Global trade is under unprecedented pressure from COVID-19 and geopolitical challenges, with supply chains affected by a range of factors firms cannot control. As liquidity dries up and the global economy shrinks, banks should prepare for higher levels of non-performing loans, and should find ways to move credit risk off their balance sheets.
At the same time, banks must transform traditional trade finance and supply chain finance (SCF) offerings to provide credit relief and flexibility to customers who are under unprecedented strain. In addition, geopolitical and other factors mean some firms are shifting production out of China at short notice. If banks cannot provide appropriate core services to clients in their new locations, they risk losing them.
On top of that, trade finance is a predominantly paper-based, manual process that is ripe for digitisation. COVID-19 has added to the urgency to digitise, with customers and staff working remotely. As a result, and with non-bank competitors moving into this space, banks must become more agile and innovative: digitising documents, streamlining processes and employing technological solutions to resolve existing inefficiencies.
Automating existing processes will cut risk, boost revenues and improve customer satisfaction, as well as lower banks’ exposure and risk, and position them strongly for the future. Banks should also work with authorities to ensure standardised cross- border technology, processes and standards.