Jason Simon explains how FinTechs can help optimize trade finance

In Latin America and other regions, FinTechs are often associated with consumer services offered directly or through an established player, such as a bank, but they are also quietly supporting institutions in the back-office areas. Jason Simon, an expert in the fields of FinTech and eCommerce, looks at how trade finance could get a lot of fuel from FinTechs.

Objectives include reducing costs and risks and optimizing processes, noted participants in a teleconference organized by the Americas chapter of the International Trade and Forfaiting Association (ITFA). One goal of ITFA is to help its affiliates, including those in the Americas, move along the digital highway. ITFA is an association of companies, financial institutions, and intermediaries involved in global trade, forfaiting, supply chain, and receivables financing.

“The adoption supports a broader offensive to digitize the trade sector, to digitally and securely bring together different players such as banks, insurers, and exporters, to improve the speed and transparency of transactions and create new business opportunities in areas such as receivables financing,” explains Simon.

Four main areas FinTechs are working on with financial institutions and their technology providers are data management, artificial intelligence, workflow digitization platforms, and distributed accounting technology, the latter the least advanced area. “Adoption risks are coming down quite a bit,” Simon asserts. “However, the benefits for early adopters are increasing because this new way of working is what businesses expect and they will be looking for banking partners that offer a growing digital experience.”

The trend of FinTech penetration outside the consumer area of financial institutions began with accounts payable and accounts receivable financing and treasury management. Adoption is increasing in areas such as trade finance and process digitization, with onboarding and customer insight and request for proposals as emerging segments of the FinTech focus.

FinTechs really help financial institutions address the global trade finance need. “We’ve heard about the trade finance gap and that’s definitely where there are new ways to originate more by digitizing more and providing better service to your end customers, your financial institutions, whether they are credit insurers or non-bank financiers.” Simon states.

When FinTechs focus on one segment or function, the benefit is that they are highly specialized and try to become the best at what they do, but they are not trying to do everything or change what works, but to complement existing back-office systems, front-office systems, portals and messaging.

ITFA’s 37 affiliated FinTechs include Intix, which focuses on business activity tracking; Enigio, which focuses on digitizing original documents; Traydstream, which deals with automated document verification; and Mitigram, which is involved in digitizing trade finance flows.

There is no doubt that there is close collaboration between FinTechs and financial institutions, but also between FinTechs and major back-office providers. This is primarily an opportunity when the business does not change, but it can be done in a much more efficient way by reducing costs, reducing risks, and making sure people have more interesting jobs to retain them.

Based on the software-as-a-solution model, FinTech Traydstream, with offices in the UK, India, and Pakistan, converts paper-based information into digital information using optical character recognition technology before verifying and classifying it, leveraging machine learning. On the other hand, Bawany, whose firm works with Standard Bank and another large US commercial bank, among other clients, highlighted the potential of blockchain and added that interoperability and coordination between different vendors were a real hurdle.

It is well known that the world is changing and, in this new wave that has already arrived thanks to technology, the term FinTech appears again and again. There is no doubt that this business concept that is revolutionizing the financial market on a global scale is here to stay and has now been able to define those financial services that use technology to make life easier for the customer and improve the user experience. In other words, online credit, online currency exchange, online payments, digital banking, among other services. It doesn’t take much wisdom to define these as products or services that overlap technology and money.

FinTech companies have shown that there is another way to manage customers’ money, a faster, more convenient, and transparent way. Their strength lies in offering faster solutions, with fewer resources and using less money.