The global trade finance gap has fallen from US$1.6tn to US$1.5tn, but the impact of fintech has been minimal to date.

The latest annual survey from the Asian Development Bank (ADB) finds that many of the perennial issues persist, such as funding gaps in emerging markets, hugely disproportionate rejection rates for small businesses and a rise in non-bank lending.

But despite the industry’s zeal for digitisation, just 20% of firms reporting have used digital finance platforms. In line with global trends, peer-to-peer lending is the most-used fintech model (23%).

And while 80% of banks surveyed said fintech will reduce compliance costs and 66% said that it will enhance their ability to assess SME risk, the rejection rate of SMEs continues to rise.

74% of rejected trade finance transactions are for SME and midcap applicants, with 29% of these being rejected over KYC concerns. Last year’s survey showed that 56% of SME trade finance proposals are rejected, compared with 10% of multinationals.

The problem is not going away, despite the potential for fintech innovation to help service underbanked areas. Developments in areas such as regtech and AI can help automate and streamline KYC applications. However, these have yet to make it into widespread, mainstream use.

There’s a dichotomy between expectation and reality that seems to be occurring across the industry. Fintech, be it blockchain, AI or regtech, is a hot topic, and the ADB finds that US$13bn of venture capital was poured into the sector last year. But in many cases, its benefits are yet to be realised.

In geographic terms, Asia continues to shoulder a disproportionate share of the trade finance gap, another trend that shows no sign of abating. The ADB finds that 40% of the global trade finance gap is in emerging Asia, roughly US$600bn – slightly under the US$692bn reported last year, but a vast figure nonetheless.

Over recent years, much has been made of the decline in correspondent banking, but the likelihood is that these severances have already reached their peak, perhaps why the gap has narrowed.

Most trade finance bankers will admit privately that they have adapted to the regulatory conditions that presaged these terminations. Basel III is no longer the new normal, it is just the norm. Lobbying efforts by trade bodies for regulators to recognise trade finance as a different risk category to other, higher risk areas of finance, continue, but capital holding requirements are now factored into banks’ risk models, as are KYC and anti-AML obligations.

That the trade finance gap has narrowed, even slightly, at a time of low trade growth is perhaps a welcome surprise. Global trade grew at just 1.3% last year, and protectionism is on the rise in developed markets – hardly the ideal setting for trade and investment.

The ADB’s head of trade finance, Steven Beck, calls on governments and enterprise to work together to help narrow the gap, saying that a 10% increase in trade finance globally could boost employment by 1%.

“A sizeable trade finance gap is a drag on trade, growth, and job creation. We hope the results of the survey will encourage private and public sectors to ramp up collaborative efforts to improve businesses’ access to trade finance,” he says.