Trade finance is considered one of the most established forms of finance, having been practiced since the time of Mesopotamian civilisations. Commercial banks were up until recently, the key players in the market, using manually established networks and building a record of assets, as today, based on their approved credit limit per country and industry. Issues often arose when banks no longer could facilitate trades as their credit lines were already filled, or when exporters wished to start exporting to a market outside of their existing bank’s network.
Today, global trade is estimated to exceed 19 trillion US dollars but the largely manual process of obtaining trade finance can limit some exporters’ access to potentially available pools of capital in the global market. As if multilateral bidding processes and curtailing price discovery was not complicated enough?
The dissolute leap of artificial intelligence (AI) has already propelled business strategists to reshape their business models. Online trade finance marketplaces make the process of accessing trade finance more agile and flexible by enabling businesses to showcase their financing needs to multiple potentially interested funders in a single, optimised manner. The export finance industry, meanwhile, can benefit from the artificial intelligence (AI) powered exports as they have access to online information, the convenience offered by credit insurance online, the discovery of prices in global deals, as well as details of all key aspects of the underlying transaction, which was always the crux of the trust issue in the past.
Conventional trading processes are also suspectable to leaks of confidential information, as most conversations via email and phone can be leaked. E-marketplaces make all information encrypted. Data and discussions are more secure, and every event is recorded without being deleted or altered, which also eliminates the risk of a privacy breach. AI and digital trade finance markets exercise automated pricing mechanisms, giving freedom of choice and enhanced security which brings the exporters and the funders on a shared platform that democratises trade finance and increases the efficiency of profitable exports to the new markets.
AI-powered solutions are committed to providing transparency by looking at the credit history of borrowers whilst machine-learning, which is a subset of AI, builds a predictive model by creating trends from the existing data which points to enhanced decision-making processes. For example, data analytics provider company “Kensho” which utilizes machine learning techniques, quickly predicted an extended drop in the market value of the British pound. After machine learning success stories like this went viral globally the S&P announced that it would be acquiring Kensho services for roughly $550 million.
FinTech offers a single-window marketplace connecting exporters, funders and insurers on a single platform. By availing of credit insurance online, the exporter can get lower cost of funds and funders on the other hand mitigate their investment risk. Fineon Exchange’s export finance marketplace not only provides access to credit insurance and export finance but also offers certain advantages like global reach for funders and exporters, flexibility in trades, and security and transparency of all transactions.
