US banks on trade shifts, rising costs and digital transformation

At a roundtable held on the sidelines of GTR US in New York in December, leading voices from the country’s local, regional and international banks discussed shifting trade patterns and the rise of supply chain finance. They also explored how collaboration and technology can address challenges such as regulatory demands, ESG progress and cross-border complexities.

Roundtable participants:

• Joon Kim, managing director, global head, trade finance, cash management and solution structuring platform group, BNY Treasury Services (host and chair)
• Lydia Lopiparo, managing director, US head, global trade finance, TD Securities
• Emy Ruiz, SVP, head of global transaction banking, global trade and supply chain finance, Fifth Third Bank
• Thomas Sakellariou, business director, structured export finance, Intesa Sanpaolo
• Brenda Santoro, head of global trade, SVB, a division of First Citizens Bank
• Priyamvada Singh, global head of supply chain finance and co-head of global trade finance, Americas, SMBC
• Nick Smit, head of financial institutions, ING Americas
• Michael Stitt, head of supply chain finance origination, US Bank

Kim: It’s great to have both US and international banks with strategic operations in the Americas here today – thanks for joining us.

To start us off: following the pandemic and as we return to normalisation, trade finance remains a critical part of transaction banking. With evolving regulatory landscapes and the ongoing digital transformation, what trade finance products are you seeing in high demand in the US? How are your banks adapting to these changes?

Smit: There are three key trends in trade right now. Trade is growing again, with projections around 3% in 2025. Secondly, trade flows are shifting – Mexico is now more important to US trade than China, for example, reflecting the rise of nearshoring and friendshoring. Lastly, open account dominates about 80% of trade, a huge shift from earlier days.

What does it mean for our business? For most of our portfolios, traditional trade is probably flat or down because of the rise of open account. We’re likely all focusing more on structuring supply chain and receivables finance, and building teams and capacity around that.

At ING, we’ve also seen a big rise in commodity finance as flows between regions like Asia, Mexico, and the US grow, so we’ve created a dedicated commodity finance group to focus on those opportunities.

Stitt: We’ve shifted focus from traditional trade to supply chain finance. For us, that means approved payables structures and receivables purchases – not insured pools. Receivables ramp up much faster, with shorter sales cycles and fewer parties involved. Onboarding 200 suppliers under a payables programme, for example, means 200 sales calls, whereas receivables are simpler and quicker.

Traditional trade is still an important trade tool, but increasingly becoming more targeted where letters of credit and doc collection products are required.

Sakellariou: Supply chain finance and receivables finance are definitely in focus, but what’s interesting is how fintechs are reshaping the market. Where we’d typically see traditional supply chain finance, we’re now seeing irrevocable payment undertaking (IPU) structures, which are being actively pushed by corporates.

In receivables finance, we’re also noticing more demand for buyer pools – but managing 20 or 30 obligors can be a challenge. At Intesa Sanpaolo, we’re working on an offering to address this.

Another growing area is inventory finance. Lessons from the pandemic have made resilient supply chains a priority, and banks that can support inventory-focused solutions are positioning themselves well in the current environment.

Ruiz: We’re also seeing requests for purchase order financing, especially in pre-shipment stages. This trend is more common in the middle market space.

Longer tenors are becoming the norm. For example, while receivables financing used to cap at 180 days, we’re now seeing requests for 360-day tenors or longer. Some corporates are even asking us to consider multi-year contracts, like two- or three-year deals, and to bifurcate payments within those contracts.

While we still see receivables as short-term, many corporates view three- to five-year contracts as ‘short-term’ and want solutions aligned with that perspective. We’re working on ways to support these requests, allowing us to buy into payment streams without fully committing to long-term contracts.

Kim: That’s quite encouraging. If you look at the data, the trade finance gap shows that while most are willing to take risks on large corporates, there’s a real opportunity in taking on middle-market and SME risks. If more banks can step into that space, it could be a significant positive for our business.

Ruiz: Exactly. By focusing on the middle market, you’re helping these companies become more resilient, competitive and sustainable. You’re offering them solutions that were once only available to large corporates, now tailored to their needs. This approach can elevate them to the next level. That’s why we’re adapting our solutions – customising them by industry or segment to better support their growth and success.

Santoro: I’d like to expand on that. We’re at an early but exciting stage for the combined entities of legacy Silicon Valley Bank (SVB), First Citizens and CIT. These businesses together present significant opportunities in the trade space. While we’re still in the early phases of integration, the potential is clear.

For SVB, with its focus on the innovation economy, trade-related financing often sits within the ABL space, where traditional debt structures are more the norm.

There’s strong demand for standbys to replace traditional trade instruments, like bid bonds or guarantees, particularly for clients selling to governments overseas.

CIT brings supply chain finance and international factoring into the mix, and the middle-market segment remains untapped. Bringing these capabilities together creates a unique opportunity, with the middle market as a real sweet spot for trade. Once integration is complete, I see tremendous potential to grow this business.

Singh: I’d also highlight the regionalisation of trade, particularly with increasing flows into Latin America and Mexico, as an important development. Trade patterns are evolving, with growing demand for trade finance supporting these flows. Given our presence across North and South America, we’re well-positioned to capture this momentum, especially in key economies like Brazil and Mexico – there’s no Latin America story without them.

Mexico has emerged as one of the US’ largest trade partners, while Brazil is playing a bigger role in global trade, including flows with Asia, particularly China. US companies operating in Latin America are also increasingly focused on working capital optimisation in local currencies. They’re looking to their global banking partners, like us, to step up and deliver tailored solutions in these markets.

Ruiz: We’re also seeing a shift with the manufacturing resurgence in the US. A lot of companies within our footprint are looking to expand or partner with businesses in Mexico, Brazil and other markets. They’re seeking local funding and working capital but approaching US banks to structure the credit, often leveraging parent guarantees in the US to support their international operations.

This is an area where we’d love to support our clients more effectively. However, as regional banks, it often raises the question of how we partner with larger global banks to provide seamless solutions while keeping everything within a unified structure.

Kim: So how are you working together – global and regional banks – to build more robust trade finance business? How are you addressing liquidity challenges and expanding international access for customers, especially compared to 20 years ago when banks were more siloed and less collaborative?

Ruiz: We’ve shifted our strategy around collaboration, focusing on building deeper relationships with a select group of key global and foreign banks. Instead of working with a large number of banks, we’re prioritising those with strong reach in critical markets like China, India and Mexico. This approach allows us to create a more extensive and robust network.

In the past, spreading business thinly – giving certain banks just one letter of credit per quarter, for example – didn’t foster true partnerships. It was more of a vendor relationship, which limited pricing and collaboration opportunities.

Santoro: One of the key priorities for the trade business is ensuring we have the right partner banks in place. Internally, I’m focused on driving a more strategic approach to these relationships. Given the scale of First Citizens and its various entities, it’s essential to have strong banking relationships to enable our product offerings across the board and support the firm at an enterprise level.

Lopiparo: TD has a developed, strong trade business, focusing on exports, imports, standbys and bank guarantees. I joined about six years ago, and since then, we have been growing our traditional trade offerings, especially for our global corporate TD Securities clients. The growth has been steady in this area, but we are not at a point to roll out supply chain finance programmes. Instead, our immediate focus is on investing where it matters for our customers with whom we have longstanding, trusted relationships, by providing innovative solutions for their working capital needs. To this point, we have several partner banks reaching out to us for participation opportunities. These partnerships work well when they align with our client needs, and we have seen great collaboration across the banking industry.

Furthermore, while we directly issue standbys and bank guarantees in several jurisdictions, the US, UK, Canada, and Singapore, we leverage our FI relationships to extend our reach and better support our clients globally.

TD’s FI team works closely with correspondent banks, enabling us to issue in markets where we do not currently operate. We value strong, reliable relationships with both our clients and FI partners.

Singh: It’s become a much more collaborative space, with most banks adopting originate-to-distribute strategies, which makes strong banking partnerships essential.

Another critical aspect is the role of being a ‘bank for banks’. US and European banks play an important role in providing finance to emerging market banks, leveraging access to liquid dollar markets or G7 currencies. This support is essential for financing trade flows in emerging markets.

There’s still a significant need for FI trade to continue growing, and banks with cohesive, strategic FI approaches are well-positioned to meet that demand. By extending trade finance loans and structured solutions to emerging market banks, we address a need that remains underserved in the global trade ecosystem.

Smit: When it comes to emerging markets, the key challenge is primarily bank risk, and there are three main factors to consider. First, the regulatory burden: our regulators have significantly increased risk-weighted asset (RWA) requirements for credit risk models, adding complexity. Second, rising costs: KYC requirements have intensified, driving up costs and impacting our return on equity.

The third factor is the relationship angle. As has been mentioned, if a client comes to you for just one or two letters of credit, there’s no deeper relationship to leverage, which makes it harder to justify the effort. For international banks, this is a major challenge – figuring out how to make emerging markets trade viable when it’s fundamentally different from supply chain finance, which is more focused on corporate risk.

Kim: Collaboration with fintechs has evolved. In the past, there was a fear they might take over parts of our business. Now, we see them more as partners. How do you see fintechs and digitalisation impacting your business, particularly in enhancing efficiency and reducing operational risks?

Stitt: From our perspective, fintechs are key partners, especially in supply chain finance. Our strategy is channel-agnostic, as long as the platform can pass our rigorous third-party risk assessment. We’re most focused on ensuring our client is involved. If our client has skin in the game, we’re interested.

We’ve settled on one preferred platform for originating deals, integrating it fully to meet client needs. At the same time, we’re open to participating in other platforms, which gives us more flexibility. I prefer this approach over what I often see with global systemically important banks, where if they’re not the lead, they’re unwilling to participate. While I understand that logic, it’s one of the reasons I moved to US Bank – this approach gives us a broader playing field.

Ultimately, fintechs excel in technology, and we’re bankers, not tech builders. Trying to do it all ourselves often leads to failure, so leveraging fintech expertise is a far smarter path forward.

Ruiz: We see fintechs as essential partners. For instance, our embedded payments group, Newline by Fifth Third, is one of our investments and has been growing exponentially.

This approach also gives us flexibility to provide the solutions and services our clients need. Not all clients will work with the same platform. By staying platform-agnostic, we can create a balance and support a broader range of client needs effectively.

Kim: Collaboration is key, but here’s the challenge: with so many fintechs out there, how do you prioritise? You can’t work with all of them, so what factors guide your decisions?

Santoro: It depends on the segment of the broader enterprise business you’re focusing on. For SVB, we’ve partnered closely with fintechs, many of whom are our clients. This continues, particularly in areas like embedded payments, where there’s strong mutual interest – they see the opportunity, and so do we.

Prioritising partnerships comes down to evaluation, much like any risk assessment: who is the company? What’s their track record and history? These factors are central to our decision-making model. We engage with fintechs and leverage them where it makes sense to expand our capabilities.

For CIT, particularly in the supply chain finance space, multiple platforms are already in use.

Sakellariou: It’s also important to consider the specific structures each fintech deploys. For example, some may use note purchase models, while others stick to traditional accounts receivable. Some might involve SPVs, which may require different capital allocations.

That said, we find most fintechs to be highly flexible. Given that many of our corporate clients partner with fintechs, we do our best to accommodate their preferences and collaborate effectively.

Lopiparo: TD is integrated into the fintech ecosystem – either banking them or partnering with them – however, we in transaction banking are just starting to explore opportunities. To your point, there are a lot of options in this area, and we have been approached by plenty of providers. However, we receive enough inbound business from our existing clients and partners and those relationships take precedence. It is no secret that the onboarding and vendor management process at banks can be incredibly complex; getting through that alone is a significant hurdle. That said, we are exploring relevant fintechs as partners in an effort to support our clients. Safety, soundness and accurate representation are important to us. Therefore, finding the right fintech partner is critical.

Ruiz: I think it ultimately comes down to what you want to achieve with your trade business. We started by participating with other banks and still do, recognising that many of our clients work with other financial institutions where Fifth Third isn’t the lead. Participation allows us to stay engaged.

We’re working to do what larger banks do: distribute risk, convert interest income to fee income, and offer more sustainable growth for our trade business. This enables us to provide clients who don’t work with larger banks access to the same solutions, levelling the playing field.

The direction you take with your trade business determines which fintechs you partner with. For us, all partnerships are fully disclosed; we don’t work with IPUs because we’re not comfortable with the lack of security.

Smit: When I think about fintechs, there are four key areas where they add value. The first is onboarding – streamlining the client or supplier onboarding process can be a game changer, especially when it integrates seamlessly with your internal systems.

The second is distribution. Platforms like Komgo, which we’ve adopted, allow us to efficiently distribute assets. It operates externally, so there’s competition and transparency for the assets we put on the platform, making it a highly effective solution.

The third is KYC initiatives, like the Swift Registry, that have improved KYC processes, and we see a lot of value in their ability to simplify and standardise compliance.

The fourth, and slowest to evolve, is the digitisation of the trade process. This remains a challenge due to its complexity, involving multiple parties and layers of coordination. While progress is being made, it’s understandable why this area has lagged behind others.

Kim: Let’s talk about growth – everyone wants to grow, especially on the US domestic side, where we have the expertise to make it happen. But as we look to expand internationally, where trade truly thrives, what are the biggest challenges you’re facing today in making that happen?

Stitt: Let me talk about our supply chain business and the challenges of internationalising it, especially when suppliers or buyers are in foreign jurisdictions. Internally, the approval process is complex and involves legal, compliance, tax and other stakeholders – it’s rigorous but manageable.

The bigger challenge lies in rapidly changing regulatory environments abroad, which often feel like competitive barriers. For instance, data privacy regulations in China are incredibly restrictive and unpredictable. It’s not just about deciding how much risk to take – it’s about struggling to even define the risk in the first place, given how frequently the rules change.

Canada, too, has its quirks. I need special approvals just to conduct business there, which can be frustrating. And it’s not just Canada – many jurisdictions have put up barriers that make trade more complicated. It’s surprising, especially compared to 20 years ago when global trade seemed to be expanding more freely. Now, it feels like walls are being put up, making access to certain markets much harder.

Ruiz: Instruments that are tried and proven in the US are becoming increasingly challenging in other jurisdictions. For example, buying a draft in Canada now involves navigating complex legal hurdles, even when you’re still a holder in due course. It’s puzzling since these were treated the same for years.

The situation is even more difficult in China, where attempting to encumber assets is almost impossible.

Case law can be ambiguous, and even with negotiable instruments – which we rely on in foreign jurisdictions without a local presence – you might not end up in the position you expected. These legal and regulatory uncertainties are some of the biggest hurdles we face today.

Santoro: We’re currently focused on domestic and are evaluating our international strategy. We take a client-centric approach, determining where our clients need us most. From there, we consider the products and services we offer to best support their needs and growth

Smit: Growth for growth’s sake, or internationalisation just for the sake of expanding, doesn’t work. You need to identify a niche within your client base – understanding the specific needs of your corporates – and build your business around that focus.

Kim: You mean, like specialising in commodities, for example?

Smit: Exactly. If you know the trader space, have a strong track record, and understand the pitfalls of trade commodity finance, you should build on that expertise and commit to it. Another example is trade corridors – like the US West Coast-Taiwan corridor. That’s a long-standing channel that won’t disappear anytime soon. If your bank is strong in a corridor like Mexico-US, focus on it. Success lies in knowing your strengths and leaning into them.

Singh: As an international bank with a presence in several countries, we address these challenges by following our clients along key trade corridors – whether it’s the Middle East to Africa, Asia to Africa, or the US and China to LatAm. We align with trade volumes and leverage our on-the-ground presence to capture those flows.

It’s also about partnerships. Earlier, we discussed the importance of collaborating with local banks, and that’s something we actively do – even investing in them. For instance, SMBC has a multi-franchise strategy in Asia, where we’ve partnered with and invested in local banks. It’s a win-win for both regional and global banks, enabling us to deliver comprehensive solutions.

Ruiz: The path to perfection for us involves a strategic focus on select countries. Each year, we conduct a review to ensure we’re staying current – can we buy receivables? Issue letters of credit? Engage in specific services? This ongoing process helps us refine our approach. We may remove countries where trade flows no longer justify involvement or add new ones, as we’ve recently done.

This method ensures we stay aligned with where our clients are doing business. Rather than building a strategy for Brazil, for example, we focus on supporting clients in our footprint who are active there. It’s about creating an international angle tailored to client needs while maintaining strong connections between domestic and global markets.

Singh: On legal due diligence, I think we all recognise that we’re individually conducting the same reviews on common issues, each spending separate budgets. I wish there were more opportunities for the industry to share this effort collectively.

Kim: Swift has looked into similar ideas. The challenge is that every bank still needs to perform its own due diligence, creating duplicated efforts.

You have all summarised it well: we know the challenges and the opportunities, but we can’t do it all. It’s about prioritising where we can create the most value based on our specialities. Partnering with correspondent banks becomes crucial to achieving that.

The other question is how to address the rising costs of sanctions, tariffs and KYC compliance, which aren’t going away. Pricing it higher for clients isn’t always an option. Some banks are automating sanctions processes with OCR technology.

Is that helping reduce costs?

Singh: Pulling the cost optimisation lever? Yes, that’s a given.

Tariffs raise broader questions, including whether globalisation is truly dead or if trade patterns are simply shifting. While higher prices may be passed to consumers, the larger implications include sustained inflationary pressures and the challenge of ensuring access to trade finance, particularly for mid-market companies.

Banks face multiple headwinds, from inflation and Basel regulations to the persistent trade finance gap. Addressing these requires pulling key levers, such as improving balance sheet efficiency and advocating with regulators to ease constraints that hinder financial services delivery.

Automation will play a significant role, especially as many banks still grapple with high overhead costs due to ageing technology and labour-intensive operations. Modernising infrastructure is critical, as is using the balance sheet more strategically – offering a wider array of products to core clients rather than focusing on one-off solutions.

Ruiz: Banks and regulators will need to collaborate more closely to establish a level playing field. It can’t be each bank pursuing its own approach while regulators set conflicting expectations. A more holistic partnership between the financial sector and regulators is essential to addressing these challenges effectively, as they’re not going away anytime soon.

Smaller companies are bearing the brunt of these pressures, particularly those relying on overseas purchases to secure competitive pricing. With tariffs and other barriers, their costs are rising, making it harder for them to remain competitive. Even domestic manufacturing may not offer relief, as it could prove even more expensive.

Santoro: We invest significant time in educating our clients about sanctions. While larger companies in our portfolio typically understand the complexities, many smaller firms find it challenging to navigate what can feel like a minefield.

We work closely with them, explaining requirements, guiding them through the process, and helping them ensure they have the proper documentation to trade internationally. It’s not a cost-saving approach, but it’s one of the reasons clients seek us out – for our knowledge, expertise and the advisory support we provide.

Smit: When it comes to tariffs, they’re undeniably here to stay. While the exact levels may vary, the reality is that tariffs will continue to have an inflationary impact and drive trends like nearshoring and friendshoring.

We need to anticipate these changes as banks and leverage our regional strengths to address them.

However, the reality is that the costs of tariffs are here to stay, and we need to have a serious conversation about how to navigate that effectively.

Kim: Regarding costs and Basel, I think regulators are listening, which is encouraging. However, it’s likely we’ll see requirements for greater capital retention. The question is, how do we see that playing out in practice?

Stitt: Private capital is increasingly stepping in to fund trade transactions, driven by a different regulatory posture and typically a higher risk appetite than traditional banks. The downside, of course, is pricing – private capital tends to come at a premium.

However, for some, access to capital often outweighs the cost, making price less of a barrier in many cases. We’re seeing growing interest from private equity funds and other players who recognise the opportunity to generate attractive yields in this space.

Singh: Making better use of our balance sheet and optimising RWA efficiency is a key focus. Increasingly, global banks are shifting from trying to make individual trades more efficient to adopting a portfolio-based approach. Capital-efficient structures for trade finance portfolios, such as credit risk transfers and capital relief trades, are becoming more mainstream due to trade’s emergence as a highly distributable asset class with growing interest from non-traditional investors.

Stitt: The challenge, of course, is that once you complete one of these trades, you need to refill the pipeline. Origination becomes critical.

Singh: Yes, and at the same time, this highlights the importance of evolving regulatory policies. Stricter conditions on banks stem from the crises of the past 20 years, requiring us to demonstrate stronger, more resilient capital efficiency models. It’s up to banks to show we have sufficient liquidity and can meet the demands of a larger community seeking access to finance. Building and proving these robust models is where much of the effort now lies.

Stitt: I think the challenge here is quite paradoxical. In trade, we argue for a better loss given default (LGD), which makes sense. But when the conversation starts, it often comes down to, ‘Show me your loss history’. The problem is, there isn’t one because of the characteristics of supply chain finance. And without that loss history, it’s difficult to justify a better LGD. It’s a frustrating cycle.

Smit: We’ve had a bit of a preview since European banks must implement these changes sooner than US banks. The differing regulatory environments between Europe and the US will create challenges for many banks to navigate.

What we’re observing in traditional trade is a slight reduction in RWAs. However, in supply chain finance, RWAs are increasing, while for receivables, it’s more neutral – depending largely on whether security has been perfected.

Kim: Digitalisation and technology are vital for our industry. Trade finance, with its wealth of data on what goods are moving and who’s involved, is arguably ahead of the curve in integrating ESG compared to something like payments. What are you focusing on, and how important are ESG initiatives in your strategy moving forward?

Singh: If sustainability matters to our clients, it should matter to us. Regardless of regulatory requirements, we should focus on transparency in what we fund and how we disclose it. Many clients are already investing in supply chain transparency, understanding their climate footprint, and aligning with what matters to their consumers.

Banks have played a role by creating capital market instruments with sustainability-linked features, but there’s more to do. We must also enable clients to drive sustainability within their supply chains. Larger corporates are demanding higher standards from SME suppliers, yet these smaller businesses often lack the resources or knowledge to meet those expectations.

This is where banks can add value – not just through financing but by partnering with sustainability tech providers. Offering tools like climate mapping or sustainability assessment technology tools as part of our overall financing solutions can help clients achieve their goals while strengthening our role as a valuable partner in their journey toward sustainability.

Smit: The interesting part about sustainability is its dual nature – it’s both a risk and an opportunity. On the risk side, failing to address global warming poses significant threats. The European Central Bank, for instance, sees this as a major risk, requiring banks to conduct extensive portfolio reporting and stress testing.

On the opportunity side, it’s about following your clients. Many are corporates and governments with net-zero targets, presenting opportunities in project finance, solar energy – which is now the cheapest source of energy due to affordable solar panels – and related areas. These projects allow banks to offer comprehensive solutions, not just trade coverage but full financial support.