnight. We will look back at this moment as a paradigm shift on digital trade, just as the economic crisis of 2008-09 was a paradigm shift towards online purchasing.”
Trade financing and supply chains are having to adapt faster than ever, the Global Trade Review (GTR) reported on 1 April.
The banking industry’s issuing of letters of credit, for example, is being impacted by delays in the delivery of goods and remote document inspections.
Financers and funders are using online solutions to ensure trade continues to be properly funded.
Bibby Financial Services told the Daily Update it is hosting virtual meetings and using online tools such as DocuSign and Microsoft Teams to keep funding flowing and maintain communication with clients.
Meanwhile Deepesh Patel, editorial director at Trade Finance Global, said the sector in general had “certainly accelerated trade finance digitisation projects” and sped up “the move towards end-to-end digital processes for both banks and corporates”.
Looking at the broader picture, Deepesh said there are two key elements to the digitisation movement:
“We have seen plenty of guidance published around the legal standing on accepting digital documents, e-signatures versus wet signatures, and confirming banks not needing to see physical paperwork.
“We’ve also seen an increase in bank-fintech and fintech-fintech partnerships within trade and supply chain finance. The move towards fully digital transactions and document processing as well as DLT (distributed ledger technology) and non-DLT based platforms have never been more important.”
A “new normal of paperless trade” and more flexible working is now likely to emerge, Patel says.
Chance for UK to take the lead
Crisis breeds opportunity and Southworth argues the UK’s strong financial sector and tech-savvy businesses are well placed to make the most of this paradigmatic shift.
“The UK has a real opportunity to create a competitive advantage, which is why there is such an appetite to remove legal barriers. It’s important we bring small business with us and support them to make the transition. That means skilling up, digitising systems and developing digital export strategies.”
If you are interesting in finding out more about the acceleration of digitisation in trade finance as a result of COVID-19 listen this recent podcast from TFG.