In a recent (virtual) roundtable, GTR brought together several members of its advisory board to get their take on pandemic-driven digitisation. Here are some of the main points raised.


From nice-to-have to must-have

Despite the best efforts of banks, fintechs and various consortia, progress in scaling up the digitisation of trade has been slow, with investments tending to emanate from separate innovation pools. This has now changed dramatically, says Vinay Mendonca, global head of product at HSBC. “Digitisation is no longer viewed as a separate innovation work stream. It is integral to the ongoing business and the crisis has accelerated interest and uptake across different digital solutions for trade and trade finance.”

“The imperative is now here,” adds Alisa DiCaprio, head of trade and supply chain at R3. “People now see that blockchain is an important piece of any digital solution, and we have seen an acceleration of interest in how to implement it in a sustainable way. It is not a debate any more. The regulators are now fully participating, and that has been an important benefit.”

It isn’t just new solutions that corporates are asking for, says Michael Vrontamitis, head of trade for Europe and the Americas at Standard Chartered. “Everyone has suffered with this inability of paper documents to be delivered during the crisis. One of the positive immediate outcomes is that we have seen existing electronic solutions, such as using electronic devices versus paper for communicating with the bank through our digital channels, pick up really rapidly.”


An entry point for ambitious projects

For International Trade and Forfaiting Association (ITFA) chair Sean Edwards, the fact that digitisation has now become mainstream has created an entry point for some of the more creative applications of the technology. “If you have digital documents which are not on paper, and you can sign them digitally, what other things can you then do with them? Can you transfer them, can you sell them, can you use them as security? From a legal perspective, there is a lot of focus now on things that could make an enormous amount of difference,” he says.

One example of this is ITFA’s digital negotiable instruments (DNI) initiative, which aims to fully digitise bills of exchange and promissory notes. “This is something that combines all the technologies, such as electronic signatures and distributed ledger technology (DLT), but is actually reviving a very old trade instrument which everybody wants to be digitised,” he says, adding: “I think we might be at the point where we now have the ear of the people who count.”


The way corporates transact and trade is changing

Digitisation isn’t just happening on the financing side. With vast swathes of the world’s population confined to their homes, online purchasing – whether B2C or B2B – has surged in popularity. A recent McKinsey survey of B2B businesses across 11 countries found that more than 90% of sellers transitioned to a digital sales model during Covid-19, with virtual cards and invoice payments becoming an increasingly common feature.

“There is a shift in the way companies are carrying out their day-to-day commerce,” says Claire Thompson, executive vice-president of enterprise partnerships at Mastercard. “From electronic signing to digitising payments, we are seeing an acceleration. As companies look ahead to the new normal, there is a huge focus on ensuring their business model is fit for purpose, and e-commerce will be a large part of that.”


Progress isn’t happening quickly enough

Despite encouraging signs, the industry still needs to do more to ensure that makeshift digital measures become consolidated business practices, says Daniel Cotti, managing director of centre of excellence banking and trade, Marco Polo at TradeIX. “I am most worried about decision-making processes in banks and corporates, which have become longer during the pandemic,” he says. “There are still cumbersome, lengthy processes around onboarding new partners, as well as a focus on short-term business cases rather than a long-term view. People still want to just play it safe, and this makes me nervous.”

“The reality is that there is a lot to be done,” adds Vrontamitis. “Digitising trade is a massive transformation project. However, the regulators are much more open to change, and companies are more open to change, although we expect to see the cost challenges that will come in the post-Covid world challenging investment.”


SMEs risk getting left behind

However, while digital solutions offer myriad opportunities to banks and exporters alike, there is a risk that the digital divide may widen, leaving smaller businesses unable to compete in the global market.

R3’s DiCaprio points out that digitisation, if done right, can clear the obstacles between small businesses and global markets, as well as going some way towards closing the US$1.5tn trade finance gap, which disproportionately affects SMEs. “There has been a lot of discussion about deep tier supply chain financing and getting financing to SMEs. This is exactly where blockchain can help. The global mindset right now presents us with a very special opportunity to make significant inroads on this issue, but I worry that we are going to miss it,” she says. “The solutions that I see are groundbreaking, but they risk ending up in islands, rather than as global solutions.”

“There are clearly some sectors and some companies that were well on their way along the digital path even before the crisis,” says Thompson. “My fear is that we will see a polarisation, whereby the digital players increase their scale and scope, and leave SMEs and more vulnerable sectors behind. It is essential that we really come together to ensure that doesn’t happen.”