Today, we are seeing significant digital disruption in the business of trade and supply chain financing that is largely influenced by global events and geopolitics, changing regulations, compliance and control requirements, advancements in technology and innovation, and access to capital.

When examining these disruptors more closely, it’s clear there are a wide variety of factors that can impact global trade and supply chain financing. These can range all the way from elevated inflation (which has the potential to cause margin pressures) to geopolitics (which can impact globalization and force changes towards friend shoring) and near shoring. At the same time, complex and fragmented supply chains can introduce challenges like supply chain compliance and fraud mitigation. Supplier visibility and traceability is growing in importance to help achieve environmental, social and governance (ESG) targets.

These are just a few of the many key factors we see driving transformational change within trade and supply chain processes.

Transitioning from a fragmented to a data-driven supply chain

In the past, we have traditionally seen manual, paper-intensive trade processes that have the potential to generate large amounts of data. However, this data can often become trapped in silos and cause complexities, resulting in delays and increased costs. With the increasing demands of global trade, organizations are starting to embrace digitization, standardization and collaboration to accelerate time to value and reduce costs.

Technology is playing an important role in reprogramming the DNA of trade and supply chain financing. It can help connect disparate and disconnected manual processes and platforms to a data-driven and connected trade ecosystem. Siloed processes can become integrated by using intelligent workflows, which help enable seamless and automated exchange of financial, informational and physical supply chain data in one distributed network.

With these capabilities, a single source of truth can then be established across all parties, helping to increase trust between trading parties. This approach can provide users with new and more efficient ways of conducting and financing global trade.

How IBM is helping to digitize trade finance with a platform approach  

Digitization—along with standardization and collaboration within the industry—can help create a variety of benefits. For example, banks gain real-time visibility into their respective supply chains, eliminate paper-based processes and associated manual labor, improve speed to working capital optimization, enhance cash-flow forecasting accuracy, safeguard transactions against cybersecurity risk, enable greater supply chain resiliency and unlock wider procure-to-pay benefits.

At IBM, we recognize that this transformation will require adopting a platform strategy that lifts the supporting ecosystem, and we aim to deliver this using next-generation ‘as a Service’ business models.

As organizations look to modernize their trade finance journeys, we have leveraged the breadth of IBM’s technology and consulting capabilities to develop a Connected Trade Platform for the industry.

As part of our approach, we are sourcing digitally native business-process capabilities from multiple fintechs, given that no two banks are likely going to going to have the same set of applications or processes.

Our platform strategy is designed to build secured infrastructure that is optimized for regulated business processes and help support clients in their compliance journeys. It is also abstracted at a common infrastructure control plane that aims to make it easy for banks to adopt and consume. With a plug-and-play integration framework for banking-specific backend systems, the platform can help enable the flow of financial transactions from the front office to the back office.

At IBM, we believe it’s critical that this industry-specific platform is optimized to enable growth and de-risk trade for all the participants in the ecosystem:

• From a bank’s perspective, this can mean reduced time to market, elimination of fragmented and manual processes, and conformity to an individual bank’s security and compliance standards.
• From a buyer’s perspective, it can drive significant improvement in working capital, superior supplier performance and accelerated ESG initiatives.
• From a fintech perspective, it can reduce the barrier to adoption, enable an expanded go-to-market reach, deliver flexible integration with a bank’s backend systems and allow for simplified operations management of their respective applications.

“As banks strive to provide their corporate clients across the globe with solutions that can help them drive their businesses forward, it’s important that banks modernize their own processes. This modernization allows them to better digitize their trade finance processes, driving the benefits that will enable the growth of their trade businesses, whilst also creating a more streamlined client experience,” said Iain MacLennan, Head of Trade and Supply Chain Finance at Finastra.

Transforming trade finance with industry cloud platforms and AI

Core to this platform is IBM Cloud for Financial Services, a first-of-its-kind cloud designed to serve the challenging needs of regulated industries with laws, rules and regulations built in from the outset. Clients leveraging IBM Cloud for Financial Services through IBM’s Connected Trade Platform can take advantage of technical expertise to enable cloud deployment as they address their compliance requirements.

Additionally, artificial intelligence (AI) plays an important role. Although AI is what will unleash productivity for banks and corporate buyers, it will require responsible, transparent and explainable AI to transform the workflows and provide cross-border assurance. IBM technologies include watsonx.ai (the next-generation enterprise studio for AI builders to train, validate, and tune AI models for trade), watsonx.governance (an AI governance toolkit to enable trusted AI workflows) and watsonx Orchestrate (to automate back-office transactions using digital labor).

Finally, IBM Consulting’s Integrated Trade Finance Advisory, Integration practices, and Managed Services capabilities—which include more than 2,000 professionals in this domain—are helping clients accelerate their trade digitization journey.

As organizations strive to optimize trade and supply finance processes, now is the time to embrace digitization to transact faster and more efficiently while prioritizing security and compliance.