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Data In The Trade Finance Ecosystem

Leendert Grobbelaar, Group Trade and Supply Chain Product Owner at Standard Bank CIB

The trade finance ecosystem plays a crucial role in facilitating international trade by providing financing and risk mitigation services to importers, exporters and other participants in the global supply chain. In recent years, the trade finance ecosystem has undergone significant transformations driven by technological advancements and the growing importance of data – and we’re proud to be leading the charge in and for Africa.

The Evolution of Trade Finance

Traditionally, trade finance relied heavily on manual processes, paper-based documentation, and lengthy transaction cycles. The digital revolution has introduced automation, digitisation and data-driven solutions that have improved operational efficiency, reduced costs, minimised fraud risks, and enhanced transparency. Automating scrutiny of applications also improves the quality of validations.

We’re also working hard to use our wealth of data, better. There’s a lot of regulation that needs to fall into place before some of our internal projects can be commercialised, but we’re working hard with regulators to help realise the potential. In Africa, our regulation is particularly inward-facing and there’s not a lot of appreciation for the benefits of being able to do more with data. We’re explaining the power of cloud computing, illustrating the power of data and sharing our research to help drive change to open the minds of regulators and to show them what benefits can be unlocked if we use our data wisely.

The Role of Data in Trade Finance

Data is the lifeblood of the trade finance ecosystem, enabling stakeholders to make informed decisions, streamline processes and mitigate risks. The availability and effective utilisation of data have several key implications:

  • Enhanced Risk Assessment and Credit Scoring

Data-driven analytics enable financial institutions to assess the creditworthiness of potential borrowers and evaluate the risk associated with trade transactions. Access to real-time and historical data helps create accurate credit scoring models, improving risk management practices and facilitating informed lending decisions.

  • Improved Efficiency and Automation:

Data integration and automation streamline trade finance operations by reducing manual intervention, minimising errors and speeding up transaction cycles. Trade finance platforms powered by data enable seamless exchange of information, automated document verification and faster processing of transactions, ultimately enhancing operational efficiency.

  • Increased Transparency and Compliance:

Data-driven solutions enhance transparency and compliance in trade finance by providing visibility into transactional data, supply chain information and regulatory requirements. This helps mitigate fraud, money laundering, and terrorist financing risks, while ensuring adherence to international trade regulations. Our compliance department works hard on forward-thinking solutions to challenges, rather than being reactive.

  • Facilitation of Supply Chain Financing:

Data analytics and technologies such as the Internet of Things (IoT) enable the collection and analysis of supply chain data in real-time. This allows financial institutions to extend financing to suppliers based on the verifiable data points, such as inventory levels, production volumes and delivery performance, improving liquidity in the supply chain.

We looked at the finance and working capital services in the supply chain  and saw the need for reinvention, driving to digitise processes to offer quicker turnarounds and help our customers with working capital flows. That led us to launch a new digital front end for our trade business, with a primary focus on digitisation with quality data, improving processing and reducing turnaround time. We took time to understand the process and where digitisation could help – just because a process is digital, doesn’t mean it is at peak efficiency. The process allows us to improve risk management and offer better credit scoring in applications – essentially, it offers unprecedented transparency into a traditionally opaque process, helping us build trust with clients. It connects them better with the transactional value chain and gives them access to information about the status of their applications.

  • Unlocking New Opportunities

The vast amount of trade finance data provides valuable insights into market trends, customer behaviour and emerging opportunities. Financial institutions and other stakeholders can leverage this data to identify untapped markets, develop innovative products and enhance customer experiences, leading to new business opportunities.

Having access to more data ourselves – and seeing our clients able to access and share more data – allows us the opportunity to see how we can create different products for clients that solve their problems.

More Data = More Challenges

While data holds immense potential for the trade finance ecosystem, several challenges need to be addressed to fully capitalize on its benefits:

  • Data Quality and Standardization

Ensuring data accuracy, integrity and standardization across multiple systems, participants and the global ecosystem remain a challenge. From a data perspective, we believe that blockchain tech will form the rails from a technical perspective which will allow us to use the data we have better – and more safely. We’re participating in several proof of concepts internally and with the industry which will help standardise international frameworks and help with the widespread adoption. 

  • Data Security and Privacy

The increasing reliance on data raises concerns about privacy, security and data breaches. Robust cybersecurity measures, data protection frameworks and secure data-sharing protocols are critical to maintaining trust and confidence in the trade finance ecosystem.

  • Skills and Expertise:

The successful utilization of data in trade finance requires skilled professionals with expertise in data analytics, machine learning, and emerging technologies. Building a talent pool equipped with the necessary knowledge and skills is vital to support the growing data ecosystem in Trade Finance.

We need to take a look at traditional skills in the trade finance space and move with the times. If you don’t have the ability to understand or work with data as part of your modern skill set, you’re behind the curve. As we design the necessary skills for the future, data understanding and management will be front and centre – whether for sales managers, product managers, in operations or any other department. You can’t be an effective leader or manager if you don’t understand data in the modern sense.

Our internal skills academy offers a few learning paths related to data, which anyone in the organisation can access. All graduates entering our organisation also go through these learning paths so that they have the necessary skills to cope with the way the business – and the world – is moving.