New technology-based business models are driving global trade into a digital future faster than ever before. Clients are demanding a tailored customer experience enabled by new platforms. This reality is a trend cross-border trade operations cannot ignore, write Susana Domínguez and Iván Sanchez Parro, product owners at Mercury Trade Finance Solutions.


Among the different payment instruments available at an international level, the letter of credit (LC) is the most popular means of payment in the trade of goods due to the security it offers in the delivery, payment and collection of the merchandise. One of the primary obligations arising from this instrument is the payment upon compliance with the documents subject to the terms and conditions specified in the LC. Therefore, it is crucial to examine the shipping documents to determine that they comply with the terms and conditions that originate the collection and trigger the payment.

The main shipping documents required in foreign trade transactions are the bill of lading, commercial invoice, certificate of origin and packing list or inspection certificate, although depending on the goods and conditions, other documents may be requested. If the review of these documents is not performed correctly,it can result in high risks for financial institutions. However, document review is a complex, time-consuming and error-prone task, requiring many hours of back-office work. Additionally, document review specialists are in high demand and short supply, making this process costly. As a result, some entities maintain specialised centres belonging to the same corporation, while others outsource the review by subcontracting to private companies working for multiple banks. These mechanisms delay management and reduce efficiency and time to process payments, and maintaining these centres represents a significant expense.

According to a report published by the ICC, financial institutions have recognised the existence of significant gaps in the activities and steps that involve a manual review of documents. Additionally, if the financial entity does not have the appropriate system, the processing of transactions becomes even less agile and flexible. Consequently, technology must be incorporated as a tool within the operational flow and translated into the necessary digitalisation and automation of documents to support and make this complex task more efficient. One of the first major challenges is the digitisation of documents and their verification, supported by artificial intelligence and digital signatures.


Trade finance digitalisation

Digitalisation in trade finance provides short-term advantages related to transferring data, documents and processes from an analogue environment to a digital one.

If we have learned anything from the pandemic, it is that the world is interconnected and processes must be resilient to mitigate the negative impacts of both internal and external shocks. There are more than 4 billion paper documents in use in the trade finance industry today, according to the ICC. Therefore, in the context of trade finance, one of the main objectives is the elimination of paper in international transactions, mainly to mitigate impacts (such as delays in documentation, difficulties in getting documents to the destination country, issues with getting goods out of the port, and avoiding frauds) and contribute to environmental sustainability.

Some actors are promoting this change, for example, the Electronic Trade Documents Bill in the UK government’s legislative agenda. If this law is approved, electronic versions of trade documents will have the same legal standing as their paper counterpart. It is no surprise that achieving a complete digitalisation of physical documents within the next 10 years is high on the agenda of the different stakeholders active in international trade.

The solutions designed by Mercury Trade Finance Solutions (TFS) attempt to solve these challenges. Mercury TFS offers automated solutions for the control and transparency of trade finance operations and transactions. The company positions itself as one of the most relevant software providers for trade finance solutions.

Mercury Document Review and Mercury Tracking Module are two innovative solutions that incorporate various technologies. Using artificial intelligence and machine learning, the data of the uploaded documents are extracted, structured and analysed, providing support for decision-making.


Document review: How does it work?

Step 1

The system allows uploading any set of shipping documents in multiple formats (mostly multi-page formats like PDF and TIFF).

Step 2

Mercury has an intelligent assistant, which identifies, classifies and extracts information from the documents. The system combines technology with artificial intelligence. Using optical character recognition (OCR), it examines the documents’ text, extracts the information and translates the characters into a code that can be used for data processing. This innovative assistant solution can manage the review in different languages, such as English or Spanish. At this point, the system faces significant challenges as documentation may have low-resolution quality, watermarks, or may even be handwritten, making it difficult to extract. The documents are also classified using machine learning algorithms. In this sense, the system faces another challenge in that transport documents, including commercial invoices, bills of lading and certificates of origin, are not homogeneous. They all have different structures and formats depending on the country and the agency responsible for issuing them. As a result, there is great complexity in classifying these documents. Thanks to artificial intelligence, these algorithms train themselves to identify patterns and improve their efficiency as more analyses are carried out.

Step 3

The system interprets and assists the operator in decision-making. The artificial intelligence algorithm that Mercury TFS uses works to extract, classify and analyse the data obtained between the documentary credit and the required shipping documents. The system then displays the result of the analysis performed based on more than 40 business rules according to ICC international validations. In this way, the system provides guided assistance to the back-office user to review discrepancies. In addition, the system adds the discrepancies found in the corresponding Swift message. The objective of the Document Review solution is not to replace the back-office, but to provide effective support, lower the margin of operational error, enable better accuracy in finding discrepancies, and reduce the risk and the time it takes to review shipping documents.


Tracking Module: Real-time oversight of goods delivery

In terms of the transportation of goods, Mercury software is also committed to improving the letter of credit experience by incorporating its Tracking Module. Through a tracking reference, this tool allows any company or bank user to obtain the status of the shipment in real-time, and access updated information on factors such as boarding/pick-up date, landing and delivery date, the place, date and time of the goods, shipment status and transport details. As a result, it minimises the costs of the delivery process while increasing distribution control, guaranteeing order traceability, reducing customer uncertainty and curtailing delays. Mercury’s software is connected via API to Morpheus Network, a service that provides all the shipping information from the different transport companies.

With these two examples of technology applied to trade finance, Mercury’s solution makes international trade flows faster and more agile. Furthermore, operational risks and times are reduced by harnessing the power of technology.

New technologies are set to play a major role in international trade in the coming years. The incorporation of artificial intelligence in conjunction with other technologies, such as blockchain, can take advantage of benefits, such as the introduction of the smart contract in trade finance.

Such solutions help reduce the risk of errors or fraud, improve transparency in commercial transactions, increase trust between parties, guarantee the reliability of data and facilitate the exchange of payments.

All parties involved in international trade face a major challenge in the coming years. On the one hand, it is necessary to establish a commonly accepted international legislation for digital documents. On the other hand, the involvement of all stakeholders is needed in order to take advantage of the available technologies in a more effective and efficient way, and thus move towards digital trade.