A group of influential regulators and central banks are offering financial sponsorship to firms that can deploy technology to improve access to trade finance, particularly for SMEs and companies in emerging markets.

The so-called TechChallenge was unveiled in a joint announcement on August 3 by the Hong Kong Monetary Authority (HKMA) and the innovation hub of the Bank for International Settlements (BIS).

Firms that can present technology-driven solutions to problems facing the trade finance market have until August 31 to submit their proposals.

The challenge is administered by Deloitte’s Asia Pacific-based blockchain lab, and is run in collaboration with the Asian Development Bank (ADB), the International Chamber of Commerce (ICC), the Institute of International Finance (IIF), the People’s Bank of China (PBOC) and the Wolfsberg Group.

“We have a shared goal of addressing the pain points in the trade finance business, and this initiative is one of the key steps towards achieving this goal,” says Edmond Lau, senior executive director at the HKMA – the overarching regulator for Hong Kong’s financial services sector.

“We envisage that the TechChallenge will encourage international collaboration, spur innovation and produce fruitful results that benefit the trade finance industry globally.”

Two of the three award categories focus on access to trade finance.

BIS says smaller businesses “still have only limited access to trade finance, mostly as a result of data gaps or data silos”. It suggests that technology can be used to bridge those gaps, for instance by enabling banks to better assess the risk profile of an SME.

It singles out technology that could help verify the authenticity of trade transactions or minimise the risk of fraud – currently a hot topic in the commodity finance sector – suggesting a platform-based approach that connects different data sources as one potential way forward.

It is also interested in how data could be better used or analysed, and whether artificial intelligence, machine learning or distributed ledger technology could play a part.

BIS also points out that the trade finance gap “is particularly acute in emerging markets”, adding: “Many such markets do not yet benefit from tech-driven trade networks and platforms.”

It invites suggestions for low-cost or open-sourced technology that could be used to connect different trade-related infrastructures, including those suitable for “low-end mobile devices”.

The third award category focuses on data itself.

“Trade finance platforms operate as networks where participant banks have access to customer data that are stored on the platform,” it says.

“However, the existing trade finance platforms run on different applications and technology solutions and have different participants – thereby becoming akin to ‘digital islands’.”

BIS says that prevents the formation of network effects, and challenges entrants to find a way of connecting separate trade platforms in order to increase the overall network size.

The HKMA and BIS say submissions will be assessed by a panel of public and private sector judges, with “financial sponsorship… available for shortlisted entrants”. The winners will be announced and showcased at Hong Kong’s Fintech Week event in November this year.

Benoît Cœuré, head of BIS’ innovation hub, adds that the TechChallenge “is taking place against the backdrop of the Covid-19 global pandemic, which is impacting global trade volumes and by implication the livelihoods of many SMEs”.

“This initiative recognises that novel technologies and public-private partnerships can assist in improving outcomes, including through further digitising trade finance,” he says.

One knock-on effect of the pandemic has been an uptick in efforts to digitise trade documents, as lockdown measures in place across the globe make paper-based processes much more difficult.

A recent ICC survey of banks revealed that digital trade is seen as an “immediate or near-future priority” for 84% of respondents, and that 83% of international banks already have a digital strategy in place.

Alisa DiCaprio, head of trade and supply chain at blockchain consortium R3, says the survey shows the extent to which Covid-19 “accelerated the digitisation of trade agenda in ways that were unimaginable a year ago”.