Trade finance digitization: the skills, talent and standards needed

In this guest post we spoke to Hannah Nguyen from the ICC Digital Standards Initiative and Tat Yeen Yap from fintech, MonetaGo. In the first section, Hannah explains the need for trade finance digitization, what changes to expect in the next 5 years and how the ICC is helping to empower those changes through new standards and toolkits. In the second section, Tat Yeen goes into more specifics about the talent and roles needed to support these changes.

A paper-based system

Every single day, four billion pieces of paper are circulated between the physical and financial supply chains of businesses involved in cross-border trade. Many of these documents are used to satisfy requirements stipulated in letters of credit and documentary collections.

While rules and training are well-established in this paper-based world, an over-reliance on paper is a source of cost, delay, inefficiency, fraud, error and environmental impact. A cross-border transaction involves multiple actors and on average requires the exchange of up to 36 different documents and 240 copies.

Imagine the staggering amount of man hours, costs and carbon footprint associated with courier and manual reconciliation involved in ensuring that the documents get transported to the right parties and checked for accuracy and authenticity before they can be deemed fit for purpose.

Moving towards trade finance digitization

As trade and supply chains grow more complex—involving more intermediaries, service providers, regulatory clearances, and certifications— companies, especially MSMEs, face greater challenges in accessing financing and, by extension, more complexity in market access and documentation. At the same time, banks face mounting pressure to improve compliance, reduce costs, go green and provide more meaningful work for their employees.

Since the COVID-19 pandemic started ravaging the world in Q1 2020, financial institutions have implemented a series of enhancements to reduce over-reliance on paper-based processes, ranging from electronic signatures to using purely computer-generated documents. The industry has benefited from the accelerated usage of some well-known technologies, such as OCR and AI, to process and analyse paper-based documents more efficiently.

However, there is still a lack of high quality and reliable data on a real-time or near-real time basis. The trade finance gap grew to an all-time high of $1.7 trillion in 2020, according to the 2021 Trade Finance Gaps, Growth, and Jobs Survey by the Asian Development Bank (ADB) because in a large part, banks did not have the data needed to access the risks of certain trade finance transactions and clients in a time-and-cost effective manner.

While digitizing trade finance will not solve every problem, it is a huge enabler to help increase data quality while reducing fraud, authentication and compliance risks.

Take for instance the various frauds related to paper-based title documents, especially some of the high-profile cases in the last 10 years; the Qingdao metal warehousing scandal in China in 2014, the duplicate warehouse receipt issues in some of the LME warehouses in 2017 and most recently the forged documents behind the Hin Leong scandal that rocked the Singapore trading community two years ago. There are also numerous other cases of fake bills of lading that may not make the front page.

Trade finance digitization is a matter of urgency for banks and non-bank FIs alike because it will distinguish the competitive, effective and properly risk-managed trade financier from the rest, while enabling a host of new opportunities to be captured.

What to expect over the next five years

In the next 5 years, we can expect to see much more collaboration between the private sector and public sector to gain access to and share data digitally in a trusted and scalable manner. Imagine what you can do with trade finance if you are able to verify not only the transaction, but also how ESG-compliant the trade is, right from the KYC, KYG, KYS to what kind of transport mode the goods arrive in, and the carbon footprint associated with that.

For that future to happen we need everyone in the supply chain to be connected. Because we live in a diverse world where different actors have different choices when it comes to technology, vendor and digital maturity, we need an underlying foundation of standards to facilitate efficient and trusted exchange of information between ports, carriers, banks, border agencies, importers and exporters.

This means leveraging the same data dictionary and aligning on the fundamentals of a trusted technology environment to enable seamless end-to-end data exchange, all within a globally harmonized, enabling legal framework.

Why is the appetite for trade finance digitization stronger now than before?

These changes are happening now because we have a new wave of talent entering the industry, as well as a large pool of talent already working in it but acutely aware of the limitations of the status quo.

Many governments have also recognized the potential for electronic documents to make global trade more efficient, secure and resilient to the impact of unexpected international events such as the recent pandemic and shipping disruptions. This is evident in the growing number of jurisdictions around the world aligning their domestic legislation to the UNCITRAL Model Law on Electronic Transferable Records (MLETR), to enable the legal recognition of electronic transferable records globally.

How is the ICC helping to empower these changes and ensure they become a reality?

To embrace this change, trade finance professionals ranging from heads of department to operations executives, need to have a fundamental appreciation of the various components required to digitise trade, especially at the intersection of the physical and financial supply chains.

This includes an understanding of how electronic transferable records are created, how to verify identities in the digital world and how to effectively apply the ICC e-rules such as the eUCP and eURC.

Set up at the end of 2020, the ICC Digital Standards Initiative (“DSI”) has a focused mission to accelerate the trade digitization journey globally. This entails three separate but interlinked pillars:

  1. Devising a new ecosystem of standards and technology enablers where relevant data from the physical supply chain can be efficiently fed into the financial supply chain to power payment, insurance and trade finance processes.
  1. Modernizing the rules for trade so that banking industry rules and local laws are aligned with the objective of recognizing electronic records.
  1. Empowering businesses and policy makers to acquire new capabilities, invest in infrastructures and training necessary for the transformation needed at the operational, organizational and systemic levels.

Given the scope of change necessary to create a truly digital trade experience, getting started can sound overwhelming. But there are standards, technology solutions, industry e-Rules and best practices that can facilitate the process.

An example is the newly released “Standards Toolkit for Cross-border Paperless Trade” jointly authored by ICC DSI and the WTO. Close to 100 available standards, frameworks and initiatives that offer the potential to enable all parties in global supply chains to speak the same language have been identified, ranging from country codes and legal entity identifier standards to electronic trade document standards and interoperable digitalisation frameworks.

At the same time, the DSI is partnering with ICC Academy to present an all-new Masterclass in Trade and Supply Chain Digitisation.

Similar to the way bankers can complete a certification on the Incoterms® rules or trade finance techniques with the ICC Academy, this new Masterclass will provide attendees with a deep understanding of the various components required to digitize trade at scale and how harmonising global standards and legal foundations for digital trade can build effective bridges between previously disconnected “digital islands”. This will, facilitate not only data connectivity but also financial inclusion and sustainable growth for all.

Who will support these changes? The need for tech talent in the trade finance industry

In this section Tat Yeen Yap, Managing Director, Asia Pacific at the fintech, MonetaGo, explains the type of skills and roles that will be needed to support the changes identified by Hannah Nguyen in the first section of this post.

There will be growing demand for software engineers, UI/UX engineers, integration engineers, data analysts, data scientists and many other ‘techie’ roles to work on trade-finance related projects. We envisage the following trends:

  1. Digitization of trade finance will create new and varied data sources with an expanding number of data points. The need to handle, process, and make sense of this data will create increased demand for people with knowledge and experience in database technologies and data analysis, including machine-learning models and data storytelling. Those with expertise in and experience with ledgers and systems of record and cloud-computing technologies will also be in high demand.
  1. Innovation and collaboration will be the main forces propelling the digitization of trade finance. There will be new areas of information technology projects that require people who have knowledge and experience in engineering, project management and IT security to digitize the existing trade finance workflow and implement the technologies for use cases.
  1. Given the highly regulated environment that providers of trade finance solutions operate in, those with knowledge of regulatory requirements and constraints in these environments will also be in high demand. In this context, knowledge of confidential computing technologies, cybersecurity, along with data privacy and residency, will be important skillsets to successfully deploy digital trade finance solutions.
  1. In parallel, we expect to see increased demand in fintech companies for people with trade finance knowledge who can relate “tech” to “fin.” People with the relevant trade finance background looking to make mid-career switches into the fintech world will be in demand for positions related to product development and customer-facing roles such as sales and implementation.

For an example of a mid-career switch from banking to fintech, read ICC Academy’s previous interview with Tat Yeen: ‘Always be learning’. Lessons from a 29-year career in banking and trade finance

Why is it an exciting time for tech talent to be part of this industry?

The industry-wide recognition of the need to digitize trade processes has been growing, but there is still plenty of work needed to be done to shape the trajectory of the trade-finance digitization journey.

It is an exciting time to join this industry as a tech talent because you have a unique opportunity to apply cutting edge technological processes that will help transform and grow an industry that has often been slow to adapt to technological changes but is now primed to accelerate in going digital.

The digitization of trade finance brings myriad opportunities for tech talent to use their skills to serve economic growth, poverty reduction and private financial flows across economies, which are all benefits that trade finance brings to the world. According to the World Trade Organisation, 80-90% of world trade relies on trade finance. The Asian Development Bank estimates a $1.7 trillion trade finance gap, which hinders international trade.

Digital trade finance solutions can help reduce that gap by making trade finance more accessible, efficient and safer, to the benefit of trade financiers and the customers they serve.

Business case study: MonetaGo

MonetaGo is the world’s foremost provider of duplicate financing prevention technology in trade finance. Its Secure Financing solution has been proven-in-production since 2018, and is being deployed globally in partnership with SWIFT to enable their member institutions to detect both domestic and cross-border duplicate financing involving multiple document types. Click here for more information.

Besides trade finance deduplication, the Secure Financing solution provides authentication of transaction data against trusted sources of data. Integration of MonetaGo’s services with providers of such data on a global, regional and domestic level is an area of continuous development.

MonetaGo expects to add at least 50 new hires to its product and engineering teams in 2022-2023, besides growing its sales and commercial teams. These roles will include:

Product Managers:

Each candidate’s strong understanding of international trade, trade finance techniques and documentation will form a solid foundation for the candidate to advance his/her career goals with MonetaGo’s product team.

By developing and exercising essential skills in product design and development, the candidate will be responsible for participating and leading both product discovery and development to achieve specific product goals; engaging with customers, defining product use cases, validating MonetaGo’s product solutions, and collaborating with cross-functional team members to deliver the solutions.

Engineers:

Each candidate will be working alongside innovators and technologists in the engineering team on the full software development life cycle, including design, analysis, development and delivery of software components for MonetaGo’s suite of products.

The candidate will be exposed to complex financial workflows, within the context of trade and trade finance, develop his/her understanding toward specific business requirements and specialize in customizing MonetaGo’s solution services for diverse workflows.

Key skills required for these roles include:

  • Knowledge of agile project management methods and enterprise product development;
  • Strong analytical and problem-solving abilities, including ability to anticipate, identify, and solve critical problems;
  • Knowledge of financial products and services;
  • Strong inter-personal, communication and presentation skills;
  • Advanced Microsoft skills and other software tools relevant to the role.

For current available roles, visit the MonetaGo careers page.

Ready to learn more?

ICC's industry-accredited e-course: Digital Trade Finance & Fintechs.