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2018 – Trade Finance Trends

1. Cryptocurrencies took centre stage

At the start of the year, TFG were cautiously optimistic about the use of cryptocurrencies in trade finance by major banks. Admittedly we underestimated the use cases of blockchain based cryptocurrencies financing trade, including the first Letter of Credit transaction between Spain and Mexico, facilitated by BBVA. The spike in major cryptocurrencies also came as a surprise to us, driven by huge media attention, and high profile investors purchasing popular currencies.

2. New players in trade finance

2017 saw the rise of new financiers in the trade finance space, in particular those within the supply chain; logistics companies such as Maersk, freight forwarders and ecommerce disruptors such as Currenxie, using Amazon trade history data to offer trade finance to sellers. As well as this, facilitators of trade finance such as the TradeIX platform have sprung up.

3. Regtech and Cyber Attacks

Anti-money laundering, know your customer / goods, and know your customer’s customer were no longer just buzzwords in 2017, but now standard practise by trade financiers. As a result, we’ve seen the rise of compliance and due diligence costs, yet the need to prevent terrorist financing or prevent money laundering remains paramount, as highlighted the key theme in Sibos 2017.

Maersk suffered a ransomware attack in June 2017, crippling its IT logistics systems. Despite working with IBM to implement blockchain systems to prevent such cybersecurity attack and store data more securely, this was certainly a wake up call for the maritime industry.

As well as this, the rise of machine learning algorithms to predict default risks, supply chain mechanics and artificial intelligence can help reduce costs significantly within the industry.

4. The Year of the Euro

On the 25th June 2016 when Britain voted to leave the EU, the pound plummeted by around 12% versus USD and EUR, but even today, remains roughly 9% weaker than it was in the first half of 2016. Sterling has seen a range of nearly 11% against the euro, ending the year very much in the middle of that range. The result of this for trade is that it’s been more expensive to import, causing increases in food prices and inflation of around 2.8% in 2018.

That said, the weakened pound has yielded opportunities for exporters as we noted, and continues to drive trade.

5. TFG International Trade Awards

This year Trade Finance Global’s inaugural international trade awards recognised many new starters and disruptors, a first in 3 years. The international trade awards highlighted those who were making considerable steps to connect the dots in the supply chain, tokenise trade and help SMEs access trade finance globally.

rajesh

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