Despite the overwhelmingly clear business case for trade digitisation, uptake of digital solutions remains low. Accelerating the journey towards the future of trade means addressing the persistent barriers to adoption, and this can only be achieved by bringing the global ecosystem together to ensure digitisation makes trade better, faster and safer for all.


Any remaining objections to digitising global trade dissipated when lockdowns in the Covid-19 pandemic made carrying out paper-based processes an impossibility for a time. But over two years later, the global proportion of end-to-end digitalised transactions remains negligible. As the war in Ukraine and ongoing Covid lockdowns in China continue to challenge exporters and importers, the business case for a faster, more efficient and less costly way of doing trade has become stronger still, making closing the gap between intent and action even more of an imperative.

In recent years, an enormous amount of time and effort has been invested into the creation of digital solutions for almost every issue trade faces. If adopted globally, the benefits will be nothing short of transformational. According to the Commonwealth Secretariat, exports from the Commonwealth nations could increase by as much as US$1.2tn in the next five years if trade reaches full digitalisation, while the International Chamber of Commerce (ICC) found that digitalisation could add an eye-watering US$9tn to G7 trade over the same period.

However, this adoption isn’t happening at the speed needed. To give a few examples, the electronic bill of lading, which the Digital Container Shipping Association calculates will save the global shipping industry US$4bn each year if 50% adoption is achieved, is used by only 0.1% of container shipments.

Meanwhile, the legal entity identifier (LEI), which a joint McKinsey and Global LEI Foundation (GLEIF) white paper found could cut letter of credit issuance costs for banks by up to US$500mn a year, has been adopted by only 0.5% of businesses worldwide. According to GLEIF figures, the annual growth rate for LEI adoption is around 15%, which means that, at current rates, it will take almost 40 years – over a generation – until each of the world’s 400 million businesses has an LEI.

What’s more, even the most successful digital trade platforms are only managing to onboard one or two corporates a day. “In short, trade digitisation has a scale problem,” says Oswald Kuyler, head of strategy, Europe at MonetaGo.


Barriers to scale

There are several reasons for this. One is a lack of legal uncertainty around the use of electronic trade documents in many jurisdictions, which presents a barrier to some innovative solutions being widely implemented. This is being addressed by legal reform in jurisdictions such as Singapore and Bahrain with the adoption of the United Nations Commission on International Trade Law’s (UNCITRAL) model law on electronic transferable records (MLETR), and in the United Kingdom with the adoption of draft legislation put forward by the Law Commission of England and Wales.

Another, bigger, issue is fragmentation – the perennial “digital islands” problem to which countless column inches and hours of trade conference panels have been dedicated. Disparate systems have often been built on different technologies with little thought given to enabling data to flow through them into the wider ecosystem. For end users – the businesses actually carrying out trade every day – this means that integrating any new solutions requires a cumbersome and costly one-to-one exercise, with different connectors for each platform.

As the ICC demonstrated recently with the publication of its Standards Toolkit for Cross-Border Trade, there are close to 100 available standards, frameworks and initiatives that offer the potential to enable all parties in global supply chains to speak the same, universal language – regardless of the tools used to automate processes – by leveraging a core set of standardised trade-related document and data formats. Using these standards – as well as others such as Swift’s ISO 20022 – will enable these digital islands to be connected, albeit retrospectively.

However, arguably the biggest challenge of all is that of the motivation, or lack thereof, to adopt the tools and the standards that will enable digital trade. Economists often emphasise that incentives matter, and for participants in global trade, the majority of which are SMEs with little in the way of discretionary budget, the incentive often remains unclear.

Taking again the LEI as an example: This 20-character, alpha-numeric code that uniquely identifies participants in financial transactions creates certainty around who is who, who owns whom and who owns what, quickly and effortlessly. Global bodies have explicitly named it as an enabler of digital trade, and a study carried out by the Asian Development Bank in 2019 found that it is both affordable and easy to obtain by SMEs and large companies alike, but it is yet to be embraced at scale.

“Why aren’t SMEs immediately applying for an LEI? The question they’re asking is: what do I do with it? Do I get quicker onboarding, or cheaper financing? The answer to those questions is no,” says Kuyler. “Until we can show them the real, immediate value of a solution, it won’t be adopted.”

The same goes for the onboarding of the myriad fintech solutions by banks and multinational corporates. “In the corporate world, there is a prioritisation of projects,” says Kuyler. “This is based on one of three things: more money coming in, less expenditure going out, or the reduction of risk. Innovation is fabulous, but unless you can demonstrate to a company or a bank how a solution will win them more customers, save them money or prevent negative consequences, it will be impossible to gain their buy-in.”


Making a better case for adoption

Translating the abstract, macroeconomic advantages of digitisation to the concrete, firm level benefits will require a concerted approach from every actor within the ecosystem to get the incentive design right. Otherwise, the pace of adoption will remain glacial at best.

One way to achieve worldwide reach for digital solutions is to leverage the rails that are already available. Swift, for example, is not only working with its global community to overcome the fragmented implementation of APIs that has proliferated in financial services in recent years, but also provides useful central infrastructure such as identity management, authentication, security, network reach and connectivity.

Indeed, it is this central infrastructure that is enabling MonetaGo to take its Secure Financing trade finance fraud prevention solution to the world. “Consuming the MonetaGo API over Swift means users can access mutualised capabilities that today are typically provided, and invested in, by each financial institution individually,” says Kuyler. “This strengthens the incentive to adopt Secure Financing beyond the already solid risk prevention use case. With costs defrayed worldwide, resulting in the lowest possible cost for lenders in every jurisdiction, this affordability reduces economic barriers to adoption, helping drive network effects to combat duplicate financing fraud domestically and internationally.”

Bringing everyone around the table to ensure that solutions are designed with service users’ immediate needs in mind is another important piece of the puzzle. The recent launch of the Centre for Digital Trade and Innovation (C4DTI), a UK-led global initiative set up in partnership with industry and government to drive the digitalisation of trade at scale, is an encouraging step. As an impartial convening entity, it provides a mechanism to work through barriers to the practical implementation phase at the company level, through pilots and testing as well as research projects – making sure that all stakeholders in trade are aware of, and can take advantage of, everythingthat digitisation has to offer.

“C4DTI is an exciting initiative that I hope to see replicated elsewhere,” says Kuyler. “Not only will it ensure that digital trade is designed around its participants, but it will also raise the profile of the solutions that are available among businesses.”

The events of recent years have demonstrated the vital need for a faster, more efficient and cheaper way of doing trade – and there are likely more disruptive events on the horizon. The cumbersome system we have today is not fit for purpose, but accelerating its transformation needs more global thinking, more collaboration and better incentives for take-up. Only then will the promise of digitisation in trade be fully realised.