2020iccglobaltradesurveyvweb PDF

ICC GUIDING DRIVING
BANKING INTERNATIONAL CHANGE IN

COMMISSION BANKING PRACTICE TRADE FINANCE
2020
ICC GLOBAL
SURVEY ON
TRADE FINANCE
B 2020 ICC GLOBAL SURVEY ON TRADE FINANCE
IN THIS REPORT
About the International Chamber of Commerce 2
Acknowledgements 4
Introduction 6
Foreword 6
State of trade: tension, transition, and turning point 8
Introduction to the Global Survey 10
Key findings of the Global Survey and the COVID-19 Survey 12
Market Outlook on Trade Finance: COVID-19 and Beyond 15

Survey analysis 15
Scenario analysis on the impact of COVID-19 on trade finance 22
The economic impact of COVID-19 on supply chains 25

COVID-19 Survey analysis 31
SWIFT Trade Traffic: the year in review 39
TXF on Export Finance 50
Supply Chain Finance 57

Survey analysis 57
Supply chain finance: evolution or implosion? 62
Sustainability 64
Survey analysis 64
ICC: accelerating progress on sustainable trade finance 68
Regulation and Compliance 71

Survey analysis 71
Regulations in a digital world 77
Stronger together: combatting trade-based money laundering 81
Combating money laundering: improving systems, enabling trade 83
Digitisation 85
Survey analysis 85
Digital trade and COVID-19: maintaining the crisis-driven momentum 93
Financial Inclusion 98
Survey analysis 98
SMEs and the trade finance gap: it’s a data problem... 104
How to increase the professionalisation of trade finance 106
Successors in Trade: “Is it time to isolate or time to reach out?” 108
Mind the gap: why we need to think about small exporters 114
2020 ICC GLOBAL SURVEY ON TRADE FINANCE 1

ABOUT THE INTERNATIONAL
CHAMBER OF COMMERCE
The International Chamber of Commerce (ICC) is the institutional representative of more than
45 million companies in over 100 countries. ICC’s core mission is to make business work for
everyone, every day, everywhere. Through a unique mix of advocacy, solutions and standard
setting, we promote international trade, responsible business conduct and a global approach
to regulation, in addition to providing market-leading dispute resolution services. Our members
include many of the world’s leading companies, SMEs, business associations and local chambers of
commerce.
For more information please visit: iccwbo.org
Project Manager
David Bischof – ICC Banking Commission
Editorial Committee
Dominic Broom – ICC Banking Commission
Mark Evans – ANZ
Huny Garg – SWIFT
Xu Jun – Bank of China
Ana Kavtaradze – Bank of Georgia
Alexander R. Malaket – Opus Advisory, Chair
Dave Meynell – TradeLC Advisory
Vincent O’Brien – ICC Banking Commission
Olivier Paul – ICC Banking Commission
Sponsorship Manager
Sandra Sanchez Nery
Boston Consulting Group

Sukand Ramachandran, Managing Director and Senior Partner
Ravi Hanspal, Principal
Noah Mayerson, Associate
Printed in July 2020

Copyright © 2020
International Chamber of Commerce
ICC Publication No. WBO891E
ISBN: 978-92-842-0578-3
All rights reserved. ICC holds all copyright and other intellectual property rights
in this collective work.
No part of this work may be reproduced, copied, distributed, transmitted,

translated or adapted in any form or by any means – graphic, electronic
or mechanical, and including without limitation, photocopying, scanning,
recording, taping, or by use of computer, the internet or information retrieval
systems – without written permission of ICC through ICC Services, Publications
Department.
Visit the ICC Banking Commission website:

iccwbo.org/publication/global-survey
2 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

THANK YOU TO OUR SPONSORS
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ACKNOWLEDGEMENTS
This 11th edition of the ICC Global Survey on Trade Finance is the result of a dedicated
collaboration between ICC, ICC Banking Commission experts and staff, and numerous
organisations and individuals who have contributed with leading market intelligence content
and timely production support. The report was enabled with outstanding guidance and
backing from the Editorial Committee.
We express our sincere appreciation to the Editorial Committee for its commitment,
engagement and invaluable contributions to shaping both the strategic direction and the
content and analysis in this flagship ICC publication:
• Dominic Broom – ICC Banking Commission

• Mark Evans – ANZ
• Huny Garg – SWIFT
• Xu Jun – Bank of China
• Ana Kavtaradze – Bank of Georgia
• Alexander R. Malaket – Opus Advisory, Chair
• Dave Meynell – TradeLC Advisory
• Vincent O’Brien – ICC Banking Commission
• Olivier Paul – ICC Banking Commission
This report depended on the support and expertise of various specialists and partner
organisations. We would like to thank our contributing authors for this edition and our
colleagues in partner organisations who have also facilitated these contributions.
We extend our appreciation to the 346 respondents to the Global Survey located in
85 countries for their comprehensive, considered and insightful answers to the survey, which
are at the heart of the consistently high value and quality of this report. Survey responses,
complemented by expert insight, content and commentary, underpin a publication unlike any
other in the market today, richly valuable for practitioners, policy professionals, international
development practitioners, academics, multilateral entities and a wide range of members of
the global ecosystem of trade and trade financing.
Boston Consulting Group is a critical partner to the ICC and the Banking Commission in
the conception, development and publication of two flagship ICC reports, this one and
the ICC Trade Register. Our multi-year association has progressed to encompass a wider
scope of collaboration, and has been instrumental in raising the robustness, quality and
authoritativeness of these reports. Our thanks to the BCG team for its tireless work, proactive
leadership and skilled program management: Sukand Ramachandran, Ravi Hanspal and
Noah Mayerson.
We would also like to thank TXF for their ongoing support by providing insightful market
data and analysis to the ICC Global Survey over recent years. Our thanks go the TXF team
for their dedication to the project and invaluable contributions: Tom Parkman, Alfonso Olivas,
Sergio Lopez, and Max Thompson.

INTRODUCTION
Foreword
John W.H. Denton AO,

Secretary General, International Chamber of Commerce
The year 2020 has not unfolded as anyone This year’s Global Survey indicates that banks
would have anticipated. The rapid spread are optimistic about the long-term future of
of COVID-19 to nearly every country and trade finance and are looking to invest further
territory in mere weeks has challenged to gain new clients, offer new products
assumptions about the resilience of the global (such as supply chain finance), expand
economy and put tremendous strain on geographically and increase digital offerings.
governments, businesses, healthcare systems However, in the short term many banks
and communities. anticipate a steep decline in trade flows due
to COVID-19, with the majority expecting at
With supply lines and physical movement least a 20–30% decline in 2020 from original
often curtailed in response, global trade as forecasts. This broadly aligns with BCG’s
we knew it in ‘pre-COVID-19’ times has been analysis in the Global Survey, forecasting
significantly disrupted. The consequences a decline of between 11% and 30% in 2020
have been severe, and the IMF predicts trade flows.
unsurprisingly the greatest drop in global
growth since the Great Depression. Every day,
the ongoing pandemic threatens the viability Enabling the shift to digitalised trade
of businesses of all sizes and in nearly every ICC has already launched several initiatives
sector. And as lockdowns in many countries to ensure that its global network can be put
remain in force, the devastating combination to best use in the fight against COVID-19.
of labour constraints, travel restrictions and One aspect of our response to this crisis has
demand shocks continue to cripple business incorporated key objectives to bring greater
activity and escalate unemployment. efficiency to the paper-based global trading
system. Central to this is expediting the shift
In such times, the role of ICC as the voice of to digitalised trade, which the Global Survey
global business is vital. Our work is animated shows is already underway but will need to
by our clear priority to protect and preserve accelerate in the wake of the crisis. Already
lives and livelihoods. As the only private this year, ICC has launched the Digital Trade
sector organisation with a permanent seat at Standards Initiative, a cross-industry effort
the United Nations, ICC has a crucial role to to enable the standardisation of digital
play in supporting the international response trade. This effort will bring greater economic
to this pandemic. And with an unparalleled inclusion, connect digital islands and ensure
reach across global business, we are uniquely the all-important collective nature of formats
placed to marshal key evidence to guide and processes. We are also working with
policymakers through their vital decisions. governments to implement broader legal

recognition of electronic documentation
based on the uniform model law established Responding to a crisis for the
by UNCITRAL. The far-reaching impacts of benefit of all
the pandemic have made plain that we must Uniting our many efforts is ICC’s guiding
improve the outdated system of trade in objective in these difficult times to preserve
operation at the outset of the crisis. lives and livelihoods. We are committed to
enabling effective response efforts to the
public health and economic crisis created
The fight to save SMEs and by COVID-19 as it is happening, and we are
maintain open trade intent on shaping a recovery phase that
One of the many benefits of a more leads to a more resilient global economy and
digitalised trading system will be greater trading system.
inclusion and increased opportunities for
smaller businesses, which are the drivers We will ensure that our unparalleled
of economic growth in most countries. The network of 45 million businesses worldwide
Global Survey reveals that financial inclusion is positioned to help policymakers take
was already a material concern for many decisions based on the best evidence
trade banks even before the COVID-19 crisis, available. And we will ensure that the private
which is expected to have a disproportionate sector plays its part in mitigating the global
impact on SMEs. ICC has been vocal impact of this pandemic.
about the urgent need to support SMEs
We do so in keeping with the spirit of ICC’s
during and after the pandemic. In March,
creation more than 100 years ago, when
we launched an urgent call for decisive
the ravages of the First World War brought
action to ‘Save Our SMEs’ and combat the
businesses together in support of peace,
economic repercussions of this pandemic.
prosperity and opportunity for all. As we look
We are continuing to raise awareness of the
ahead with hope to a ‘post-COVID-19’ future,
challenges faced by SMEs with governments
that driving purpose remains as important
and international financial institutions and are
as ever.
providing concrete tools to help them stay
in business.

State of trade: tension, transition, and turning point
Alexander R. Malaket,
President, OPUS Advisory Services International Inc.;
Chair, ICC Finance for Development Market Intelligence
Trade has been a critically important part of This temporary moment of tension in the
the human experience for thousands of years. dynamics of trade will normalise as a more
It has seen periods of tension, transition and thoughtful, strategic and informed approach
tragedy – at the core of war and colonialism, to policy returns to shape the global
at the heart of impressive progress in discourse and the actions that follow.
economic inclusion and international
development, and recently at the centre of a In the meantime, the forced, now inevitable,
political posturing and policy that can best be search for alternatives – once it succeeds –
described as controversial. will set a much more solid, inclusive and
sustainable foundation for the global
Additionally, and with some justification, architecture for trade.
trade faces questions today that have never
been levelled at this part of commerce ICC participated in the annual Trade Finance
before: questions related to its sustainability Experts’ Group Meeting hosted by the WTO
in its current form and to the carbon footprint in Geneva in March of this year. This meeting
of key components of the physical supply of senior trade leaders from around the world,
chain, such as the global shipping industry. chaired by WTO Counsellor Marc Auboin
Relatedly, questions about the importance and hosted by Deputy Director General Yi,
of supply chain visibility and traceability provides a unique forum for a far-reaching
have come to the forefront of commercial update on key initiatives and issues across the
and regulatory dialogue, with increasing industry, as well as substantive dialogue on
responsibility placed upon large global policy and advocacy priorities.
buyers, for the behaviours and actions of
their suppliers and extended supply chains. It was in this context that an
underappreciated but important reality of
As we develop content for the 2020 edition trade today was highlighted: the level of
of the ICC Global Survey on Trade Finance, zero-tariff trade concluded on the basis of
the world – including global supply chains – the WTO’s ‘Most Favoured Nation’ status has
grapples with the tragedy and as yet opaque never been higher (Figure 1).
impact of the COVID-19 crisis.
Put another way, despite active, misguided
The Bloomberg New Economy newsletter efforts to dismantle a system that has
of 7 March 2020 strikes a note of cautious contributed to global growth and prosperity
optimism by noting that “Globalization faces since the post-world war era, the reality is
a bend-but-won’t-break crisis on coronavirus” that the core purpose of the multilateral
– a statement that applies equally well to the system continues to advance.
state of globalisation linked to trade.
Trade works and is continuing to work
We have seen significant ‘bending’, and despite an onslaught of poor decisions, poor
incurred material costs around the world policy and absent leadership from those
from a spate of tariffs and ‘trade wars’ that best positioned to advance and magnify its
no one can or will ‘win’, yet the fundamental positive effects for the world.
character of the system remains resilient.
Multilateral, rules-based trade continues to be The prevailing geopolitical and policy
central to the governing of trade flows around environment forces a search for alternatives
the world, despite a slowing of global growth in leadership, in policy and in options for
to the range of 3% in 2019. achieving a more balanced, inclusive reality,
with trade making an important contribution.

Figure 1
Tariffs applied to the value of imports, by processing stage, world average (2002–2017)
Total %
16
14
12
10
8
6
4
2
0
2002 2004 2006 2008 2010 2012 2014 2016
All products Capital goods Consumer goods Intermediate goods Raw materials
Note: trade-weighted average for effectively applied tariffs.

Source: World Bank, WITS (World Integrated Trade Solution)
We will soon see a period of transition to a supply chain finance (with important partners
‘new normal’ in international economics and like BAFT, the ITFA, FCI and EBA among
trade. Just as the G20 occupies a growing others) regulatory and compliance issues in
position of influence globally as a direct financial crime, advancing the development
result of its rightly more inclusive nature, of trade finance as an increasingly investable
this ‘new normal’ will be characterised by a asset class, and a wide range of other
growing appreciation for the interconnected important topics.
nature of prosperity, inclusion and security,
and will refocus on the necessary growth of Business, and trade, can and should be
multilateral engagement. powerful forces for good in the communities
and societies in which we thrive. Even the
As the ICC starts its second century most commercially disciplined, profit-oriented
under new leadership, and as the Banking organisations in the world are beginning to
Commission finds its roots in the new Finance recognise that the sands are shifting, with
for Development Knowledge Centre, we will questions around sustainability increasingly
continue to advocate – clearly, unequivocally at the core of commercial dialogue, and the
and consistently – in support of multilateral emerging framework of Economic, Social and
engagement, and inclusive, rules-based trade. Governance (ESG) likewise is increasingly an
imperative. Our work around enabling access
This means we will continue to focus on to trade finance as an element of financial and
understanding and addressing the global economic inclusion progresses through critical
gap in trade financing, while continuing to partnerships with multilateral development
engage in advocacy through partners like the banks, including ADB, EBRD and IFC among
WTO, the B20/ G20, the United Nations, the others, as well as with the Berne Union and its
Financial Stability Board, the Financial Action members around the world.
Task Force, and the Wolfsberg Group among
others. ICC, with our network of National Committees,
our more than 45 million members worldwide,
This includes our traditional areas of work, and our ecosystem of partners, is uniquely
shaping industry practice, standards and positioned to be a thoughtful voice and a
guidance, as well as emerging areas of constructive force as we shift from tension to
contribution such as digitisation of trade, transition to turning point.

Introduction to the Global Survey
The 11th edition of the ICC Global Survey to begin to understand the impacts of the
on Trade Finance took place over eight pandemic on global trade and trade finance.
weeks, from February to March 2020,
gathering insights from 346 respondents The profile of the 346 respondents varies
in 85 countries. The Global Survey was widely, from large multinational banks serving
ank is your bank?
conducted by the ICC Banking Commission, customers around the globe to small local
in partnership with Boston Consulting banks with few customers and low trade
Group (BCG), TXF, SWIFT and the Asian flows. The diversity of respondents reflects
Development Bank (ADB). BCG supported the structure of the trade finance market.
with the data collection, aggregation of The most represented regions in the survey
results and analysis of the survey data. Given are Western Europe at 32% and Asia Pacific
the rapidly advancing COVID-19 pandemic, (APAC) at 30% (Figure 3).
a supplementary survey was conducted
Figure 2
What type of bank is your bank?
27%
bank headquartered? 42%

Regional
%
Local
Global
31%
Figure 3
Where is your bank headquartered?
5%
5%
6% Western Europe
32% Asia Pacific
7%
Central and Eastern Europe
% Africa
Latin America and Caribbean
13%
North America
Middle East
30%

al USD value of all trade finance applications your bank received in 2019?
We asked participants to estimate the USD some large players, with 27% indicating they
value of all trade finance applications that received at least USD 100 billion in trade
their banks received last year. The majority finance applications in 2019. This diversity
(59%) indicated a small-to-medium sized in size and scope provides a rich set of
trade finance business of up to USD 25 billion answers and data to draw upon, once again
(Figure 4), which is broadly reflective of the clearly illustrating the representativeness,
dispersed trade finance market around the importance, and reach of the Global Survey.
world. However, respondents also included
Figure 4
What was the total USD value of all trade finance applications your bank received in 2019?
6%
7%
7% USD 0-25B
USD 25-50B
8% USD 50-100B
%
USD 100-250B
59%
USD 250-500B
13%
USD 500B+

Key findings of the Global Survey and the COVID-19 Survey
This year’s Global Survey has again provided insights into the trends shaping trade finance, and
a fact-based, data-driven view of some of the trade industry’s hypotheses on trade. In addition,
the short supplementary COVID-19 Survey has allowed us to understand some of the emerging
challenges and responses arising from the crisis across the globe.
In summary, the two surveys have provided relate to consequences of regulation

insights across the following themes: that are believed to be unintended,
and that directly affect access to trade
1. Market outlook on trade finance financing – thus inevitably curtailing trade
• Banks around the world are looking to and impacting economic inclusion and
expand their trade finance business – for international development.
our purposes this includes traditional trade
finance (TTF) and the various techniques 2. The impact of COVID-19 on trade
of supply chain finance (SCF) – through and trade finance
various means, including gaining new • Banks from all geographies are already
clients, offering new products, expanding noticing the impact of COVID-19 on
geographically, and increasing digital trade flows, with most reporting a 0-10%
offerings. In particular, 86% of respondents decrease in Q1 2020. Banks expect an
said that supply chain finance was either even more significant decline in trade
an immediate or near-future priority, while flows for the full year, with the majority
84% answered the same for digital. expecting at least a 20–30% decline from
original forecasts, which broadly aligns
• However, concern persists about with both WTO and BCG scenarios.
regulatory and compliance-related
obstacles to growing trade finance • Encouragingly, the majority of banks are
businesses. These include anti-money helping their customers who have been
laundering (AML) and Know Your affected by COVID-19, using various
Customer (KYC) requirements, and the measures including extending financing
challenges arising from requirements terms and providing more convenient
linked to countering the financing of digital (or partly digital) solutions. Some
terrorism (CFT), as well as those related to banks have also relaxed their internal
international sanction regulations. policies on original documentation
rules, which hopefully is a sign of things
• Industry practitioners and leaders to come as the current crisis catalyses
fully support the policy and regulatory and accelerates a significant reduction
objectives, as well as the overarching need (perhaps ultimately the elimination)
to protect the global financial system of paper in trade and trade finance
from abuse. The issues flagged, however, transactions. Leading trade banks have
What has ICC done...?

• Leading trade banks have come together under the auspices of the Banking Commission
Digitalisation Working Group to issue a paper sharing practices adopted in order to enable
trade to flow despite pandemic-related difficulties in accessing hard-copies of trade
documentation
• The ICC has issued a call for governments to quickly enact legislation and measures aimed
at advancing digital trade.

come together under the auspices of clear market trends that continue to reflect
the Banking Commission Digitalisation growth in open account trade as well as in
Working Group to issue a paper sharing SCF techniques such as payables finance.
practices adopted in order to enable This significant difference in expected
trade to flow despite pandemic-related growth rates may reflect differing views
difficulties in accessing hard-copies of around the evolution of the market, or they
trade documentation. may be an illustration of limited appetite,
expertise or capacity among local banks to
• Most banks have not yet seen meaningful significantly advance their SCF propositions.
support from local authorities to
facilitate ongoing trade on digital • Respondents indicate lingering concerns
terms. Requirements persist for original regarding regulation and the ability
documentation in trade transactions, of smaller banks to enter SCF due to
perhaps unsurprisingly given the speed challenges with technology build (e.g. high
with which COVID-19 has transformed the costs and lack of internal capabilities),
commercial landscape. although smaller players have overcome
these through partnerships and white
• The early part of the COVID-19 crisis labelling solutions.
did not have a systemic impact on the
availability of trade financing which, by 4. Sustainability
all reports, remained consistent. However, • All banks are increasingly recognising
careful market monitoring by ICC, the the imperative to develop a sustainability
WTO, and other key players now suggests strategy, with 67% of respondents stating
emerging system-wide difficulties with that they have one. This urgency has
USD liquidity, targeted deployment and primarily been fuelled by concerns related
far tighter controls on trade financing. to reputational risk and by fast-growing
Deteriorations in credit quality linked to client expectations.
coming bankruptcies are expected to
generate a wave of adverse consequences • There is strong agreement that the
for trade and trade financing. environment and climate change should
Encouragingly, according to the vast be priorities, with the majority of banks
majority of reports, industry standards already integrating sustainability risks
and practice around the financing of trade into credit risk management procedures
have been robust and respected through for clients and conducting sustainability-
the crisis to date. related due diligence.
3. Supply chain finance • There is a clear desire, however, for more

• Trade banks, particularly those serving formal guidelines for banks in this area,
global customers, are broadly adopting with 84% of respondents saying they
supply chain finance platforms and expect would welcome ICC support in providing
further growth in this space. However, sustainability guidelines. The nascent
there is an ongoing divide between global state of these matters, coupled with
and non-global banks, with 64% of global the wide range of levels of progress on
banks offering SCF platforms, compared sustainability issues across jurisdictions,
to just 13% of local banks and 38% of including among central banks, adds
regional banks. complexity and urgency to efforts to
advance a sustainability agenda globally.
• This divide is set to continue: global banks
expect significant growth in the next five 5. Regulation and compliance
years from SCF, with one-third expecting • Survey respondents continue to express
over 50% growth. In contrast, the majority concern regarding the impacts of existing
of local banks expect only 0–15% growth regulation and compliance policies, with
over the same period, which is notable given

56% indicating ‘significant concern’ is instructive, as is the significant
regarding regulatory requirements. difference in benefits expected through
cost reduction versus more general,
• The majority of banks expect positive business impact. The chasm
customer risk due diligence (including between global banks and others in
sustainability risks) and increased recognising a compelling business case
minimum capital requirements to tied to digitisation risks driving further
become areas of increased regulatory consolidation and concentration in trade
focus in the coming years. financing among banks.
• Industry stakeholders have reacted 7. Financial inclusion

positively to the visibility of the BIS • 73% of survey respondents feel that
in terms of capital requirements as a there is a shortage in servicing the
short-term response to COVID-19; the needs of the global market, and the
imperative to balance regulatory efficacy majority believe that there is a role
with risk-aligned treatment of trade for governments and export credit/
finance continues to be an area of focus. multilateral agencies to help close this
gap.
6. Digitisation
• While digitisation is widely seen as one • Most banks reject only a small
of the most important trends to shape percentage of trade finance applications,
trade and trade finance in the coming with 62% rejecting between 0–10% of
years, there is a clear divide: while 83% applications in 2019. Micro, small and
of global banks have a digital strategy, medium-sized enterprises (MSMEs), and
only 46% of local banks report having those from Africa and Central/ Eastern
one. Europe, are disproportionately rejected
– consistent with the findings from the
• This divide exists not only in technology previous three editions of the Global
adoption, but also in whether Survey. The most common reasons cited
digitisation is considered useful and can for rejection are KYC concerns and low-
reduce costs. While 59% of global banks quality applications.
indicate that digitisation would provide
a significant benefit to their operations, • Digital trade is widely seen as a key
just 25% of local and 32% regional banks enabler to help banks close the trade
indicate the same. Furthermore, 90% of finance gap, with 55% of survey
global banks expect a reduction in their respondents positioning themselves to
cost base from the implementation of service more MSMEs using technology
digital solutions, but only 55% of non- solutions. The challenge is to ensure
global banks say the same. enough local banks – that often serve
these MSMEs – are sufficiently digitally
• The sharp contrast in expected benefits enabled to make it commercially viable
from digitisation between global to serve the MSME client segment.
banks and regional/ local institutions

MARKET OUTLOOK ON TRADE
FINANCE: COVID-19 AND BEYOND
Survey analysis
Since 2000, global trade flows have trebled offerings”, whilst 54% indicated that they will
from USD 6.2 trillion to USD 18.1 trillion in be “expanding their market participation”.
2019 – growth now widely acknowledged
as having been enabled by trade financing, Only 3% of respondents answered that their
which provides liquidity and risk mitigation banks were planning to either reduce their
solutions for importers and exporters, product offering or their market participation –
allowing them to transact with confidence demonstrating the optimism many banks have
across borders. in their trade finance business.
The strong growth in trade finance over the These results are significant for the
past two decades looks set to continue as industry and reiterate the point that trade
we enter the 2020s. The 2020 Global Survey finance is continuing to evolve. Although
indicates that banks continue to see trade the transition to digital has been slower
finance as a growth area. Across the board, than for other banking products for well-
respondents indicated their ambitions to documented reasons, over the coming
expand their trade finance arrangements to years this digitisation will materially shape
new clients, products and geographies. how trade finance works and the types of
solutions offered.
The importance of this activity was brought
sharply into focus at the peak of the global Financial Technology firms or Fintechs will
financial crisis and in the intervening continue to expand their involvement in trade
years, where ‘real economy’ activity like financing – likely focused on SCF – over the
international trade moved to the forefront medium term. This will likely evolve through
of the recovery. The priority assigned a combination of direct funding to SMEs
to transaction banking, including trade and/ or the formation of white-labelled
considering its trade finance
financing, business
within financial model?
institutions was technology partnerships. Continued growth in
raised in consequence. open account trade and SCF will encourage
non-banks to enter the market. The growth
Respondents were asked to identify which trajectory and capacity of non-banks will bear
options they are considering in growing watching over the coming years, particularly
their business (Figure 5). 77% included in terms of these entities’ ability to bring
“transitioning to digital” in their selections balance sheet capacity to market.
(Figure 6). Encouragingly, 61% indicated
that they were planning to “expand product 54% of banks mentioned, pre-COVID-19,
that they will be expanding their market
Figure 5
Is your bank reconsidering its trade finance business model?
11%
Yes
22%
% No
Don’t know
67%

ur bank considering for its trade finance model?
Figure 6
What options are your bank considering for its trade finance model?
%
80 77%
61%
60 54%
40%
40
20
3% 3%
0
Transitioning Expanding Expanding Serving new Reducing Reducing market
to digital product offering market types of product offering participation
participation customers
participation despite recent geographical trade finance to grow, and 49% expecting it
retrenchment and the ongoing to decline in the coming years.
reconfiguration of trade corridors. Whether
this speaks to a growing desire to target Such expectations have been reported
the MSME client segment, or the intention despite ongoing and arguably worsening
to create net new capacity to underwrite geopolitical and ‘trade war’ dynamics, at a
business by distributing trade assets to time when trade has finally, post the 2008
interested investors, remains to be seen. global financial crisis, regained its familiar
position as an engine of economic growth.
When asked about the growth prospects for The exact nature and duration of the impact
trade finance by geography, respondents from COVID-19 remains unclear; in particular,
overwhelmingly predicted growth over the the devastating human and economic
coming two years. Growth expectations were impact of the virus on the most vulnerable
mand for tradepositive
financing
acrosswill growwith
the board, or 86%
decline over
indicating the nextnow
but until 2 years (by region)?
highest-growth markets will
that the demand for trade finance will grow demand careful monitoring and has already
in Asia Pacific (Figure 7), while 75% said the required crisis-level response from authorities
same for Africa. Western Europe saw the around the globe. There is serious risk that
biggest split in the survey, with 51% expecting the USD 1.5 trillion annual trade finance
gap will be exacerbated by the COVID-19
Figure 7
Will demand for trade financing grow or decline over the next two years (by region)?
%
100
14%
25% 33% 34% 41% 43% 49%
50
86%
75% 67% 66% 59% 57% 51%
Decline
Grow
0
Asia Pacific Africa Middle East Latin North Central and Western
America America Eastern Europe
and the Europe
Caribbean

crisis. Significant mitigation measures by This suggests a disconnect between where
multilateral development banks, export credit banks are focusing and where the market is
agencies and others are already in progress, moving. Whether the gap is bridged by banks
but there is much work still to be done. shifting their priorities to align with emerging
client expectations, or by the entry of more
Asked what they consider to be the priority non-banks into the trade financing market,
elements to develop in their trade finance remains to be seen.
businesses, the vast majority of respondents
indicated that traditional trade finance was 84% of participants responded that digital
still an immediate priority for their bank solutions and platforms were either an
(Figure 8). immediate or near-future priority, confirming
the widespread view that trade banks
While traditional trade finance is the largest see digitisation as a key market force that
source of revenue today, its lead is now only will help drive further investment and
marginal versus open account trade: a shift participation in global trade.
that is expected to continue over the next few
years, even if a short-term, COVID-induced Only 45% of respondents saw attraction of
return to traditional mechanisms does non-bank capital (i.e. asset distribution to
materialise. third party investors) as a priority area for
development. This is worth highlighting given
Despite ongoing market shifts away from the prevailing interest rate environment, the
traditional trade and trade financing clear search among asset managers and
7. Pleasemechanisms,
indicate onlywhat53%you consider to be
of respondents the priority
other areas of
capital markets development
players for attractive and strategic foc
in the financing of international
indicated that trade
SCF is an immediate priority. investment alternatives, and the ongoing
Figure 8
Please indicate what you consider to be the priority areas of development and strategic
focus for your bank
Traditional trade finance 70% 16% 7% 8%
Emerging technology, digital trade and

54% 30% 14% 2%
online trade platforms
Supply chain finance 53% 33% 10% 5%
New alliances between banks and fintechs 43% 35% 13% 9%
Organisational structural reform

38% 34% 10% 18%
towards transaction banking
Investments in cash management

34% 27% 20% 18%
and markets capabilities
Increase in geographic/ client coverage 32% 30% 12% 25%
Financing new sectors 26% 45% 12% 16%
Attraction of non-bank capital to create

19% 26% 12% 42%
additional trade financing
Decrease in geographic/ client coverage 10% 10% 2% 77%
0% 50% 100%
Now/immediate future (next 12 months) The longer term (next 3-5 years)
The near future (next 1-3 years) Not a priority

capital cost challenges faced by bank ecosystems (Figure 10), rising to 55% for
intermediated trade finance. The ‘originate respondents from global banks.
to hold’ business model persists, as does the
interbank asset distribution practice. However, While the vast majority of respondents (92%)
indications are that there is an undercurrent indicated that only a minimal proportion of
of interest in exploring asset distribution their trade finance business is conducted
alternatives, enabling technologies and through Distributed Ledger Technology (DLT)
the role of non-bank capital in increasing or blockchain (Figure 9), there are indications
global trade financing capacity. The ICC has that the market perceives opportunity in
launched a Working Group – Institutional the application of DLT to trade and trade
Investors in Trade Finance – to further explore financing, as reflected in several DLT-based
and advance this aspect of the market. multibank consortia in the market. Other
commentators, such as the World Economic
e Finance through DLT /toBlockchain
A transition digital is one of/ the
Digital
most Forum, have identified trade finance as an
ank provided in 2019?
prominent themes seen in trade finance over area where compelling DLT use cases can and
the past few years and was a significant should be developed.
focus of this year’s survey. Indeed, 36%
of respondents expect either moderate or This disparity in expectations and priorities
significant growth in the share of their trade linked to digital trade between global and
finance business provided through digital other banks could be driven by the scale
of investments that larger banks have been
Figure 9
What value of trade finance through DLT/ blockchain/ digital ecosystems has your bank
provided in 2019?
%
100
t the above to change for 2020?

USD 0-1B
92% 93% 86%
50 96%
USD 1-5B
USD 5-10B
USD 10-20B
5%
5% 3% 4% 10% USD 20B+
0 7%
Total Local Regional Global
Figure 10
How do you expect this to change for 2020?
%
100
10% 15% 8% 5%
12%
26% 22%
50%
50
80%
64% 63% Significant change
45% Moderate change
o this question did not

0
include the type of bank in their responses and hence are onlyLittle/
included in the total column
no change

able to make in DLT, blockchain and digital to banks is an increasingly complex and
ecosystems, and in turn the commitment burdensome regulatory regime.
to making these technologies a key part
of the future of trade finance. The evolving When asked about potential barriers to the
imbalance in digital capabilities between growth of trade finance, participating banks
global banks and others may lead to further overwhelmingly indicated concern about
consolidation and concentration in the AML/ KYC requirements (with 63% extremely
trade finance market, unless regional and concerned) (Figure 11) and countering the
local institutions actively seek to retain their financing of terrorism/ international sanction
place in the financing of trade. It may also regulations (with 61% extremely concerned).
evolve that the rising tide of digitisation In past editions of the Global Survey, AML/
lifts all trade banks (and fintechs), as it KYC requirements have similarly been cited
combines with notions of open networks and as the top growth-impeding concern of trade
complementary partnerships to reorient the banks.
landscape in trade financing.
Regulatory and compliance expectations
Despite the survey pointing towards future continue to be an overwhelming concern
growth and investment in trade finance, of banks in terms of growth prospects and
8. Please find below a list of potential obstacles
concerns persist about ongoing obstacles to
to your bank’s growth prospects
the ability to generate additional trade
in the fin
bank, if at all, about each of these?
expanding the trade finance arrangements financing capacity. The concern is not driven
of financial institutions. Of particular concern by any fundamental disagreement around
Figure 11
How concerned is your bank about the following potential obstacles?
AML/ KYC requirements 63% 21% 11% 3%
Counter-terrorism and international sanctions

61% 18% 15% 2%
regulation and compliance
High transaction costs or low fee income 50% 33% 11% 3%
Basel capital regulatory requirements 47% 31% 14% 6%
Increasing protectionism, trade-restrictive measures,

33% 49% 9% 4% 5%
trade tensions and global economic uncertainty
Reduction in pool of senior technical specialists,
31% 32% 27% 8% 2%
bank staff’s lack of familiarity with products
Low credit ratings of company’s/ obligor’s country 30% 43% 18% 5% 4%
Low credit ratings of companies/ obligors 29% 39% 23% 4% 5%
Legacy technologies 27% 36% 24% 4% 9%
Competition and disruption from

26% 36% 27% 8% 4%
fintechs and non-banks
Low credit ratings of issuing banks 24% 40% 25% 6% 5%
Balance sheet constraints/

23% 39% 23% 8% 7%
insufficient credit limits
Lack of dollar liquidity or access to capital 21% 25% 33% 15% 6%
Volatile commodity markets 20% 46% 26% 5% 3%
Clients’ lack of familiarity with products 16% 41% 31% 10% 2%
Shifting trade flows and corridors 15% 49% 25% 4% 6%
0% 50% 100%
Extremely concerned Not very concerned Don’t know

Somewhat concerned Not at all concerned

the objectives of regulatory and compliance of subjectivity in decision making, and
expectations, but rather around the nature they bring validated, verified data into the
and scope of the role of banks in areas like equation. In addition, projects such as the
AML/ CFT and around issues like cross- ADB’s Trade Finance Scorecard: Regulation
border inconsistency in regulation, as well as and Market Feedback can help stakeholders
what are believed to be unintended adverse better navigate regulatory requirements
consequences on trade finance through in different jurisdictions, which have been
regulation and compliance. shown to be a barrier contributing to the
trade finance gap.
A combination of factors, such as increased
feedback from financial intelligence units Looking beyond risk and regulation, 82% of
(FIUs) to industry, the use of enabling respondents indicated that they were at least
technology (Regulatory Technology or somewhat concerned by trade tensions and
RegTech) and, where feasible, greater protectionism (Figure 11), likely driven by an
collaboration between industry and escalation in trade tensions between the US
regulatory bodies can help achieve the shared and several jurisdictions, including China.
objective of balancing effective regulation Respondents appeared less concerned by
with access to trade finance. the specific impacts this would have on trade
finance (Figure 12). While this may appear
Industry collaboration and government counterintuitive given the adverse impact
support, such as introducing shared KYC trade tensions have had on actual flows, the
libraries and using Legal Entity Identifiers view of practitioners may be that tensions
(LEIs) in AML, KYC, and other types of will lead to a restructuring of the architecture
9. To screening,
what can further
extent do youhelpagree/disagree
banks manage for trade
that – including
existing global supply chains
or anticipated tradeandtensions will:
regulatory requirements. These solutions trade corridors – but that trade will ultimately
reduce duplication of effort and the degree continue and will need to be financed.
Figure 12
To what extent do you agree/ disagree that existing or anticipated trade tensions will:
Reduce trade finance funds available for

SMEs and/ or encourage banks to not take on 8% 15% 22% 29% 20% 6%
new SME clients involved in cross-border trade?
Reduce the amount of trade finance credit

6% 16% 26% 31% 17% 5%
made available by your bank to new clients?
Encourage your bank to dedicate fewer

resources/ less capital to support cross border 6% 15% 19% 26% 25% 9%
trade and more to domestic transactions?
Reduce the amount of trade finance credit

6% 12% 18% 40% 21% 5%
made available by your bank to current clients?
0% 50% 100%
Strongly agree Neutral Strongly disagree

Somewhat agree Somewhat disagree Don’t know

12. Compared to 2018, how easy does your bank find it to attract trade finance talent?
Talent Management Figure 13

Over 50% of banks are finding Compared to 2018, how easy does your bank find it to
it more challenging to attract attract trade finance talent?
trade finance talent in 2019 %
than in 2018 (Figure 13). The 50
vast majority of banks are
recruiting internally (Figure 14),
with external sponsorships and 37%
initiatives proving less popular. 34%
Attracting and developing the

next generation of trade finance 25
practitioners is a challenge
that has been the subject of
14%
industry discussion for a decade
or longer; while consolidation 10%
of the trade finance business 6%

helped redistribute capacity for
a time, the issue is now systemic,
13. How isityour bank attracting a new generation
has spawned several industry
0
of trade No
Significantly Somewhat finance staff?
Somewhat Significantly
easier easier difference more more
initiatives including by BAFT, challenging challenging
ITFA and the ICC through the
Successors in Trade program
to attract, train and retain
transaction banking and trade
finance specialists.
The changing nature of trade

finance, and the availability of Figure 14
increasingly robust technology How is your bank attracting a new generation of trade
to effect compliance checks, finance staff?
document verification and No. of responses
other operational activities, 150
will inevitably change the
skill profile, demographic and 121
character of human resources
required to sustain trade
financing capabilities in banks 100
and in the wider market. It is
also increasingly clear that
long-term, incremental ‘learn by 59
doing’ approaches favoured in
50 41
trade operations units will not 37
keep pace with the needs of
23
the market, or with the career
aspirations and expectations of
the next generation of the global 0
labour force. Identifying Offering/ Sponsoring Participating Other
talent from sponsoring university in industry
within the specific graduates initiatives
bank qualifications
and trainings

FEATURE
Scenario analysis on the impact of COVID-19 on trade finance

Sukand Ramachandran, Managing Director and Senior Partner, Boston Consulting Group
Ravi Hanspal, Principal, Boston Consulting Group
Noah Mayerson, Associate, Boston Consulting Group
What does COVID-19 mean for international trade and trade finance?
While global trade remained at a near- drop from USD 46 billion in 2019 to USD 40
record high of USD 18.1 trillion in 2019, the billion in 2020 – growing on average at 4.1%
onset of the COVID-19 crisis is expected to per year until 2028.
dramatically impact both the world economy
and global trade in the short-to-medium Scenario 2: We assume a deeper 6-to-9-
term. The headline-grabbing developments month downturn with a slower V-shaped
in recent weeks and months – tens of millions recovery (approaching a U shape) into 2021.
unemployed, record falls in stock indices, and This implies that by end of Q4 2020, most
unprecedented government intervention – major economies will have reopened and
speak to both how profoundly and quickly some form of economic business-as-usual
the virus has challenged the presumed will have returned. We consider this scenario
strength of the global economy. And indeed, the most likely. In this scenario, we estimate
the positive growth trajectory in global trade that global trade will decline by 21% in 2020
over the past decade will doubtlessly be and only return to its pre-crisis levels in 2024.
disrupted, as well. Given this less bullish scenario, we would
expect trade finance revenues to decrease
The ultimate impact of COVID-19 on to USD 36 billion – the lowest level in over a
international trade will depend on the scale decade – subsequently growing by 1.5% per
and duration of the pandemic itself and year until 2028.
on the various governmental and policy
interventions intended to mitigate the Scenario 3: In this scenario, we assume a
economic crisis. While difficult to predict the deep widespread shock lasting more than a
precise economic impact of the pandemic, year with an L-shaped recovery that leaves
we believe that three scenarios for economic economic growth at a lower trajectory over
output are plausible, each with different the long run. This would become a distinct
implications for international trade (Figure 15) possibility if COVID-19 (and the associated
and trade finance revenues (Figure 16). lockdowns and declines in economic output)
persist throughout 2020 and/ or if the virus
Scenario 1: We assume a moderate 3-to-6- returns in the winter of 2020/ 2021. If this
month downturn, with a V-shaped recovery were the case, we project that international
into 2021 that sees the global economy trade will decline by 30% in 2020, rising
quickly return to its pre-crisis growth path. to just USD 15 trillion by 2028 – far below
This more optimistic scenario would only its pre-crisis value, and approaching levels
likely have been achieved if COVID-19 comparable to those seen at the peak of
were brought under control by most major the 2008 global financial crisis, which was
economies by the middle of 2020; given arguably less severe than COVID-19 yet still
the progress of the pandemic at the time required over a decade of recovery time.
of publishing, this unfortunately no longer
seems to be a realistic outcome. In this At the time of publication, the likelihood
scenario, we estimate that the fall in global of second and third waves of COVID-19
trade for 2020 will be around 11%, and that it is increasingly part of the medical and
will return to its 2019 value by 2021, going on economic discourse, as is the probability of
to reach nearly USD 27 trillion by 2028. We additional mutations, linked directly to the
would also expect trade finance revenues to loosening of restrictions, even controlled

Trade flows to grow in the range of ~6% to ~1% till 2028
degrees of return to work, and Figure 15

the gradual return of travel BCG Trade Finance Model, estimated global trade flows,
across local and international 2000-2028
borders. The behaviour Global trade in USD T
of pockets of population CAGR '19-'28
30
flaunting physical distancing 27
and limitations on large-group 4.4%
gatherings presents a serious
concern. Taken together, these 21
factors present a significant risk 1. 4%
20 18
that may increase the likelihood
of Scenario 3 developing. 15
-2 . 0 %
This independent analysis

largely mirrors the April 2020 10
projections of the World Trade
Organization, which estimated
global trade to decline by
anywhere from 13% to 32% in
2020. 0
2000 2005 2010 2015 2020 2025 2030
Implications for trade finance Source: BCG Omnia Global Trade Finance Model 2020
The declines in trade finance These analyses represent only potential scenarios based on discrete data
from one point in time (06 April 2020).
revenues projected across the
Expect corresponding
three scenarios are clearly reduction in not
They are trade finance
intended
changing daily.
revenue
as a prediction pools,
or forecast, with issome
and the situation slowdown in
driven in part by a wider
slowdown in global trade,
which will consequently reduce
the demand for trade finance Figure 16
products. However, declines in BCG Trade Finance Model, estimated global trade
trade finance revenues will not finance revenues, 2011-2028
necessarily
Source: BCG directly
Omnia correlate to
Global Trade Finance Model
Global trade 2020
revenues in USD B
declines in the world economy
These analyses represent only potential
80 scenarios based on discrete data fromCAGR
one '19-'28
point in time (06 April
or global trade. Trade finance
They are not intended as a prediction or forecast, and the situation is changing daily.
earnings, particularly from the 66 4.1%
usage of documentary trade
products, have a small element of 60
53
counter-cyclicality that soften the 1 . 5%
impact of economic and financial 46
downturns. 40 40
40 36 -1 . 7%
31
As credit quality declines and
the global risk environment
worsens, it is normal to find 20
that the cost of risk mitigation
solutions rises; this will in part
counter the anticipated reduction
in transaction volumes and will 0
2010 2015 2020 2025 2030
contribute to offsetting declines
in trade finance-related revenue. Source: BCG Omnia Global Trade Finance Model 2020
These analyses represent only potential scenarios based on discrete data
from one point in time (06 April 2020).
Products like letters of credit They are not intended as a prediction or forecast, and the situation is
and bank guarantees, which changing daily.

Backup: Expect economic uncertainty to sustain and / or increase demand for Documentary Trade as corporates seek risk mitigation
Figure 17
BCG Trade Finance Model, estimated share of documentary trade vs. open account, 2011-2028
‘L’ shaped recovery ‘Extended V’/ ‘U’ recovery ‘V’ shaped recovery
CAGR CAGR CAGR

2019-28 2019-28 019-28
Trade revenues in USD B Trade revenues in USD B Trade revenues in USD B
50 60 1.5 % 80
46 46 -1.7% 4 .1%
1.5% 53
43 - 1.7% 51
50 66
40 48 4.1%
40 47 62
38 46 46 46 59
37 44 60
43
34 35 42
54
56
33
52%
54%
32 52
52%
31 40
46%
31 50
52%
53%
48 2.2%
1.1%
53%
36
47%
46 46
53%
30
53%
48%
57%
-1.2% 52%
54%
43
53%
57%
49%
54%
52%
57%
40
54%
49%
57%
50%
57%
40
58%
51%
58%
52%
58%
59%
55%
52%
54%
52%
20
53%
20
20
54%
48%
46%
6.0%
53%
48%
48%
47%
2.0%
52%
47%
47%
10
48%
47%
51%
47%
46%
43%
51%
48%
46%
50%
-2.3%
43%
46%
43%
49%
43%
48%
43%
48%
42%
42%
46%
48%
42%
45%
41%
47%
0 0 0
2023
2025
2026
2019
2024
2021
2022
2027
2028
2017
2018
2020
2019
2021
2027
2028
2017
2018
2020
2023
2025
2026
2024
2022
2017
2018
2020
2023
2025
2026
2019
2021
2022
2024
2027
2028
Forecast Forecast Forecast
Doc Trade OA Trade
Source: BCG Omnia Global Trade Finance Model 2020

These analyses represent only potential scenarios based on discrete data from one point in time (06 April 2020). They are
not intended as a prediction or forecast, and the situation is changing daily.
command higher margins than open account determined to do away with the anachronistic
trade products, will likely grow in popularity and inefficient system of paper-based trade.
given their reputation for risk mitigation.
As such, we expect a temporary shift For more information, please see the
toward documentary trade across the three extended article ‘State of the Market’ in the
scenarios, with the shift increasing as the ICC Trade Register.
scenarios worsen (Figure 17).
The COVID-19 situation is rapidly evolving,
A decline in trade finance revenues and on a daily basis. This article represents a
the reduced usage of open account trade number of scenarios based on discrete data
products are not the only expected impacts from one point in time (early April 2020). It
of the pandemic on trade finance. Given the is not intended as a prediction or forecast
widescale economic disruption we expect a about the duration of lockdown, peak of viral
sharp rise in trade finance defaults, especially infections, efficacy of government or health
among SMEs (though we also anticipate that care responses to the virus, or other health or
despite this rise, relative to other banking societal impacts, and it does not represent an
products, trade finance will still be seen as ‘official’ BCG view. It also does not constitute
low risk). medical, legal or safety advice, and is not a
critique, endorsement or recommendation
Optimistically, the crisis may also help to of a particular response. As such, you are
hasten the shift toward digital solutions in advised to use this document as general
trade. As discussed later in the survey, banks guidance only in making your own continued
have struggled to navigate a system reliant assessments as to the appropriate course of
in part on paper-based documentation action, taking into account local laws, rules,
in a world under lockdown. Industry and regulations, and orders.
regulators may emerge from the crisis

FEATURE
The economic impact of COVID-19 on supply chains

Krishnan Ramadurai, Chair, ICC Trade Register
Ravi Hanspal, Principal, Boston Consulting Group
We would like to acknowledge Zoltan Pozsar and James Sweeney for their original publication
‘Covid-19 and Global Dollar Funding’, that introduced some of the concepts discussed in this
article in the context of COVID-19
As COVID-19 spreads globally and we begin • A physical supply chain, involving the
to manage the immediate-term health crisis production and movement of goods
(ventilator supply, ICU capacity, access to PPE and services
and the like), our attention has increasingly
shifted to the economic crisis at hand. Given • A financial supply chain, involving the
the global reach of the pandemic, a common movement of money, financing and risk
topic for thoughtful commercial and policy mitigation as well as related transfers of
consideration is the impact on global supply ownership, plus the aforementioned
chains, pressured from both ‘supply’ and value-add
‘demand’ side challenges.
• A data and information supply chain,
What will the shutdown of industrial increasingly powered by technology, such
production and services mean for output? as remote sensors, complex financial and
What will billions being placed into self- logistics systems and others that can
isolation and banned from working, provide extensive, near real-time insight
socialising, travelling and, in many ways, into the state of a transaction and a
spending, do to demand? And, what impact shipment
will such shocks have on financial markets,
bank lending and global liquidity? To help visualise the transfer of value – which
relates directly to payment flows – along
What do we mean by supply chain? the electronics supply chain, we have used
A supply chain is the interconnected transfer a sequential chain (Figure 18), but supply
of value from one party to another as part chains can be highly complex in reality, with
of an end-to-end manufacturing process, components commonly crossing the same
often across multiple geographical borders, borders multiple times over the course of a
and commonly involving an ecosystem of production process.
hundreds, perhaps multiple thousands,
of commercial enterprises – domestic or Fundamentally, goods move from seller
international. At each stage of the supply to buyer and payments from buyer to
chain, there is an input, a ‘value add’, and an seller. If one link ‘breaks’ – through a stall
output, with the distribution of these varying in output or a stall in payment – the supply
materials across stages. A prime example is chain no longer works, and all players face
in the electronics industry: the supply chain consequences. As value is added at each
may start in Asia with intermediate producers stage of the production process, the health
in South Korea and Chinese Taipei supplying of the financial supply chain becomes
goods to China, where the final assemblers increasingly critical to completion and
add their value to the goods and ship them to delivery, driving demand for a range of trade
various destinations such as the US, Europe, financing solutions aimed at mitigating risk
South America, or elsewhere in Asia. and ensuring adequate cash flow and working
capital in the supply chain. Trade finance is,
Supply chains are increasingly viewed as in this way, the oil in the engine of global
being composed of at least three concurrent commerce.
and complementary layers:

Figure 18
Sample electronics supply chain
Sta g e 1 Sta g e 2 Sta g e 3 Sta g e 4

Producer 1 Producer 2 Final assembly End destination
S o uth K o r e a Chine se Taip e i China USA
Copyright © 2020 by Boston Consulting Group. All rights reserved.

Inp ut 5 Inp ut 10 Inp ut 20 Inp ut 30
Value ad d 5 Value ad d 10 Value ad d 10 Value ad d 10
Outp ut 10 Outp ut 20 Outp ut 30 Outp ut 40
Value add decreases as proportion of input value from immediate suppliers to final assembly to end destination
20
What is the impact of COVID-19 on bank credit lines. Alternatively, they

on supply? may be able to extend payment terms to
On the supply side, COVID-19 first truly hit their suppliers, but this effectively means
supply chains by the mandated shutdown of transferring the risks down the supply chain.
production capacity in China, which was soon The ability to extend payment terms is a
replicated across the world. function of the bargaining power the buyer
can exercise over the seller. Suppliers down
As production shuts down and disables the supply chain will typically be squeezed
critical components of the supply chain, the most. The impact will be disproportionate,
gaps turn into problems. Inventories of raw as small and medium enterprises far down the
materials and finished goods build up, and supply chain will have the least bargaining
staff are laid off. Transport and logistics power or external funding options and will
start to seize-up, compounding the problem also feel the cash flow strains quicker than
by slowing down any limited remaining large corporates.
production and delivery capacity.
Although trade finance practitioners are
Soon, with no goods coming in or out, increasingly working to solve the ‘last mile’
payments are delayed and missed along the financing challenge in international supply
supply chain. Delayed or missed payments chains, and although payables finance
will mean that intermediate suppliers will programs can offset some of the adverse
need to meet wages, fixed overheads such cash flow impact of extended payment
as rent, and debt servicing costs from either terms, such programs are most commonly
internal cash reserves or by drawing-down available to larger suppliers collectively

representing the most significant ‘spend’ by suppliers, mean that the overall supply
the buyer. Small suppliers that are considered chain is simpler and easier to manage.
strategic to the smooth functioning of a
supply chain may be the exception, as well • Terms of trade: The greater the disparity
those with unique product characteristics or in bargaining power between buyers and
intellectual property that cannot be easily sellers, and the smaller the concentration
replaced. This dynamic contributes to the of buyers to suppliers (or vice versa), the
reasons why payables finance programs must less resilient the supply chain will be. The
be appropriately structured, managed and Japanese earthquake and tsunami in 2011
reported upon, and must be thoughtfully exposed the dependence of Japanese
deployed across international supply chains. car manufacturers on OEM suppliers to
The COVID-19 crisis has provided stark their factories located in the US, as well
illustrations of supply chain vulnerability in as the critical importance of a particular
medical equipment and agri-food, among Japanese supplier to a US technology
others, with multilateral institutions having giant’s supply chain and production
to step in quickly and decisively to shore up capability.
critical supply chains.
• Value addition: Supply chains
The susceptibility of a specific supply chain characterised by higher value addition at
will vary depending on five key factors: each stage will be impacted more than
supply chains where value addition is
• Industry: The complexity of supply modest or incremental, as the risk is less
chains varies materially by industry. concentrated in the latter scenario. The
The automotive, electronics and garment sector will typically experience
telecommunication industries rely on a more muted impact than sectors such
many different component manufacturers, as electronics and automotive. This is
and their end production is dependent on because intermediates depend more
all of these coming together seamlessly. heavily on payments flowing through
In addition, these industries often are these high value-added supply chains, and
geographically concentrated, with a large therefore experience more immediate and
proportion of manufacturing in China. adverse impact in the event of a disruption
The combination of China as an anchor in payment flows.
to many global supply chains, and the
same country being the source (though • Supply chain strategy: As supply chains
no longer the epicentre) of the pandemic have become leaner and leaner, there
outbreak, has directly shaped the impact has been less and less slack in the
of COVID-19 on trade flows, and has system: fewer resources on standby, less
amplified calls for more agile (and in some contingency stock, no more buffers in
cases, reconfigured) supply chains that delivery timelines. While this can cut costs,
had been loudly heard in the context of it also means that at times of disruption,
pre-COVID-19 trade war rhetoric. Certain impacts are seen immediately and may
firms are known to actively counter the become more difficult to address, as
trend in automotive supply chains: fewer has been observed during the COVID-19
but more intelligent parts, and fewer crisis. As a result, some of the most tightly

operated supply chains may be the first to be amplified as consumers delay major
face trouble. purchases and travel, local commutes reduce
drastically due to lockdown, and businesses –
• Leverage: As supply chain finance even entire sectors – face a difficult recovery
(specifically payables finance) has grown post-lockdown.
in popularity, supply chains have become
increasingly leveraged. As a result, At an institutional level, this decline in
individual firms within the ecosystem have demand can quickly translate into falling
become less disciplined in maintaining revenues and forced extension of payment
their own healthy working capital, terms for suppliers. When coupled with the
resulting in potentially smaller cash need to meet fixed costs, pay wages, and
reserves at a time of crisis. service debt, internal cash flows can come
under strain, resulting in drawdowns of credit
What will happen to demand? lines at banks – just as we are seeing from the
Inevitably, supply-side shocks are being shutdown in supply.
accompanied by demand-side shocks
caused by widespread production and The devastating demand-side and supply-side
service sector shutdowns, coupled with impacts of COVID-19 build upon each other
lockdowns restricting the movement – and and reinforce a cycle of crisis as each side of
ability to work – of billions of people, goods, the market wrestles with existential risk in an
and services. Consequently, discretionary environment with perhaps no parallel from
consumer spending is likely to collapse. which to draw helpful lessons and insight.
This will be further exacerbated by the fall What does this mean for
in financial markets and the ‘dash for cash’ businesses financially?
as reflected in the indiscriminate selling of As discussed, at an institutional level a
financial assets, which results in declining shock in supply and demand will translate
household wealth and falling consumption. into missed and delayed payments. If these
Even households not directly impacted will missed and delayed payments accumulate,
become cautious – with growing uncertainty and are overlaid with a need to meet
over jobs, investments, and pensions – salaries, fixed costs and debt payments, then
translating into less spending. internal cash flows are likely to come under
substantial strain. Institutions will have two
Understandably, the decline in demand choices: either they extend payment terms to
will be felt most acutely in sectors such as their suppliers, or draw down available credit
travel, and in some areas of the services lines from banks.
sector, due to the direct impact of forced
shutdowns and border closures. Given the While drawdown of bank credit lines is
increasing importance of the services sector essentially a function of a bank’s assessment
and its contribution to country GDPs, the fall of an institution’s ability and willingness to
in demand will have an adverse knock-on repay loans and the bank’s appetite to take
impact on reported GDP numbers. on more risk exposure, the ability to extend
payment terms is a function of the terms of
This will no doubt be accompanied by a trade and the bargaining power the corporate
decrease in demand for goods as the drop in has over its suppliers.
the service and travel sectors ripple across
supply chains such as those for food and Looking back at our example from the
beverages for bars, restaurants, and hotels, electronics industry, intermediate suppliers
fuel for aviation, and many others. This will in Korea, Chinese Taipei and final assemblers

in China could lean on big technology necessarily preventing default on existing
companies with large cash surpluses for facilities.
early payment or direct cash funding. We
are already seeing some firms accelerating However, an additional key risk to consider
payments to European suppliers, paying them – particularly around the theme of supply
within 15 days. While this will provide some chains – is liquidity. As USD is the major
back-stop relief for suppliers, this is not a invoicing currency for global trade in goods
permanent solution. and services, the risks at a bank level are
essentially related to USD funding and the
With capital markets in a swoon, accessing ability for banks to provide this funding.
the commercial paper, bond and equity
markets would no longer be a viable option As supply-side shocks intertwine with
for large and medium-sized corporates demand-side shocks, corporates will draw
under normal circumstances. In addition, down internal cash surpluses in the first
SMEs that are typically wholly reliant on instance, and credit lines in local currency
banks would also find themselves in a ‘no (LCY) and foreign currency (FCY). While LCY
win’ situation, assuming banks would want funding should not be a major issue (central
to limit exposures. As such, the crisis calls banks can print local currency to meet any
for extraordinary measures and government sharp increase in demand), banks will need
intervention to ensure that credit continues to fund USD loans from their stock of USD
to flow and support real economic activity – deposits. For banks that are structurally
which is exactly what is happening. short on USD, they will need to borrow in the
inter-bank market from USD surplus banks
Indeed, in the US the Treasury Department which often tend to be the US banks. In
and Federal Reserve have launched a addition, countries under US sanctions will
series of financing programmes under the face amplified issues due to restricted access
new CARES Act (Coronavirus Aid, Relief, to USD funding.
and Economic Security Act), including the
Primary Market Corporate Credit Facility As corporate USD cash surpluses in banks
and Main Street Business Lending Program. gets drawn down there is a knock-on impact
Similar programmes are seen elsewhere, for banks, which puts pressure on their
including CBILS (Coronavirus Interruption Liquidity Coverage Ratios (LCR), as these
Business Loans Scheme) in the UK to withdrawals raise the denominator of the
provide government-backed lending to small LCR ratio, forcing banks to increase their
businesses. stock of high-quality liquid assets (HQLA),
the numerator of the LCR ratio. The ability to
What does this mean for the reduce outflows for banks in this situation is
banking system? limited.
A key obvious risk for the banking system
in such a crisis is the likelihood of increased The inter-bank market is a source of liquidity
defaults, as the health of corporates and in good times. However, as liquidity is fragile
small businesses starts to deteriorate, in a crisis, it can act only as a temporary
and they can no longer service their debt. backstop, and banks needing USD funding
While this may be, in part, softened by on a continuous basis will need to get their
government intervention, the majority of funding from alternative sources. These
government programmes are focused around alternatives, using our stylised example of
providing and backing new lending – but not the electronics industry, will be the local
Taiwanese and South Korean banks, that will

fill the gap left by the Japanese banks, which London and Hong Kong will need to find
are the traditional lenders of USD in the alternative sources of USD to match their
electronics supply chain. books. As in normal times most of these
dollars were used to fund carry trades, this
This switch in funding sources has the switch has the potential to transmit local
potential to redistribute cross-currency imbalances globally.
funding pressures from a USD/ Yen basis,
USD/ Korean Won basis or USD/ Taiwanese In the unlikely event the Chinese central bank
Dollar basis. The knock-on impact of these exhausts its dollar liquidity in cash markets
pressures will flow through in the earnings like the FX market described above, then
of these banks, as banks in South Korea and the bank will either repo or sell its treasury
Chinese Taipei cannot raise USD as cheaply portfolio to fund the dollars required. The
as the Japanese banks. central bank will, however, not approach the
US Federal Reserve to tap swap lines as,
Given that Japan, South Korea and unlike several other central banks (e.g. Japan,
Chinese Taipei dominate the ‘value add’ share UK, Europe and Switzerland), the Chinese
of the electronics supply chain that runs central bank does not have swap lines with
through China, USD liquidity will be more them.
at risk in these geographies than in China. If
the cascade of requests to draw down credit In essence, a cascade of USD drawdowns has
lines and in particular USD loans becomes the potential to create stress in USD liquidity:
a systemic issue, then it can translate into
a depletion of USD reserves at local central • In peripheral cross-currency markets (e.g.
banks and in turn drain excess reserves at the TWD/ USD) as missed payments grow
US Federal Reserve.
• In EUR/ USD and USD/ Yen currency
Using China as an example, in the case that markets as reserve managers stop lending
local banks are swamped with a drawdown in the FX swap market to help their local
of USD deposits their natural port of call will banks and the banking system deal with
be the People’s Bank of China. In turn, the USD outflows in their jurisdictions
Chinese central bank – as it keeps a part of
its FX reserves in FX swaps where they lend • Insofar as USD Libor-OIS spreads grow,
USD in exchange for Euros and Yen – will now as banks start to remedy their LCR ratios
need to flip this around and unwind these to counter the outflow of operational
swaps, effectively becoming USD borrowers deposits and the drawdown of credit lines
rather than lenders. This means dealers in
Concluding thoughts – selected policy considerations

This brings to mind a number of considerations for potential policy interventions:
• Expand USD swap lines to countries currently with no access to these swap lines. This
effectively means going beyond the 14 countries that currently have access to these swap
lines.
• Multilateral Banks raise USD funding from Global Capital Markets which can then be used as
a source of liquidity to fund Trade Transactions through targeted lending programmes.
• Relax LCR and Net Stable Funding Ratio (NSFR) with a view toward channelling USD
liquidity to where it is needed most.

COVID-19 Survey analysis
The optimistic results from the Global The COVID-19 Survey had 233 respondents,
Survey demonstrate a clear desire by banks and the participating bank profile was
to grow their trade finance businesses, somewhat different from that of the Global
reflecting an underlying confidence in Survey, with 49% from local, 28% from regional,
commercial prospects, trade flows, and and 23% from global banks (Figure 19). The
general geopolitical stability. However, many largest number of responses were received
respondents completed the survey before from banks headquartered in Central and
COVID-19 moved from a localised threat Eastern Europe (39%), Western Europe (20%)
in China and South East Asia to a global and Asia Pacific (17%) (Figure 20).
pandemic. As a result, we expect sentiment
ank is your toward trade finance to be more cautious in
bank? Responses across geographies and bank types
the short-to-medium term. were broadly similar, except where highlighted
otherwise.
To supplement the Global Survey, the ICC
Banking Commission launched a short Overall, banks from all geographies are
additional survey specifically aimed at already noticing the impact of COVID-19
understanding the initial impact of COVID-19 on trade flows, with 34% suffering a 0-10%
on trade finance. The findings reflect market drop in trade flows versus expectations in Q1
views as at early April 2020. (Figure 21). A further 37% indicated that their
trade flows declined from 10-30% in Q1. Only
16% of banks suffered greater than a 30%
Figure 19
What type of bank is your bank?
bank headquartered?
23%
Local
% 49%
Regional
Global
28%
Figure 20
Where is your bank headquartered?
2%
9%
Central and
Eastern Europe
13%
39% Western Europe
Asia Pacific
%
Middle East
Africa
17%
North America
Latin America
and Caribbean
20%

decrease, although this may be because the Looking ahead to the rest of 2020, banks
impact on trade in most markets was more expect a more significant impact on trade
mpacted your Q1 trade
subtle flows
towards the versus
beginningexpectations?
of the quarter. flows as COVID-19 continues to shut down
economies, reduce consumer spending, and
Results did not diverge materially across bring businesses of all sizes to the brink. In
markets or categories of banks responding to 2020, 28% of banks expect a 20-30% hit to
the survey. Even in APAC, where the impact the trade flows they support (Figure 22), a
on trade flows might reasonably have been further 25% anticipate a 10-20% reduction,
expected to be worse given proximity to and 15% expect a 30-40% decrease. This
China, 36% reported only a 0-10% decrease in largely dovetails with the projected impact
Q1 trade flows. on global trade flows outlined above (Figure
Figure 21
How has COVID-19 impacted your Q1 trade flows versus expectations?
Total %
60
45
34%
30
3. How has COVID-19 impacted
20% your Q1 trade flows versus expectations?
17%
13%
15 8%
5% 3%
0
No impact 0-10% 10-20% 20-30% 30-40% 40-50% 50%+
decrease decrease decrease decrease decrease decrease
Western Europe %
60
45 36%
30 19% 19%
11% 9%
15 2% 4%
0
Central and Eastern Europe %
60
45 38%
30 19% 18% 14%
15 3% 7%
1%
0
Asia Pacific %
60
45 36%
31%
30
15%
15 8% 8%
3% 0%
0
Middle East %
60
45
30 21% 24%
17% 14%
10% 7% 7%
15
0
Other % (North America and Africa)
60
45
28%
30 16% 20%
12% 8% 8% 8%
15
0
No impact 0-10% 10-20% 20-30% 30-40% 40-50% 50%+

15) from BCG’s Trade Finance Model, which more in 2020 trade flows (and a further 20%
estimated an 11-30% decrease in global trade expect a 30-50% reduction). The view from
k anticipate to be
flowsthe
as aCOVID-19 impact
result of COVID-19 onthree
across 2020 trade flows?
the Middle East is likely influenced by the
different scenarios. Assessment from the state of oil prices and petroleum exports, as
WTO (April 2020) suggests a COVID-related a region heavily dependent on oil exports is
reduction of trade flows in the range of 13- seeing oil prices and volumes drop to some
32%. of the lowest levels in recent memory, for
reasons only partly related to COVID-19.
Across regions, the results are largely similar,
except for the Middle East where 24% of Respondents indicated that a range of
respondents expect a decrease of 50% or geographies and commodities are expected
Figure 22
What does your bank anticipate to be the COVID-19 impact on 2020 trade flows?
Total %
60
45
30 28%
25%
4. What does your bank anticipate to be the COVID-19 impact on 2020 trade flows?
15%
15 12%
9% 8%
3%
0
No impact 0-10% 10-20% 20-30% 30-40% 40-50% 50%+
decrease decrease decrease decrease decrease decrease
Western Europe %
60
45
26% 24%
30 20% 15%
15 9% 4%
2%
0
Central and Eastern Europe %
60
45
30%
30 24%
16%
15 6% 9% 10% 6%
0
Asia Pacific %
60
45 38%
30 26%
8% 13% 13%
15 3%
0%
0
Middle East %
60
45
30 24% 24%
17%
7% 7% 10% 10%
15
0
Other % (North America and Africa)
60
45 32%
30 20% 16%
12% 8% 12%
15
0%
0
No impact 0-10% 10-20% 20-30% 30-40% 40-50% 50%+

Figure 23
Have you seen any noticeable rise in trade finance defaults owing to COVID-19?
18%
25%
Yes
No
%
Don’t know
57%
to be impacted by COVID-19. However, retail, • Trade obligations, particularly those

travel and tourism (including airlines and related to strategically important flows
hotels), automotive, and, in particular, oil, like agri-food, commodities, defence
were cited by many respondents as the most spending and others, have tended to be
likely sectors to see significant disruption. given priority in settlement. Such action
may prevent technical or even probable
We also asked banks if they have seen any defaults from occurring in the end.
noticeable rise in trade finance defaults as a
result of COVID-19. As of early April, 57% of Industry leaders and ICC will carefully monitor
respondents had not witnessed an increase in the evolving state of trade obligations as a
defaults, while only 18% reported that they had critical element of managing the COVID-19
observed an increase in defaults (Figure 23). crisis and will work to proactively devise
mitigation strategies with authorities where
It is, however, too early in the crisis to appropriate. It will be difficult to avoid a
properly assess the resulting default situation. global, systemic liquidity crisis. The key will
Several factors must be taken into account: be the nature, decisiveness and speed of a
coordinated response across jurisdictions,
• The tenor of traditional trade finance, and in this context, multilateralism will
as well as the maturity timeframes for again demonstrate its value despite its
techniques like payables finance, often acknowledged imperfections. Further, the
exceed 90 days; instances of default, ICC Trade Register will play an important
if they arise, would not yet have been role in providing robust data, analysis and
discovered. advocacy as the default picture takes shape.
• Default status may be reached by crossing Given the sharp decline in trade flows
a timeframe defined by regulatory anticipated by the responding banks, it is
standards and may therefore be reached more important than ever that both financial
as a ‘technical’ default without reflecting institutions and public bodies think creatively
commercial or transactional reality. to help facilitate global trade and mitigate
any barriers created by COVID-19. However,
• Measures aimed at mitigating the adverse the Survey reveals mixed perceptions in this
effects of the COVID-19 crisis are under area, with individual banks taking the lead on
assessment and consideration, and may implementing new measures and solutions
include, as a matter of government and to support their customers, while other key
public policy, the creation of temporary players in the trade ecosystem may need to
loan extension or forgiveness measures. accelerate their response to the crisis.

As with the global financial crisis of 2008, In terms of customer uptake of these
international bodies, multilateral development measures, many respondents noted that,
banks, and some export credit agencies have while early, customers have responded quite
responded quickly. Equally encouragingly, positively. One respondent noted that the
the Basel Committee promptly provided “demand to structure loans was high,” while
direction aimed at reducing capital pressure. another said that “customers have responded
Other agencies of public and international very favourably and with appreciation”
policy are understandably preoccupied with to the new measures. However, one bank
urgent health and public safety priorities; respondent mentioned that they had seen
the ICC and industry partners are working “more requests for Confirmation of L/Cs from
judiciously to ensure that messages related to exporters who normally didn’t [request them]
the importance of trade and trade finance, the before the crisis”. This is not unexpected, and
imperative to support SMEs, and the urgent reflects the reality that risk is a function of
need to safely reopen the global economy are both objective fact and perception. Such an
thoughtfully communicated. observation also highlights why trade finance
techniques and mechanisms have proven
When we asked responding banks if they their mettle over hundreds of years, enabling
have implemented any measures to support trade to flow securely even under the most
their customers through the COVID-19 crisis, challenging conditions.
72% – across the various bank profiles –
indicated that their banks have done so A key question, however, is to what extent will
(Figure 24). Dozens of respondents indicated these measures suffice in the medium term?
that they were extending financing terms Trade banks are accustomed to trade finance
such as loan maturity dates and repayment being a low-risk product. However, should
schedules. the risk dynamics of trade be completely
overturned as importers’ and exporters’ cash
Many also indicated that their banks had reserves are depleted amid the COVID-19
put in place any measures to support customers impacted
stopped collecting interest on their trade
by COVID-19 (e.g. extending
crisis, more substantial intervention will
financing te
finance facilities for periods extending out be required, including government grants
to nine months and had stopped charging and growth in government-backed export
customers bank fees. A few respondents credit agency funding. Should a worse-case
credited their central banks with the crisis scenario develop, concerns will reach
deployment of new policies and programs across jurisdictions and the global financial
aimed at supporting business, with such and economic system and will demand
measures seen as providing important coordinated mitigation measures. In such
additional impetus to the initiatives taken by an eventuality, the advocacy dimension of
the banking sector. ICC’s work, and ICC’s unique, trusted, and
authoritative position with organisations like
Figure 24
Has your bank put in place any measures to support customers impacted by COVID-19?
13%
14% Yes
No
%
Don’t know
72%

rolled out any new digital solutions specifically to mitigate the disruption caused by COVID-19?
Total
Figure 25
Has your bank rolled out any new digital solutions specifically to mitigate the disruption
caused by COVID-19?
13. Has your bank rolled out any new digital solutions specifically to mitigate the d
Yes
46% No
Global
54%
41% 38%
Western Asia
Europe Pacific
59% 62%
Central Other
42%
& Middle 48% (North
50% 50% 52%
Eastern East America
58%
Europe and Africa)
the UN, the WTO, the G20 and others will be letter of credit has not been possible due to
brought sharply into focus. ‘lockdown’ restrictions impacting carriers,
bank branches, and the like.
ICC has already responded with
unprecedented speed in developing In light of this, 54% of respondents said
communications, tools and program that their banks had introduced new digital
recommendations in the context of COVID-19 solutions to mitigate any disruption caused
and continues to work on such initiatives, by COVID-19 (Figure 25). Notably, in Asia
1. Other = North America and Africa
including in support of trade and trade Pacific, the original epicentre for COVID-19,
financing. 62% of respondents indicated that their banks
have not introduced any digital solutions, the
Concerns around the impact of COVID-19 on lowest of all regions surveyed.
trade finance are not limited to credit risk, but
also operational feasibility, for example the Taken holistically, the cases where operational
transfer of critical legal documents. To this and transactional challenges in trade finance
point, we are aware of various cases where have impeded the flow of trade have been
goods are ready to export but securing a limited in number, again illustrating the

ongoing trade?
Figure 26 Total
Has your local authority/ government provided any regulatory support to your bank to
facilitate ongoing trade?
20%
29%
15. Has your local authority/government provided any regulatory support (e.g. rel
bank to facilitate ongoing trade? Yes
No
Global
Don’t know
50%
28%
Western Asia 45%

Europe 55% Pacific
72%
20% 18%
32% 30%
Central 36% Other
& Middle (North
Eastern East America
Europe 64% and Africa)
48% 52%
ability of trade finance providers to respond and interbank relationships in trade financing
relatively well in times of crisis. Whether this is clearly illustrated under current conditions;
remains the case as COVID-19 evolves is to concretely, one survey respondent shared
be determined. Technology and digitisation that their bank was launching “agreements
will play a crucial part in ensuring access to with [other] banks that in case they are
timely and sufficient trade finance at this unable to send original documents, they can
time. instead send scanned documents via email as
a temporary solution”.
1. Other
In addition = North
to more America
general usageand Africa
of online
platforms and services for day-to-day 29% of respondents said that their local
tasks, many respondents indicated that authority has provided regulatory support
their banks have relaxed existing rules on to help facilitate ongoing trade (Figure 26).
the need for original documentation, for In contrast, Asia Pacific seems to be leading
example by allowing scanned documents the way in the public sector response to
and other e-documents, and have rolled out COVID-19, with 45% of respondents indicating
new rules and platforms to enable the use at least some public action to support trade
of e-signatures for legal documents. The (the highest of any region in the survey). As
importance of global correspondent networks observed earlier, this is likely a function of

life and death priorities faced by authorities to be a powerful force in advancing long-
around the globe, coupled with resource delayed aspirations to digitise trade and
and capacity constraints: it will be important trade finance. The ICC Digital Trade Roadmap
to ensure that trade and trade finance are will be an important contribution to the
prominent in the economic and commercial development of new modes of digital trade.
policy dialogue that is developing in parallel
to the public health priorities. The impact of COVID-19 on trade comes not
only from supply and demand shocks, but
Specific measures introduced by also from logistical challenges. Quarantines
governments cited by respondents included and closed borders, coupled with reduced
stimulus packages and support for many global capacity to move cargo, will naturally
small businesses that have been introduced reduce global trade flows. In unprecedented
by parliaments and central banks around and unpredictable moments like these,
the world. But they also included more new and creative solutions emerge – first
trade-specific measures. Many respondents as temporary fixes and ultimately as
indicated that regulators had relaxed the new industry norms. The difficulty many
need for physical documentation. Other banks have found in respect of original
respondents also indicated that a reduction in documentation serves to highlight the
capital requirements and a relaxation of KYC urgency of digitisation in trade finance.
have been introduced to help support the
ongoing flow of global trade. One respondent wrote that in the short
term “the ICC should push banks to agree
Notably, 50% of respondents indicated they on amending pending L/Cs where original
did not know whether their governments documents cannot be produced anymore
had provided regulatory support to help or delivered”. However, with an eye on the
facilitate trade flows. This finding surely longer term, one respondent said, “The fact
reflects in part the urgency of focusing on that original documents have to be examined
other matters, but also hints at the need for and delivered is a significant problem.
improved communication flows and enhanced Technical issues become credit risks. I hope
understanding of available support options. that based on the experience with COVID-19
we can continue to move toward digitisation
The redefinition of the commercial, legal, and [in trade]”.
policy landscape around trade may prove

FEATURE
SWIFT Trade Traffic: the year in review

Huny Garg, Head of Trade – EMEA, Business Development, SWIFT
This section of the report provides a data-driven commentary on global trade finance traffic,
based on data from SWIFT. While SWIFT trade finance traffic represents only a modest portion
of global trade by volume, it is a good barometer of trends for L/C use, since about 90% of L/C
transactions go via SWIFT.
SWIFT Terms Explained

Traffic: Live messages sent over SWIFT
Category 4 messages/ MT400s: Flows for documentary collections, except

the three least used cash letter messages
Category 7 messages/ MT700s: Flows for commercial and standby L/Cs

and guarantees
Analysis of SWIFT Trade Traffic: Highlights in 2019

• SWIFT trade finance volume fell 6.4% in 2019 from the year before, in large part due to a
5.9% drop in category 7 and a 8.4% drop in category 4 traffic. The decline for MT700 traffic
at 3.9% was less pronounced than the overall decline that was driven by an 8.4% decline in
MT799 messages.
• Asia-Pacific continued to register much higher volumes of MT 700, garnering a 76.0% share
for imports and a 78.1% share for exports. Countries using SWIFT L/Cs the most for imports
were: Bangladesh, South Korea, China, India and Pakistan.
• Country/ region using SWIFT L/Cs the most for exports were: China, Bangladesh, India,
Hong Kong and Singapore.
• Imports rose sharpest in Ethiopia and Nepal, up 10.4%, and exports rose fastest in Portugal,
up 9.6%.
• Imports fell the most steeply in Sri Lanka, down 15.8%, and exports fell sharpest from
Saudi Arabia, down 18.6%.

Global Trends
SWIFT Trade Finance Traffic Worldwide in Number of Messages (FIN B2B only)
Figure 27
SWIFT global trade finance traffic, FY2016-FY2019
Growth rate
10 (FY 2019 vs FY 2018)
8 Total (Cat 4+7)

6.4%
7
Category 7
5.9%
2
Category 4
1 8.4%
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019
Trade finance traffic continues to slide L/C volumes and values – the slump
SWIFT trade finance volumes in 2019 were continues
down 6.4%, falling more sharply than last The volume of L/Cs on SWIFT fell again
year’s drop of 2.35%, pushed down by the last year, off 3.9%. Interestingly, Q4 2019
decline in category 7 documentary credits showed an upward trend after many quarters
and guarantees of 5.9%, and an 8.4% fall in of decline. There was a decline of 8.13% in
category 4 documentary collections. MT799 (the free format message type that
accounts for the largest portion of category
7 volumes) possibly due to improvements in
Import traffic vs Average value structured messages during standards release
Live, delivered MT 700 (Issue of a Documentary Credit), including d in 2018 by SWIFT.
Figure 28
Import traffic vs. average value in FY2019, split by region, based on SWIFT MT700 traffic
Import traffic Average value of letter of credit sent, by region
(USD)
1.7% Europe
1,856,839
5.0% 3.6% Non Eurozone
5.4% 1.7%
Middle East 779,696
6.5%
North America 692,610
Europe
691,191
Eurozone
76.0% Central and

557,893
Latin America
Asia-Pacific 525,738
Asia-Pacific Europe – Non Eurozone

Africa 496,100
Europe – Eurozone North America
Middle East Central and Latin America
Africa

T op Imp orting Countries in F Y 2019
Live, delivered MT 700s sent, including domestic and international tra
Figure 29
SWIFT MT700 import L/C volumes by country/ region (# messages)
15
925,036
Bangladesh 3.06%
953,361
10.77%
413,001 10
South Korea 4.76%
393,350
352,100
China 5.24%
333,655 5
226,607
India
214,876
0
167,538 Ethiopia
Pakistan
165,176
153,707
Hong Kong
144,026
146,073
Chinese Taipei
135,653
105,668
Vietnam
106,114
2018 0
101,590
Indonesia
98,213 2019
99,606
Sri Lanka -10
79,318
-20
-20.37%
Asia-Pacific received the most L/Cs, around The average value of import L/Cs was the
3.1 million MT700s, much more than any highest in non-Eurozone European -30
region. But the average value of an L/C countries, whereas Africa had the lowest Sri Lanka
received in Asia-Pacific was lowest at value import L/Cs.
USD 430Kv.
Looking at the cross-border volume of
Regional analysis: Import L/Cs1 MT700 traffic, excluding domestic flows, the
Asia-Pacific continued to register the largest countries importing the most using
volume for import L/Cs sent using MT 700s, L/Cs are shown in Figure 29.
making up 76.0% of world traffic in 2019, *Growth (FY 2019 vs FY 2018)
followed by the Eurozone 6.5% and the From countries with yearly volume of MT 700 greater t
and international traffic
Middle East 5.4%.
Figure 30
Fastest-growing importers, based on SWIFT MT700 traffic
15
6%
10.77% 10.37%
10
5
3.06%
0.42% 0.06%
0
Ethiopia Nepal Bangaladesh Vietnam Turkey
1 Data includes both domestic and international traffic, as commercial letters of credit can be utilised in
domestic transactions
ghts reserved.
0 2020 ICC GLOBAL SURVEY ON TRADE FINANCE 41

2018
2019
10
5
3.06%
0.42% 0.06%
0
Ethiopia Nepal Bangaladesh Vietnam Turkey
Figure 31
Copyright © 2019 by Boston Consulting Group. All rights reserved.

Importers with the sharpest declines in imports, based on SWIFT MT700 traffic
2018 0
2019
-10
-11.20%
-16.68% -16.26%
-20 -17.34%
-20.37%
-30
Sri Lanka Chile United Kingdom United States Germany
35
Bangladesh was the only country among With a yearly volume higher than 20,000
the top 5 that experienced growth in import MT700s sent internationally as a gauge, the
2018) L/C volumes. Countries like South Korea countries showing the largest
SWIFT Tradedeclines in
rly volume of MT and
700China sawthan
greater a decline of 4.76%
20,000 and
in FY 5.24%
2019 imports using
Messaging Trendin Figure
Source: Watch L/Cs are shown 35 31.
respectively.
PowExport
Regional analysis: eredL/Cs by SWIFT 1
Looking at annual volume over 20,000 BI

Asia-Pacific continued to register much
MT700s sent internationally, the countries higher volume for received MT 700s,
with the highest year-on-year growth in this (exports) accounting for 78.1% of world traffic
category in 2019 are shown in Figure 30 in 2019, followed by the eurozone (7.8%) and
Export traffic vs Average value
above. non-eurozone Europe (4.5%).
Live, delivered MT 700 (Issue of a Documentary Credit), including d
Figure 32
Export traffic vs. average value in FY2019, split by region, based on SWIFT MT700 traffic
Export traffic Average value of a letter of credit received, by region

(USD)
0.8%
4.4% Africa 2,086,325
4.5% 3.6%
0.8%
7.8% Europe
1,975,904
Non Eurozone
Middle East 1,431,044
Central and
903,877
Latin America
78.1%
North America 838,077
Asia-Pacific Europe – Non Eurozone Europe

755,971
Eurozone
Europe – Eurozone North America
Middle East Central and Latin America
Asia-Pacific 430,126
Africa
1 Data includes both domestic and international traffic, as commercial letters of credit can be utilised in
domestic transactions

Export traffic by regions
Live, delivered MT 700 (Issue of a Documentary Credit), including do
Figure 33
SWIFT MT700 messages received to non-Eurozone Europe
900
850
800
Asia-Pacific
Africa
100 Central and Latin America
Europe – Eurozone
50 Europe – Non Eurozone

Middle East
North America
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019
Export-related message traffic was down Looking at the cross border (excluding
across the board in 2019 compared with domestic flows) volume of MT700s received,
the previous year. The region that showed the countries that exported the most using
the steepest drop was the Eurozone, where L/Cs are shown in Figure 34.
export traffic trailed off 6.92%, followed by
North America, where traffic contracted
T op E xp or t i ng Count r i e s i n FY 2 01 9
6.54% and Africa, where traffic fell 5.80%.
Live, delivered MT 700s received, including do m e stic a

Figure 34
traffic
SWIFT MT700 export L/C volumes by country/ region (# messages)
10 9.57%
862,545
China 2.70%
839,277
538,323
Bangladesh 2.49%
551,742
5
294,028
India 4.73%
280,118
286,925
Hong Kong
264,257
0
248,037 Portugal
Singapore
241,792
216,246
Japan
182,074
167,462
South Korea
158,867
154,851
Chinese Taipei
140,098
2018 0
128,227
United States
118,940 2019
-5
108,265
Indonesia
106,637
-10
-15
-15.80%
-20
Japan
9
ding do mFigure
e stic and in te rn a tio n a l
35
Fastest-growing exporters in 2019, based on SWIFT MT700 traffic
10 9.57%
5
3.82%
2.89%
2.49%
1.55%
9 0
Portugal Sweden UAE Bangladesh Vietnam
ding dom estic and in te rn a tio n a l

10 9.57%
by Boston Consulting Group. All rights reserved.

It0was noted that Bangladesh continues to The countries registering the largest drop in
2018
see
5 growth in L/C volumes despite most top annual volumes in 2019, in the category over
2019 3.82%
markets seeing a decline in 2019. 2.89% 20,000 MT 700s sent internationally, are
-5 2.49%
shown in Figure 36. 1.55%
Using a yearly volume of more than 20,000
-10 -8.98%
MT -9.53%
0 700s received internationally
-9.85% as a gauge,
-9.85%
Portugal Sweden UAE Bangladesh Vietnam
the countries with the fastest growth in 2019
-15
compared to 2018 and shown in Figure 35
-15.80%
-20
Japan Italy Australia Chinese Taipei Switzerland
Figure 36
reserved.
Exporters with the sharpest declines in exports, based on SWIFT MT700 traffic
2018 0 © 2019
All rights
2019
Copyright
-5
Y 2018) SWIFT Trade

Source: WatchTrend
Copyright © 2019 by Boston Consulting Group.
rly volume of MT -10

700 greater than 10,000 in FY 2019
-9.85% -9.85% Messaging
-9.53% -8.98% 38
-15 Powered by SWIFT

-15.80%
BI
-20
Japan Italy Australia Chinese Taipei Switzerland
Y 2018) SWIFT Trade

rly volume of MT 700 greater than 10,000 in FY 2019 Source: WatchTrend
Messaging 38
Powered by SWIFT
BI

Confirmation of L/Cs received: f
Live, delivered MT 700 (Issue of
domestic and international traffi
Deep-dive on confirmed L/Cs continued to receive the highest percent of
The share of confirmed L/Cs rose slightly, up confirmed L/Cs, and Asia-Pacific the lowest.
0.3% in 2019 from the previous year. Africa
Figure 37
Confirmed export L/C volume, based on SWIFT MT700 traffic in 2019 vs. 2018
Volume of L/Cs received by confirmation
6.9
3.8
7.2
3.9
Confirmed
FY
May add confirmation
2 018 Without confirmation
FY
2 019
89.0
89.3
eived: from exporter country bank

ssue of a Documentary Credit), including
al traffic
Figure 38
Distribution of confirmed export LC volumes by region in 2019, based on SWIFT MT700 traffic
%
100
80
55.0%
62.1% 63.4%
74.6%
60 82.2% 81.8%
89.3%
95.1%
5.3%
40
7.8%
11.4%
Without
20 39.7% 10.1% confirmation
5.2% 30.1% 6.2% May add
25.2%
3.8% confirmation
12.7% 15.3% 12.0%
2.5% 6.9% Confirmed
0
Africa Asia-Pacific Central Europe- Europe-Non Middle East North All Regions
and Latin Euro Zone Euro Zone America
America

Deep-dive on L/Cs available
by negotiation
The broad preference for using L/Cs available Payment is most common) mostly used L/Cs
by negotiation as defined under ICC UCP available by Negotiation.
rules continues to be in evidence in SWIFT
message data. For purposes of this section and the graphics
Credit Availability of L/Cs Received
that follow, SWIFT has used the term ‘Credit
In most cases, L/Cs available Live, delivered
by negotiation Rule’ toMT 700
identify (Issue
the ways in whichof a Documentary
an L/C
are issued. Based on SWIFT traffic, the share may be made available, as reflected in the
was slightly higher at 74.1% in 2019 with the ICC’s Uniform Customs and Practice (UCP)
previous year at 73.6%. Regionally, L/Cs for Documentary Credits. L/Cs available by
available by negotiation accounted for 80.9% Negotiation represent one among multiple
of L/Cs in North America and 78.6% in Asia credit rule options, but by far the most
Pacific. All other regions except Africa (where common and preferred globally.
Figure 39
Export volume by credit ruleVolume
combination, based on SWIFT MT700 traffic
of L/Cs received by confirmation
9.7 7.1
8.8
10.1 7.1
8.9 0.3
Payment
0.3
Negotiation
FY Mixed payment
2 018
Deferred payment
FY Acceptance
2 019
73.6
cumentary Credit), including domestic and international traffic
74.1
Figure 40
Distribution of confirmed export LC volumes by negotiation in 2019, based on SWIFT MT700
traffic
%
100
6.7% 11.7% 9.7%
17.0% 21.4% 16.5%
26.9%
80 40.3%
60
78.6% 56.4% 74.1% Payment
61.8% 54.0%
51.4% 80.9% Negotiation
34.5%
40
Mixed
payment
0.8% 1.1% 1.2%
20 1.0% 0.7% Deferred
17.1%
20.4% 0.1% 20.2% 18.2% payment
6.7% 17.1% 8.8%
7.9% 8.7% 3.1% 4.1% 7.1% Acceptance
0 4.0% 3.0% 3.3% 2.8%
Africa Asia- Central Europe- Europe- Middle North All Regions
Pacific and Latin Euro Zone Non Euro East America
America Zone

Deep-dive on L/C validity
L/C validity – or the time between the Validity of L/Cs are generally longer in
issuance of the L/C and its expiry – remains the Eurozone (33% up to 60 days) and
short. A total of 38.9% of L/Cs were extended Africa (34.3% up to 60 days) compared
from 31 to 60 days, and 35.4% from 61 to 90 to Asia‑Pacific where validity is shorter on
days in line with the short-term nature of a average (52.9% up to 60 days).
Credit Tenor / Maturity of L/Cs Received
significant portion of global trade.
Live, delivered MT 700 (Issue of a Documentary C
Figure 41:
Volume of L/Cs split by validity, 2019, based on SWIFT MT700 traffic
2.3%
10.2%
13.1%
0-30 Days
31-60 Days
61-90 Days
eived 38.9% 91-180 Days Euro
Documentary Credit), including domestic and international

35.4% >180 Day
traffic
Centra
Figure 42
Region-by-region export volume by validity, based on SWIFT MT700 traffic
North America 6.7% 34.4% 39.4% 14.7% 4.9%
Middle East 4.9% 27.5% 43.2% 20.2% 4.2%
Europe-Non Euro Zone 6.2% 29.7% 37.6% 20.8% 5.7%
Europe-Euro Zone 4.7% 28.3% 37.7% 22.6% 6.7%
Central and Latin America 7.8% 39.9% 31.0% 16.1% 5.2%
Asia-Pacific 11.5% 41.4% 34.5% 11.1% 1.4%
Africa 5.5% 26.8% 39.0% 24.5% 4.3%
All Regions 10.2% 38.9% 35.4% 13.1% 2.3%
0-30 Days 31-60 Days 61-90 Days 91-180 Days >180 Days
Source: Watch 43
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FEATURE
TXF on Export Finance

Dr Tom Parkman, Head of Research, TXF
This feature is based on market sentiment data collected from TXF Research’s global Export
Finance Industry Report 2020, scheduled for release at TXF Global in 2020, and closed deal
data from TXF Data. The primary aim of this feature is to provide a comprehensive overview of
the state of the export finance market in 2019.
It is important to note that this feature was produced prior to the COVID-19 outbreak. While
it is discussed in some detail, the data in this feature highlights the state of the export finance
industry before the outbreak.
Methodology (ii) News articles obtained through TXF’s

TXF Research editorial team
TXF Research’s Export Finance Industry (iii) Corporate press releases found online
Report 2020 uses a mixed methodology using machine learning.
that combines quantitative and a qualitative
component. The quantitative data was Findings
collected using an online survey platform Before this feature delves into the state of the
(SurveyMonkey) with banks, export credit export finance market, it would be remiss to
agencies (ECAs), exporters, importers not start by mentioning COVID-19. In financial
(borrowers), law firms and private insurers parlance, a black swan event is an extremely
(brokers and underwriters) all taking part. The rare and damaging event that is almost
qualitative data was collected via telephone impossible to predict. It is safe to say that
interviews with consenting individuals. This the global COVID-19 pandemic is a ‘black
mixed methods approach enables the report swan’ event.
to identify the latest trends in the market with
in-depth and thought-provoking commentary To supplement TXF Research’s Export
to understand how and why these market Finance Industry Report 2020, an addendum
trends are occurring. survey looking specifically at the impact of
COVID-19 on the industry was conducted.
At the time of writing (March 2020), the One area the survey explored was
data collection was still ongoing, meaning force majeure.
that the data presented in this feature is
based on a cross section of the final dataset. Our survey data found that nearly 35% of
A total of 246 individual respondents from the sample do not know, or do not have,
the above-mentioned institutions make up a force majeure clause built into the legal
the survey data. part of their export finance loans. Further, of
those that did have a force majeure clause
TXF Data built into their legal work, a combined 75%
TXF Data is the leading source of transaction of the sample did not know, or do not have,
data in the export finance market, used as a global pandemic scenario inbuilt, and,
the main reference by all the market leaders. finally, just 15% of the sample with a force
The information is collected through three majeure clause that covers global pandemics
sources: have invoked it. It remains to be seen how
damaging COVID-19 is to the export finance
(i) Deal information submitted through industry but the uncertainty surrounding
Tagmydeals and directly to TXF force majeure could have serious financial,
operational and reputational repercussions
for institutions.

The ICC has been tracking whether force majeur clauses have been (disproportionately or
inappropriately) triggered in the context of the COVID-19 pandemic and has found no systemic
evidence of abuse – highlighting that trade continued to be conduced on a good faith basis
and in line with industry standards and practice. It has also issued a Guidance Paper on force
majeur which builds upon past ICC publications and industry practice.
The market at a glance suggests that 2019 was a fairly flat year for
In 2019, total deal volume reached export finance. This is particularly true when
USD 108 billion across 341 deals, down compared to 2018.
USD 30 billion from 2018’s USD 138 billion
total volume across 412 deals. Looking in TXF Research supports this finding with the
more detail at 2019, it was a fairly turbulent level of activity being rated as three out of
year with three clear peaks in export finance five over the past 12 months. One lawyer
activity in February, May and December explained why: “Export finance activity seems
corresponding to deals closed by Australia to be a little bit less busy than in recent times.
Pacific LNG for USD 6.9 billion, the Bahrain I think this is probably driven by the China-
Petroleum Company (BAPCO) for USD 4.1 US trade war. There has just been a general
billion, and Gazprom’s massive Amur gas softening of things. I also think Brexit has
processing plant for USD 12.8 billion, heavily had a detrimental effect too. I also think the
backed by a number of European ECAs, Coronavirus will have a very damaging effect
respectively (Figure 43). on activity.”
An overview of the export finance market in 2019
Interestingly, if these three deals are removed, At the time of the interview, the COVID-19
the export finance landscape looks quite pandemic had not taken full hold of the
different. The total deal volume drops to global economy, but it is clear now that that
USD 84 billion with an average deal size was an accurate prediction. When survey
across the year of USD 7 billion (compared respondents were asked about the impact
to USD 9 billion in Figure 44). Figure 44 also of the pandemic on the global economy,
shows that the largest deal volume in the nearly 80% posited that it will lead to a global
top performing month drops to just over recession comparable with the 2008
USD 12 billion (down from USD 25 billion financial crash.
in the same month in Figure 44) which
Figure 43
An overview of the export finance market in 2019
Volume in USD No of deals
30,000 50
40
20,000
30
20
10,000
10
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Q1 Q2 Q3 Q4
No of deals Volume in $

Figure 44
An overview of the export finance market in 2019, without the three largest deals included
Volume in USD
30,000
20,000
10,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Q1 Q2 Q3 Q4
Total Excluding biggest deals
2019 regional breakdown

A regional view TXF Research suggests that this trend will
Looking at closed deal data, Figure 45 shows continue over the next 12 months, with 49%
that Asia Pacific was the most active region of respondents suggesting that they will
for export finance in 2019, with deal volume do more export finance business in Asia
totalling USD 17.4 billion across 51 deals, Pacific, followed by the Middle East (31%)
followed by the Middle East (USD 6.9 billion and Europe (30%). One exporter currently
across 27 deals) and Russia (USD 16 billion active in Asia Pacific, and looking to do more,
across 40 deals). However, the Middle East had explains why Asia Pacific is attractive: “China
an average deal size of USD 629 million, nearly is not just the only place to do business with
double that of Asia Pacific (USD 341 million). anymore [in Asia Pacific]. We are doing
Europe had the smallest average deal size of more in Bangladesh, Vietnam, Myanmar,
USD 201 million, a finding driven by a smaller Chinese Taipei and many others. We are
total volume (USD 14 billion), but it did have the looking to cover as many markets as possible
greatest number of closed deals (n=71). not just in terms of quantity, but quality also.”
Figure 45
2019 regional breakdown
20,000 80
70
15,000 60
50
10,000 40
30
5,000 20
10
0 0
Asia Middle Russia CIS Europe Latin Africa North Australasia Asia Undisclosed
Pacific East America America Region

Figure 46
Respondents’ level of activity over the past 12 months
More active About the same Less active

Asia-Pacific 49% 45% 6%
Central and South America 27% 62% 10%
Europe
30% 65% 5%
(including Russia and Turkey)
Middle East 31% 58% 11%
North America 19% 68% 13%
A breakdown of export finance activity, by sector in 2019
A deeper look at sector breakdown more than four times larger than the average
Figure 47 shows that oil and gas continued deal size in power (USD 438 million) and
to dominate the export finance market in nearly seven times larger than transport (USD
terms of volume with USD 36.7 billion being 257 million). This closed deal data shows
closed across 21 deals in 2019, followed by why oil and gas remains the dominant sector
power (USD 22.4 billion across 51 deals) and to invest in. Figure 48 too suggests that oil
transport (USD 15.9 billion across 62 deals). and gas may continue to dominate, as it has
With the average deal size of oil and gas grown year-on-year since TXF Data started
standing at a sizeable USD 1.7 billion, it is collecting closed deal data.
Figure 47
A breakdown of export finance activity, by sector in 2019
40,000 70
60
30,000 50
40
20,000
30
10,000 20
10
0 0
Chemicals/
Oil & gas
Undisclosed
Power
Petrochemicals
Communications
Other
Commodities
Transport
Infrastructure
and Mining
Manufacturing
Capital
Equipment
Telecoms and
Metals
Agri/Soft

Figure 48
Activity levels across the sectors, 2017-2019
40,000
30,000
20,000
10,000
0
Oil & gas
Chemicals/
Undisclosed
Power
Petrochemicals
Commodities
Communications
Other
Transport
Infrastructure
and Mining
Manufacturing
Capital
Equipment
Telecoms and
Agri/Soft
Metals
2017 2018 2019
Figure 49
Export finance activity over the next 12 months, by sector
More active About the same Less active

Defence 22% 70% 8%
Infrastructure 46% 50% 4%
Manufacturing 17% 74% 8%
Metals and mining 15% 71% 14%
Oil and gas 25% 64% 12%
Petrochemicals 19% 73% 8%
Power 26% 71% 3%
Renewable energy 53% 47% 0%
Telecommunications 19% 73% 8%
Transport 36% 60% 4%
However, preliminary projections in TXF that must be adopted by every institution

Research’s Export Finance Industry Report involved in export finance. Given the strong
2020 provide some optimism for the relationship between sustainability and
renewable energy sector, with 53% of the renewable energy, there is cautious optimism
survey sample stating that they plan to to be had for the future, as one banker
become more active in this space, double pointed out: “We don’t finance anything in
that of those looking to do more in oil and coal, defence or petrochemicals anymore.
gas (25%) (Figure 49). We are also reviewing nuclear and our
involvement in mining. It will take time as
Perhaps encouragingly for the export finance many of these deals have long tenors, but I
industry too is that 59% of the survey sample see a positive future for export finance.”
believe that sustainability is a way of life

Figure 50
ECA involvement over the past three years
ECA inVolume
volvinem ent ove r t he p a st 12 mont hs
USD
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
SERV
Bank of India
Bpifrance
Finnvera plc
Finance
China EXIM
JBIC
Atradius
MIGA
KEXIM
Insurance
SACE
NEXI
KSURE
CESCE Credit
US EXIM BANK
Euler Hermes
EDC
EKF
Export - Import
EKN
Sinosure
UK Export
2017 2018 2019
Figure 51
ECA involvement over the past 12 months
12,000 60
10,000 50
8,000 40
6,000 30
4,000 20
2,000 10
0 0
SERV
Bank of India
Bpifrance
Finnvera plc
Finance
China EXIM
JBIC
Atradius
MIGA
SACE
KEXIM
Insurance
NEXI
KSURE
CESCE Credit
US EXIM BANK
Euler Hermes
EDC
EKF
Export - Import
EKN
Sinosure
UK Export
No of deals ECA involvement
ECA involvement
Figure 50 shows that compared to 2017 and Euler Hermes (USD 8.5 billion) (Figure 51),
2018, ECA involvement in 2019 has been all of which were involved in the two largest
significantly lower. Looking more closely at export finance deals in 2019 the Amur gas
the past 12 months, SACE has led the way, power processing plant (SACE and Euler
guaranteeing USD 9.8 billion worth of deals, Hermes) and the Bahrain Petroleum Company
followed by KSURE (USD 8.6 billion) and deal (KSURE).

The future of export finance Conclusion
When the survey respondents were asked 2019 proved to be a fairly flat year for
about how optimistic they were about the export finance, with oil and gas continuing
future of export finance, it was a fairly muted to dominate above any other sector.
response, with an average overall score of two While Asia Pacific did look set for a fairly
out of five. The main reason for this, as Figure optimistic future, the COVID-19 outbreak
52 shows, is because of a global recession. It will almost certainly curtail that optimism.
is important to note that respondents noted a While TXF Data suggested that 2020 might
global recession as the greatest threat prior to see a resurgence in export finance activity,
the COVID-19 pandemic. the black swan event that is COVID-19
looks set to have serious and long-lasting
Since the outbreak, an addendum survey asking consequences for trade finance.
the export finance industry about the impact
of COVID-19 has been released to the market
to better understand its impact. Of a separate
sample of 72 respondents (at the time of writing),
the reported likelihood of a global recession,
comparable to that of 2008, is four out of five.
While it is unclear what the final cost of the
outbreak will be, it is safe to say that the future of
the export finance industry is very uncertain.
Figure 52
Greatest disrupters to the export finance industry
Global recession 53%

Geopolitical tensions in borrowing countries 48%
Increasing regulation and compliance 42%
The ongoing US-China trade war 38%
Climate change/ rising environmental problems 30%
Increasingly stringent KYC (‘know your customer) requirements 26%
Involvement of development banks 23%
Increased direct lending from ECAs 16%
Lower funding/ fees from new entrants into the export market 15%

SUPPLY CHAIN FINANCE
Survey analysis
Supply chain finance is one of the fastest strategically important market that is already
growing trade finance products and is highly concentrated.
responsible for the majority of market
growth. Incumbents and disruptors who have Notably, while 65% of respondents report
succeeded in this market have done so with having built a proprietary SCF platform, over
material technology investment that has a third of respondents purchased an open
allowed the product to work at scale with network platform, use a hybrid platform, or
some of the world’s largest supply chains. The insource their SCF platform from a provider.
Global Survey, however, reveals a stark divide This highlights a potential strategy for
in how trade banks are planning to engage smaller players to stand their ground in the
with SCF – if at all. Global banks are adopting market without the need for capital-intensive
SCF platforms broadly and expect further technology builds, and hence effectively
growth in the coming years. compete in their markets. Indeed, even some
of the world’s largest banks offering SCF
The survey found that 64% of global banks solutions are today leveraging third-party
already offer an SCF platform (Figure 53), platforms to accelerate bringing leading
largely in the form of proprietary systems solutions to customers.
(Figure 54). This is compared to just 38%
of regional banks, and 13% of local banks. This is the case for payables finance
Given that open account trade and SCF programs, and increasingly for the next wave
are responsible for the vast majority of of evolving SCF techniques, as described in
growth in trade and trade finance, the the Standard Definitions for Techniques of
disparity between global, regional, and local Supply Chain Finance, co-authored by the
banks here is concerning: the lack of SCF ICC and several industry associations.
capabilities may marginalise smaller players,
potentially driving further consolidation in a
25. Does your bank currently offer a Supply Chain Finance1 (SCF) platform?
Figure 53
Does your bank currently offer a supply chain finance platform?
%
100 5% 4% 4% 5%
32%
60% 58%
83%
50
64% Don’t know
35% 38% No
13% Yes
0

26. Which of the below best describes your bank’s SCF platform(s)?
Figure 54
Which of the below best describes your bank’s SCF platform(s)?
%
100
65%
50
17%
9%
4% 4%
0
Developed a Bought from an Hybrid platform Outsourced to Other
proprietary system open network another bank
platform
In terms of the different SCF products, while concurrently inviting suppliers to access
receivables discounting is seen as the most funds early on the basis
in-demand SCF technique from a client of a discount.
perspective (Figure 55), followed closely
by payables finance, loans/ advances Current market patterns are starting
against receivables, and factoring. While to change with increased demand for
not necessarily evident from the survey receivables finance among lower-margin but
data, there is substantial variation in the high-revenue large corporates, as a means
customer profiles of these different products. to manage cash flow and liquidity. On the
Historically, receivables financing and other end, as technology has developed
factoring have been skewed to the micro, and become more scalable, and non-bank
small, and medium enterprises (MSME) players and third-party investors have
market, with payables financing more grown their presence in the market, we are
commonly used by larger corporates. Such beginning to see more and more mid-market
31. What, if any, of the following SCF techniques
programs typically involve large buyers are most frequently cited as a priority
SCF programs. for you
extending payment terms to their suppliers,
Figure 55
What, if any, of the following SCF techniques are most frequently cited as a priority
for your bank’s clients?
%
100
71%
54%
50 46% 45%
3%
0
Receivables Payables finance Loans/ advances Factoring Other
discounting against receivables

In line with market forecasts, global banks order to build a resilient, future-ready trade
reported that they expect to see a significant and supply chain business. The increased
increase in the usage of SCF over the next five availability of banking-as-a-service, software-
years – with one-third expecting over 50% as-a-service, and infrastructure-as-a-service
growth (Figure 56). By contrast, the majority (including cloud) solutions are likely to play a
of local banks expect only 0–15% growth key role.
over the same time period, again highlighting
the divergence in perspectives between Perhaps equally important, the lessons
different types of banks. This raises strategiclearned by large global banks – and fintechs –
concerns for smaller regional and local banks. around supplier onboarding and payables
If their growth will not come from SCF and finance program design and deployment can
open account trade, where will it come from prove invaluable to regional and local banks in
in a market where traditional trade is flat charting a way forward. Industry practitioners
to downward-tending, as reflected in the in leading SCF banks will likely acknowledge
analysis of SWIFT data earlier in this report? that the core challenge is not necessarily a
technology challenge. Multi-bank, consortium-
This is exacerbated by the fact that as larger based initiatives may offer a compelling
banks continue to invest in technology path for non-global banks to participate
to drive automation in trade, it will be in the open account market through SCF
increasingly difficult for smaller players to solutions targeted at their unique client base.
compete on cost-to-serve, putting them in a Relatedly, finance executives in mid-cap and
challenging position in the market. As such, smaller enterprises may not be as conversant
now is 28. What are your growth expectations
an important time for regional and for SCFand
with SCF techniques within your
may not bank for
therefore the next 5 y
local players to understand how they can express a demand for such support from their
access technology in a cost-effective way in financial institutions.
Figure 56
What are your growth expectations for SCF within your bank for the next five years?
Global %
45
32%
30 26%
16% 16%
15 11%
0% 0% 0% 0%
0
Local %
45
36%
30
23%
18%
14%
15
5% 5%
0% 0% 0%
0
Regional %
45
33%
30
21%
15 13% 13%
4% 4% 4% 4% 4%
0
0-5% 5-10% 10-15% 15-20% 20-25% 25-30% 30-40% 40-50% 50%+

While a majority of respondents indicate such as factoring – reside and are delivered
that SCF represents only 0–5% of the trade in areas outside of a typical trade finance
financing made available today, only 7% business, in some cases even outside a bank
think that this will be the same in 2025 – through a related affiliate entity.
highlighting the expectation in the market of
the growth in popularity of SCF relative to However, despite the enthusiasm that global
documentary trade and TTF (Figure 57). banks have for SCF, the survey reveals a
29. What is the proportion today of SCF againstnumber traditional Trade
of challenges FinanceSCF
in delivering provided by your ban
It is worth noting that the findings of this solutions to customers.
30. By 2025, what do you expect to be the prop

survey will likely understate bank activity
levels in SCF, since certain techniques –
traditional Trade Finance provided by your bank

Figure 57
What is the proportion today of SCF against TTF provided by your bank? By 2025, what do
you
% expect to be the proportion of SCF against TTF provided by your bank?
100
52%
50
38%
28%
21% Now
15% 17%
7% 8% 10% 2025
5% expected
0
0-5% 5-15% 15-30% 30-50% 50%+

Lack of an SCF platform and aligning internal industry priority in the coming years. Indeed,
policies to SCF are the primary concerns of the barriers to the adoption of SCF solutions
respondents (Figure 58). As referenced above cited by many banks in our survey are highly
in Figure 55, the majority of respondents who solvable – with the right tools. Fortunately, as
offer an SCF platform have developed their SCF has grown in popularity, it has also grown
own system; it seems the development of a in maturity; industry bodies such as the ICC,
system is highly prohibitive to banks not yet BAFT, the ITFA, FCI and the EBA, through the
offering SCF solutions. Global Supply Chain Finance Forum (GSCFF),
work to drive the evolution of SCF and to
KYC and supplier onboarding are concerns, advocate for its appropriate, transparent, and
with one in three respondents citing these as properly reported use in support of domestic
major challenges. Further, a quarter of banks and international commerce. Industry leaders
surveyed were concerned about competition and practitioners have a responsibility and
from non-banks and lack of common an opportunity to advance thoughtful,
standards to enable the exchange of data. informed dialogue with corporates, banks,
governments and regulators to maximise a
Ensuring that banks of all types are provided common understanding of SCF techniques
27. What are the
with majorand
guidelines challenges, if any, your
support to understand bank
and tofaces in delivering
begin setting SCF
the necessary solutions
standards to your cus
and implement SCF solutions should be an globally.
Figure 58
What are the major challenges, if any, your bank faces in delivering SCF solutions
to your customers?
Lack of a SCF platform 39%
Internal policies 36%
KYC and KYCC 34%
Supplier onboarding 33%
Competition from non-banks 26%
Lack of common standards

to enable exchange of data 26%
between different technology platforms
Lack of clarity in accounting and

24%
regulatory treatment of SCF solutions
Insufficient internal expertise 24%
No major challenges 14%
Lack of support from anchor party 11%
Usage rates of program facilities 7%
Other 7%

FEATURE
Supply chain finance: evolution or implosion?

ICC Global Survey Editorial Committee
Supply chain finance is increasingly practices, some of which should be welcomed

recognised as an important and growing and supported, and others which are
solution set in the financing of international questionable at best, or even outright abuses
trade – high-value, strategically important aimed at obscuring commercial and
economic activity worth about USD 25 trillion financial realities.
per year if we count merchandise and
service sector trade. Up to 80%, or about The evolving nature and thus far limted
USD 16 trillion, of merchandise trade is development of of clear and agreed industry
said to depend upon some form of trade standards and accepted practice, to say
finance, with the fast-growing service sector nothing of the absence of ICC rules, opinions,
inexorably developing an increasing need for and guidance which have provided critical
trade finance. parameters in traditional trade finance since
1933, amplifies the situation. Though this
SCF, an umbrella term that covers multiple is natural given the early stage in which
techniques, aims to address the vast majority SCF exists at the moment, those very same
of trade today that takes place on open characteristics, coupled with the entry of
account terms, with the remaining 10% or unregulated fintechs and non-bank financiers
so on the merchandise trade side enabled into SCF, create a perfect storm of innovation
through more traditional trade finance plus potential abuse.
mechanisms such as documentary letters of
credit and documentary collections. Trade finance and more specifically SCF have
been the subject of unaccustomed levels of
SCF has been showing promising signs of attention from the press, ratings agencies
growth and wider adoption, with one of its and regulatory authorities, partly off the back
variations or techniques, payables finance, of a very few, but highly visible commercial
providing a viable mechanism for enhancing failures linked to payables finance and partly
the cash flow of both the buyer and the as a result of market activities that trigger
seller in a cross-border supply chain. Such reactions across a range of stakeholders.
programs, where a buyer extends terms
to improve its own financial health while Thoughtful and well-informed questions
simultaneously offering discount options to are important and welcome, as are genuine
suppliers, are even encouraged in a couple efforts to shine the light of truth on SCF
of key jurisdictions as a means of addressing practices around the globe. Sensationalist
systemic liquidity issues and SME finance postures by writers or by others seeking to
challenges. earn political points are less constructive
and should be countered by more rigorous
A nascent proposition in the market, SCF as a discourse.
whole (though not all techniques under that
umbrella term) is beset by a lack of common Unbalanced postures pose an existential
understanding and clarity around what is threat to a set of financing solutions that
deemed ‘appropriate practice’, and by the could prove powerfully effective in advancing
absence of definitive guidance on accounting economic inclusion and trade-based growth.
treatment and reporting requirements.
Contrary to some of the coverage, which
This reality creates a context in which highlights the extension of terms as an
innovation can thrive. However, it also abuse of SMEs through payables finance,
indirectly enables boundary-pushing the complete picture on this technique is

Figure 59
Payables finance in action
Supplier
presents Discount @ Buyer Borrowing Rate + Premium for Supplier Risk
invoice
Request
Invoice issued
to Discount period
and approved
discount
Day Day Day Day

0 20 30 90
Buyer Invoice Buyer settles

approves paid payment for
invoice goods
that terms are extended to benefit the large that extend out beyond 24 months, whereas
buyers, while participating SMEs have the others are developing an argument that
option to secure immediate payment at a term extensions ought to be guided by the
discount to the face value of invoices, at rates typical working capital cycle of an industry
linked to the credit quality and (often lower) sector. Other questions arise around the
borrowing cost of the large buyer. types of invoicing (and therefore underlying
commercial or trade activity) that should be
Are there alternatives, like mandated considered in-scope for payables finance.
accelerated payment standards? Possibly,
but these could arguably represent a market- In the end, payables finance presents
distorting policy option as opposed to a a significant opportunity to enable the
commercial practice. Their use becomes a flow of liquidity across domestic and
matter of political choice. Could the cashflow international supply chains, down into the
situation of MSME suppliers be improved by so-called ‘long tail’ where MSMEs occupy
reducing transaction timeframes through an important space. Its appropriate use and
technology or enhanced processes? Probably. structuring ought to be determined through
a thoughtful, coordinated, and decisive set
The specific characteristics of a payables of steps involving press and ratings agencies,
finance program can vary – from the scope accountancy bodies and firms, regulators,
of coverage of suppliers, to the cost of trade industry bodies, finance providers, and
discount and the degree of extension of corporates as well as MSMEs.
terms. It is in the detail of program structure
that definitions of accepted practice and the Whether or not boundary-testing practices
value of industry guidance plus regulatory (including financial and regulatory reporting)
and standards body direction can be critically or structures will be tolerated by authorities,
important. it is clear at this moment that some form
of accepted framing of payables finance is
Should the option to extend payment terms necessary and important. Anything outside
through payables finance be open-ended, of those agreed boundaries may well be
for example? In the absence of guidance and a valuable addition but should be clearly
direction, some very credible and legitimate distinguished from SCF and payables finance.
practitioners are happy to structure programs

SUSTAINABILITY
Survey analysis
Global trade has no way of hiding from the emulating the rapid shift in focus on ESG
climate change challenge: its business-as- which has now become central to investment
usual operations have long been susceptible management and strategy, physical supply
to disruption from extreme weather events, chain management, public procurement and
and it is increasingly being forced to adapt a host of other areas. Indeed, as enablers of
to new regulations targeting carbon-heavy international trade, trade banks have a critical
industries that directly impact their viability. It role and influential opportunity to drive
is imperative for banks to not only nominally changes in business practices and behaviours
support sustainable trade, but to integrate globally for the better.
sustainability into their trade finance
policies and day-to-day activities (such as Western European banks are leading the
supply chain finance). At the same time, way in this area, with three-quarters having
sustainability should not just be viewed solely
a sustainability strategy. More broadly, these
or exclusively through the lens of climate strategies were primarily adopted due to
change, but rather, by reference to the widest
credit and reputational risk (38%), as well
definitions of sustainability which include as client expectations (35%) (Figure 61).
environmental, social and governance (ESG) These are likely also influenced by banks’
issues among others. group-wide policies and initiatives towards
sustainability. Regulatory requirements
In the survey, 66% of respondents say that are less of a driver across all geographies.
they have a sustainability strategy that However, this is likely to change in the coming
33. applies to trade finance and SCF (Figure
Does your bank have a sustainability strategy years as newapplies
that regulations
tocome
tradeintofinance
force. and supply cha
60); we would expect – and hope – for
this to climb to much closer to 100% in the
future editions of the Global Survey, perhaps
Figure 60
Does your bank have a sustainability strategy that applies to trade finance
and supply chain finance?
%
100
76% 73%
66%
55%
50
Yes
20% 23% 23%
16% 18%
34. What, if any of the following, is the
14%
8% primary reason
9% your bank has adopted
No
a sustainability
Don’t know
0
Total Western Europe Asia Pacific Other
Figure 61
What, if any of the following, is the primary reason your bank has adopted a
sustainability strategy?
%
50
38%
35%
24%
25
2%
0
Credit and Client requests Regulatory requirements Other
reputational risk and expectations
Note: 1.3% of respondents to this question did not include the location of their bank's headquarters bank in their r
ntegrating sustainability risks into credit risk management procedures for clients using trade finance
The survey demonstrates that banks of diligence in respect of KYC and other credit
all types are increasingly coming to terms risk adjudication and management policies
with the need for a sustainability strategy (Figure 62 and Figure 63). Further, 61% of
in trade. The available evidence points to respondents said that their bank has rejected
the integration of sustainability policies trade finance applications in the past year as
now – not just as a longer-term goal. Indeed, they didn’t meet their bank’s internal policies
76% of respondents indicated that they are on ESG risks (Figure 63).
already integrating sustainability-related due
Figure 62
Is your bank integrating sustainability risks into credit risk management procedures for
clients using trade finance/ supply chain finance instruments?
onducting sustainability-related due diligence in its trade finance operations as part of the Know You
24%
Yes
%
No
76%
Figure 63
Is your bank conducting sustainability-related due diligence in its trade finance operations
as part of KYC procedures?
reject any trade finance applications due to environmental / social / governance risks with clients?
24%
Yes
%
No
76%
Figure 64
Did your bank reject any trade finance applications due to ESG risks with clients?
12%
Yes
27% % No
61% Don’t know

From a demand perspective, almost half the same time, there is opportunity for banks
of banks feel their clients are requesting to recognise the critical role that trade and
innovative finance mechanisms to help them trade finance provision play in other pressing
implement more sustainable strategies and social issues, such as the eradication of forced
operations (Figure 65), highlighting a clear child labour, promoting financial inclusion
expectation for trade banks to play their part of women, and the broader fight for gender
in driving sustainability and advancing ESG equality, among numerous others. This
considerations in trade. Customers want their fast-emerging reality mirrors the increasing
banks to be proactive, and not just reactive. responsibility faced by buyers for the actions
and behaviours of members of their supply
There is strong agreement that climate chain – no matter how small or how remotely
change and the environment should be located they may be. The human cost, and
38. Are your trade
priorities finance
for banks, with clients requesting
survey respondents innovative
increasingly thefinance mechanisms
regulatory expectations for implementing
ranking these areas as their key sustainability and reputational impact – good or bad –
priorities (Figure 66). Banks continue to are transforming the way these issues are
interpret sustainability as climate-related. At prioritised and addressed around the globe.
Figure 65
Are your trade finance clients requesting innovative finance mechanisms for implementing
more
% sustainable strategies and operations?
100
62%
55%
48% 45%
50
36%
29% 27% 27% Yes
23%
18% 18%
12% No
Don’t know
35. What 0should Total
be the sustainability
Local
priorities for banks inGlobal
Regional
trade finance over the next five ye
Figure 66
What should be the sustainability priorities for banks in trade finance over the next
five years?
Climate change 63% 29% 8%
Environment, waste
58% 35% 7%
management and pollution
Supporting sustainable supply chains 45% 43% 11%
Financial inclusion (SME,

39% 45% 16%
women employment, etc.)
Social issues (gender equality,

36% 45% 19%
forced labour or child labour, etc.)
Note: 6.7% of respondents to this question did 31%

Raising awareness on sustainability
not include the type45%
of bank in their responses
24% and hence are only
above
Sustainability reporting 14% 49% 38%
0% 50% 100%
Most important More important Less important

While banks indicate sustainability as a core Group on Sustainable Trade Finance. In
business priority, there is a clear desire for 2019, for example, ICC organised a series of
structured support and formal guidelines to consultations bringing together high-level
support them in this transition. 84% of survey business leaders, policy makers, academic
respondents indicate that the ICC Banking experts, economists, and thought leaders
Commission could add value by providing to discuss the nexus between international
these tools (Figure 67). trade and climate change. However, there
is clearly room to continue and expand our
The ICC is active at the highest levels contributions in this area: an opportunity that
of advocacy around climate change will rise in priority as more of our members
and sustainability, and the ICC Banking adopt sustainability as a key part of their
Commission has a well-established Working business.
40. Where/how can the ICC banking commission add value to sustainability in trade finance?
Figure 67
Where/ how can the ICC Banking Commission add value to sustainability in trade finance?
%
100
84%
68%
52%
50
0
Issue guidelines give a framework Education and raising awareness Assist in implementing/ setting
up ways to judge on risks
involved in international trade

FEATURE
ICC: accelerating progress on sustainable trade finance

Roberto Leva, Trade & Supply Chain Finance Relationship Manager Asian Development Bank;
Co-Chair, ICC Sustainability Working Group
Harriette Resnick, Co-Chair, ICC Sustainability Working Group
Introduction Process and principles

It is no longer a question whether banks that This work stream has created tools and
provide trade finance should allocate their guidelines that enable trade bankers to
capital in a way that promotes sustainable identify sustainability risks arising from trade
ESG practices by their customers. The finance transactions and to speak to their
question now is how to get it done at scale customers about them. Its objective is to
within the critical next decade. drive integration of these tools and guidelines
into operational processes, in line with
The reasons why are evident to anyone individual banks’ risk management strategies
following world events; major fires, sea-level and ESG, reputational, and credit risk policies.
rise and coastal erosion, flooding, heat waves
and droughts, deforestation and biodiversity To facilitate trade bankers’ access to key ESG
loss are all occurring with alarming frequency information, work stream leaders Nigel Beck
across the globe. Regulatory authorities, as and Lindokuhle Ndlangamandla of Standard
well as customers, investors, and employees, Bank have collaborated on International
are focusing on whether these global threats Finance Corporation’s development of a new
pose prudential risks to banks and the extent version of its Global Map of Environmental and
to which their portfolios are aligned, or out of Social Risks in Agro-Commodity Production
sync, with sustainable development goals. (GMAP) database.2 In addition to highlighting
such risks arising in over 250 country/
In response to these challenges, the ICC commodity scenarios, GMAP now integrates
Banking Commission’s Working Group on information from the International Trade
Sustainable Trade Finance has developed Centre’s (ITC) Standards Map that specifies
database tools and guidance that can help which voluntary certification authorities are
banks identify and mitigate their exposure to available for those scenarios and whether their
risks arising from adverse environmental and requirements address the high risks identified
social effects of customers’ operations and by GMAP. Targeted next steps are to improve
supply chains. Through four work streams, ease of access to GMAP/ ITC data, potentially
members from commercial banks, multilateral through developing an interface for an
development institutions, and other trade automated feed into user systems, and to cover
experts are exploring how to accelerate the other country/ soft commodity risk scenarios.
use of trade finance to encourage sustainable
business practices.1 The objectives and
achievements of the working group to date,
which are consistent with ICC’s, ADB’s and
many member organisations’ commitment to
climate action and promotion of green and
inclusive growth, are described below.
1 The working group, led by Harriette Resnick, independent advisor, and Roberto Leva, Trade and Supply Chain
finance specialist at the Asian Development Bank, has also benefitted from the input of talented young professionals
participating in the Banking Commission’s Successors in Trade program
2 GMAP was created by IFC with the assistance of World Wildlife Fund, drawing on the IFC 2012 Performance
Standards on Environmental and Social Sustainability. To get access to the full GMAP data, register without charge
through this link: gmaptool.org/register. A webinar on the integrated GMAP tool is available at: youtube.com/
watch?v=0HLXlexzJN4&feature=youtu.be)

In addition, inspired by the due diligence Regulation, policy and green finance:
process used by banks to comply with definitions and taxonomies
KYC requirements, working group co-head The regulatory landscape relating to
Roberto Leva of the Asian Development ’sustainable finance’ is evolving quickly.
Bank spearheaded the development of Taxonomies to define that term have been
sustainable trade finance Customer Due developed by the EU and other jurisdictions
Diligence Guidelines. The guidelines include a for a range of economic activities.2
questionnaire that can form part of a client- Central banks and supervisory authorities
level review, designed to help relationship recognise, and are taking steps to address,
bankers identify whether a customer’s the prudential risk to financial institutions
operations or supply chain pose ESG risks. created by climate change and other
They also aid them in evaluating customer ESG challenges, and the need to promote
responses to determine whether the client sustainable transactions.3 Banks may soon be
is taking appropriate steps to mitigate those required to conduct stress testing through
risks. To minimise customer workload from portfolio reviews that assess exposure to
duplicative information requests, SWIFT climate change impacts.4 They may also be
is currently working to incorporate the asked to disclose the extent to which they
questionnaire as an optional feature of its have financed ‘green’ transactions, or have
new Corporate KYC Registry.1 exposure to customers whose business
results in climate-related physical or transition
We are soliciting feedback on these tools, risks or other adverse environmental or social
both from banks and corporates, to validate impacts.5
their utility and highlight potential areas for
improvement. In response to these developments, the
working group has initiated two new work
Training streams. The first, led by Merisa Lee Gimpel of
This work stream, with Roberto Leva as its Lloyds Bank, will seek to develop support for
leader, aims to develop training materials to the proposition that sustainable operations
raise awareness of the risks faced by banks if and supply chains reduce default rates for
they finance customers who fail to manage customers’ trade finance transactions. As
adverse ESG impacts. In addition to case part of this inquiry, they will consider what
studies that provide examples of these risks, data is needed to make this case. This stream
we aim to spotlight business opportunities will also examine the policy ramifications,
that encourage sustainable practices. Training i.e. whether sustainable trade finance merits
resources will also highlight the tools and capital relief, or should improve a company’s
guidelines described above. The first step will credit rating, as well as what other incentives
be the creation of a podcast sponsored by the are needed to encourage the funding of
Asian Development Bank, in collaboration with ‘green’ trade transactions.
the ICC Academy, to be widely available to
the industry in 2020, to assess further interest
in additional content. Following the podcast,
the working group, the Asian Development
Bank, and the ICC Academy will evaluate the
need for the creation of online training to be
accessed via the ICC Academy platform.
1 swift.com/news-events/news/enabling-smoother-know-your-customer-kyc_processes-for-corporates
2 See, for example, ec.europa.eu/info/files/200309-sustainable-finance-teg-final-report-taxonomy_en (“Final TEG
Report)
3 or information about the Network for Greening the Financial System, see ngfs.net/en;
centralbanking.com/awards/4662326/green-initiative-network-for-greening-the-financial-system
4 See, for example, bankofengland.co.uk/paper/2019/biennial-exploratory-scenario-climate-change-discussion-paper
5 See, for example, fsb-tcfd.org/; Final TEG Report at 9

Under the leadership of Simon Connell of Conclusion
Standard Chartered Bank, the other new Throughout its history, the ICC Banking
work stream aims to define ‘sustainable trade Commission has developed rules and best
finance’ with greater specificity1 and in line practice standards that have helped trade
with regulatory developments. The objective finance to flourish, both as critical, trade-
is to help identify which trade transactions enabling commercial activity, and more
will meet the growing demand for sustainable recently as an asset class. The Sustainable
assets that is being encouraged by public Trade Finance Working Group’s ongoing
policy measures. Focusing initially on the efforts to define the pathway for sustainable
traditional trade and supply chain finance trade and expand its positive impact
products covered in the ICC Trade Register, continues that important tradition.
work stream participants will review whether
current definitions of sustainable investments
from ongoing taxonomy initiatives can be
leveraged to apply to these trade structures,
starting with a few sample business sectors
and their related taxonomy criteria.
1 To date, our working definition has been the provision of traditional trade and supply chain finance products to support
“the business and activities of buying and selling commodities, goods and services that meet environmental, social and
economic criteria capable of benefitting all actors involved and minimizing adverse impact while fostering sustainable
global development.” iccwbo.org/publication/global-survey-2018-securing-future-growth/

REGULATION AND COMPLIANCE
Survey analysis
Over the past few years, the growing use compliance procedures, and with capital
of digital solutions by banks has enhanced and regulatory requirements (Figure 68 and
their ability to assess risk and combat Figure 69).
criminal activity. However, the increasing
sophistication of criminal and terrorist However, while there was widespread
organisations has been accompanied by a similarity across banks on capital and
growing regulatory regime aimed at stamping
regulatory requirements, there was a more
out criminal activity from the financial system
pronounced divide between different types
and from global trade. This trend, along with
of banks in respect of compliance. While
new capital requirements from the Basel 74% of global banks and 68% of regional
Committee, presents significant concern banks indicated that they were extremely
to banks across the world – particularly in
concerned by the need to implement
respect of the resources needed to meet compliance procedures, only 35% of local
the increasing complexity of regulation and
banks said the same. This, unsurprisingly,
compliance policies. suggests that navigating the complexity of
compliance rules and regulations may have
74. What56%
is the level of concern in your bank the
of survey respondents indicated that
with understanding and implementing
most pronounced impact on trade banks
complianc
their banks were significantly concerned that operate across multiple countries and
both by understanding and implementing jurisdictions.
Figure 68
How concerned is your bank with understanding and implementing compliance procedures?
%
100 5%
10% 15% 11%
21%
21%
34%
50%
50
68% 74% No concern

56%
35% Some concern
Significant concern
0
76. What is the level of concern in your bank with capital and other
regulatory requirements?
Figure 69
How concerned is your bank with capital and regulatory requirements?
%
100 5%
14% 11%
18%
40% 26%
30% 27%
50
63% No concern
56% 55% 55%
Some concern
Significant concern
0
Note: 6.5% of respondents to this question did not include the type of bank in their responses and hence are only
above

The impact of an increasingly complex support trade. This is most relevant for
regulatory regime has been felt by banks MSMEs, who are often seen to be the highest
across geographies. We asked banks to risk and therefore need the most onerous
give a sense of the FTE increase needed checks but bring in the lowest revenue per
over the past decade to understand and transaction.
implement new financial crime policies. 40%
of respondents said that they have been As such, AML, KYC, and other regulations are
required to increase their staff by 20% or alleged to be a key contributor to many banks
more (Figure 70); among banks based in underserving the SME market. However,
Western Europe this number rises to 55%. at the same time, very few banks would
Furthermore, when asked how due diligence argue against the need for such regulation,
transaction and client monitoring capabilities and therefore the key question remains:
have evolved in the past year alone, many how can regulatory authorities and banks
respondents cited an increase in staff together achieve an optimal balance between
numbers. This clearly has a material impact regulatory efficacy and assured access to
on operational costs for trade banks – which timely and affordable trade finance?
is likely to be passed on to customers in
the form of higher prices or may have the Banks may debate the expectations –
unintended adverse consequence of reducing implicit and explicit – from authorities that
overall industry capacity to provide trade the financial sector ought to become more
finance. central to investigative, intelligence, and
prosecutorial activity, and regulators may
The unintended impact of regulation arising, indicate that the commercial impact of
for example, from cross-border inconsistency compliance costs is irrelevant. In reality, the
or material variations in standards of path forward is one that leverages technology
compliance, can be profound: the complexity but is built on a foundation of effective
and/ or cost of compliance may result in collaboration between banks, governments,
73.Compared to 10
banks being lessyears
able toago (2009) can youregulators,
cost-effectively give anand estimation of the increase
industry bodies. of FTEs that
policies in your bank?
Figure 70
Compared to ten years ago, can you give an estimation of the increase of FTEs that has been
needed to implement financial crime policies in your bank?
Total 40% 16% 35% 9%
Western Europe 55% 20% 25%
Asia Pacific 29% 14% 50% 7%
Other 32% 14% 36% 18%
0% 50% 100%
Increase of more than 20% Increase of 10 to 20% Increase of up to 10% No change

Operationally, since 2018, most banks have Indicator (KPI) in the cost effectiveness of
seen either an increase or no change in the this technology, and many are pushing to
number of alerts of suspicious activity, false bring false positives to well below 15%.
positives and trade finance red flags, with
only a small minority reporting a decline Financial intelligence units report anecdotally
(Figure 71). For the significant number of that ‘defensive’ filings of Suspicious Activity
respondents who indicated an increase Reports (SARs, also called Suspicious
in 2019 across the three measures, it is Transaction Reports and Suspicious Matter
challenging to ascertain whether this trend Reports) generate material volumes of content
is good news (i.e. the numbers are increasing for authorities to review, with little actionable
due to improved bank operations and digital intelligence arising when such reports are
solutions to detect criminal activity) or a filed based on an overabundance of caution –
sign of increasing criminal sophistication and ‘just in case’ – by banks. Efforts are underway
usage of trade channels. by the Asian Development Bank, following
66. Please indicate for each of the following publication aspects of the ADB’s Trade Finance
relating to due diligence transaction mo
For the trade banks implementing machine Scorecard: Regulation and Market Feedback,
remained the same, when compared to
learning-based controls, reducing the number
2018to advance collaboration and to advocate
of false positives is a critical Key Performance for the inclusion of selected common (and
Figure 71
Please indicate for each of the following if the number has increased, decreased, or
remained the same when compared to 2018
Number of
real alerts fo 42% 30% 8% 20%
suspicious activity
Number of
45% 23% 9% 23%
false positives
Number of trade
35% 38% 11% 17%
finance red flags
0% 50% 100%
72. To what extent has the regulation implementation measures relating to financial crime and
transaction volumes)? Increased Remained the same Decreased Don’t know
Figure 72
To what extent has the regulation implementation measures relating to financial crime and
AML impacted your trade finance business (in transaction volumes)?
Total 3% 10% 52% 29% 5%
Western Europe 6% 44% 50%
Asia Pacific 7% 20% 33% 27% 13%
Other 4% 8% 67% 17% 4%
0% 50% 100%
Increased by more than 20% Unchanged/ no direct impact Decreased by more than 20%
Increased by 0 to 20% Decreased by 0 to 20%

structured) data elements in SARs, and In Western Europe, 50% of respondents
to enable cross-jurisdiction investigations said such policies had a negative impact on
and follow-ups between intelligence and transaction volumes, with 44% indicating no
investigative agencies and others. This is direct impact. While we may have expected a
with the direct intent of reducing the adverse greater proportion of respondents to indicate
impact on trade finance while concurrently a reduction in flows as a result of financial
helping to improve the value of SARs in crime regulation, it is encouraging to see how
generating actionable intelligence. banks have been able to adapt.
We also asked banks to estimate the impact KYC regulation and AML policies have
on their trade finance volumes as a result of increased the regulatory imperatives faced
AML and financial crime policies. Over half by trade banks in recent years. Manual data
of respondents said that these regulations provision by customers and slow verification
had no direct impact on transaction volumes processes can delay or even prevent
68. Please indicate
(Figure which,
72), and if any,
a further of the afollowing
34% indicated banksKYC
fromUtilities
supportingyour bank in
transactions is ausing?
decrease. However, there are relatively sharp commercially timely manner, impeding the
divergences across different geographies. building of new customer relationships.
Figure 73
Please indicate which, if any, of the following KYC utilities your bank is using?
%
60
40%
40
32%
20% 18%
20
69. For what

0 reasons does your bank not use a KYC Utility?
Utility service provider Our bank does not Jurisdictional utility Industry
use a KYC utility collaboration utility
Figure 74
For what reasons does your bank not use a KYC utility?
%
50
38%
31%
25% 25%
25
13%
6%
0
Complex legal/ Lack of Cost Internal Other Complex
data privacy appropriate KYC considerations operational technology
implications utility offering implications integration

KYC utilities aim to ease this process for Looking ahead, the survey indicates that
trade banks by standardising data and banks do not expect regulatory scrutiny to
risk operations and enabling industry abate. 84% of respondents anticipate added
collaboration. However, when asked which pressure to check client risks (Figure 75)
KYC utilities banks were using, 32% indicated from KYC and AML policies to sustainability
that they were not using one at all (Figure requirements. In line with this, digitised
73). Of the remaining respondents, 40% KYC and AML processes were the most
indicated that they were using a utility frequent single change that respondents
service provider to manage their KYC risk believe would improve efficacy in compliance
monitoring and operations, 20% were using activities. Other respondents would like to
a jurisdictional utility, and 18% were using an see increased guidance from regulators. One
industry collaboration utility. Of the one-third respondent voicing a common view across
of respondents not using a KYC utility, 38% the industry stated that they would like to see
indicated legal and privacy implications as “clearer and more consistent direction from
the main reason (Figure 74) A further 31% regulators on compliance requirements”.
said that there was no satisfactory utility
offering available. Only 6% were discouraged 52% of respondents anticipate an increase
by the cost and complexity of technology in minimum capital requirements, while
integration. 47% expect that their banks will need to
75. As regulation becomes stricter what challenges/requirements do you see being imposed o
Figure 75
As regulation becomes stricter, what challenges/ requirements do you see being imposed
on banks going forward?
%
100
84%
80
60 52%
47%
40
21%
20
0
Greater scrutiny on Increased minimum Internal investments Increased SME
banks for checking capital requirements needed to meet participation/
client risk (e.g. KYC, changing requirements diversification
sustainability, AML) of lending base

make further investments in their internal While regulation has become more complex
operations to meet this expectation. There in some areas, it appears to be starting to
is a strong sense that knowledge sharing modernise to enable more digitised trade.
and collaboration across the industry For most trade documentation, over 50% of
would improve the ability to adhere to respondents mentioned that documentation
regulatory and compliance requirements, was no longer mandated to be paper-based
suggesting a wider adoption of KYC utilities in the context of trade financing (Figure 76).
in the future. The growing receptiveness The challenge, however, is that for trade to
of regulatory authorities to engage with truly digitise, all end-to-end documentation
industry through public-private partnerships – including bills of lading and certificates of
such as the UK’s Joint Money Laundering origin, which in many markets still need to be
Intelligence Task Force or AUSTRAC’s Fintel physical – must be able to be digitised. Digital
Alliance is a constructive development with documents or digital data extracts must
promising potential. Progress on compliance- be more widely recognised as having legal
related data-sharing across borders would standing. Digital documentation would also be
be an important complement, and should be required in both the importer’s and exporter’s
achievable while respecting local and regional jurisdictions. This makes it clear that local
privacy law. regulations and requirements remain a barrier
to paperless trade. Digital trade is explored in
65. Which of these documents are legally more detail
required to bein paper
the next in
section.
your home jurisdiction?
Figure 76
Which of these documents are legally required to be paper in your home jurisdiction?
Bill of exchange 19% 56%
Promissory note 19% 55%
Bill of lading 36% 48%
Certificate of origin 39% 44%
Insurance policy 51% 29%
Import/export declaration 52% 27%
Commercial invoice 65% 23%
Letter of credit 69% 15%
Payment confirmation 70% 10%
Order form 71% 14%
0% 50% 100%
Can be paper or digital Unsure Must be digital Must be paper

FEATURE
Regulations in a digital world

Felix Prevost, Senior Capital Manager, GTRF, HSBC
When horse-drawn carts became prevalent has seen and accepted the terms of the
and streets crowded, France introduced rules contract), and legality (how else can I show
mandating that they stay on the right to this is legal unless I have a physical record?).
reduce accidents and improve traffic flow. The
UK chose the left. Whatever their reasons, be Until distributed ledger encryption
it to free coach drivers to manipulate whip (Blockchain) provides a suitably acceptable
or sword, a system of codified rules emerged ecosystem for record-keeping of contracts
to support ever faster and larger coaches. (fix the terms in perpetuity for future record
When the first motorised vehicles appeared, review, record who viewed and accepted
some states required a footman to precede the terms, etc.), electronic signatures and
the automobile to announce its presence and digital contracts provide an intermediate step
ensure clear passage. The rules of the road which can achieve similar purposes as those
continued to evolve, and today self-driving of a physical contract. The European Union
cars are on the streets of multiple cities Electronic Identification, Authentication and
around the world. Trust Services (eIDAS) regulation goes a long
way in showing how regulation can support
Over the past two centuries, international this digital solution to physical records.
trade has rocketed. Innovations in technology
support ever more goods to move around In international trade, documents have
the world in complex global supply chains. multiple uses; however, at its core trade
The advent of steam-powered ships allowed finance intermediated by banks helps build
bigger and faster ships. Containerised trust between buyers and sellers by ensuring,
shipping allowed faster loading and unloading for example, that bills of lading, which enable
of ships with fewer breakages. Finance the holder to claim and collect goods, are
of international trade, though, has barely only released by the seller to the buyer once
changed since the invention of paper money: payment is ensured. As of now, most of these
a letter of credit is a commercial bank’s documents remain paper-based as they are
promise to pay, just like currency notes today not yet widely accepted electronically. Paper
are simply a note issuer’s promise to pay the documents require manual processing and
bearer on demand. time-consuming and costly air freight delivery
from the seller to their bank to the buyer’s
Digital innovations in the space of bank and onwards to the buyer. Digitising
communication, computing and banking the paperwork could save on operating costs
promise to change trade finance. The question for each party in the chain (e.g. no postage),
we ask is whether regulations can evolve to reduce operational risk (e.g. lost documents,
support these digital innovations? To answer incorrectly read documents), improve
this, we must turn to the risks that the current carbon footprint (e.g. no post by air), enable
regulatory regimes seek to address. governments to enhance and accelerate their
customs controls (e.g. automated submission of
Communication documents for customs pre-checks while goods
The world communicates electronically. We are in transit) and ensure no tax evasion (e.g.
send emails, text, call, and videoconference one electronic submission to both exporting
around the world. Why do we still sign and and importing customs offices preventing
mail physical contracts? Regulations around mislabelling or mis-valuing of shipment).
physical documents assume that physical
presence ensures uniqueness (there is only one Evidently, all interested parties will need to
contract and no other false copy), acceptance move jointly together to support digitisation
(the signature proves that the counterparty of trade documentation. If any one party,

such as a customs officer or a freight Cloud computing could ensure that banks
forwarder, still requires a paper document have access to enough computing capacity to
by law or practice, then that document will run and grow their operations and optimise
need to be created and posted between their vast pools of data to manage risks
the other actors. According to the World arising from intermediating such things as
Economic Forum and the United Nations, a international trade. Many regulators around
supportive regulatory framework covering the world, however, remain hesitant as
banking, insurance, contract law, and customs to the prospect of banks uploading their
as set out by the UN Economic and Social data stores into the cloud. Although borne
Commission for the Asia-Pacific (UNESCAP) of an understandable desire to protect
could reduce annual trading costs by up to individual consumer data, newly enacted data
USD 7 billion and increase exports by USD protection laws can act as a brake on banks
257 billion in Asia alone. upgrading their IT infrastructure. Outsourcing
and operational resilience rules set by
Computing regulators such as the United Kingdom’s
In the second half of the twentieth century, Financial Conduct Authority (FCA) and the
banks were among the first to adopt European Banking Authority (EBA) codify
computers widely. Notwithstanding the tens of some of the expectations on banks in this
billions of dollars spent on bank IT each year, regard. Regulatory sandboxes worldwide
their core systems remain stuck in the days of provide a useful mechanism for banks and
green screens. As banks worldwide wrestle cloud service providers to demonstrate the
with creaking mainframes, two computing viability of their proposed operating model,
developments offer potential solutions. and we can expect regulators to more
fully embrace the use of cloud computing
Figure 77 1
Typical documentary credit transaction
Exporter Importer
Negotiating/ Issuing
advising bank bank
3 2 1
5 6
8 7 9
Documents Advice/ Notice Goods flows Cash flow
1 DC application 6 Document sent to issuing bank

Issuing bank will effect payment or accept for a
2 DC issued 7
future payment
3 DC advised 8 Payment to Exporter
4 Goods are shipped 9 Documents received and import bill settled

Documents presented. If any discrepancy
5
exists the Exporter is notified
Note the separate flow of documents on top of payments and goods
1 Step 8 can also take place before Step 9

in the banking industry. In the context of laundering. Through Open Banking tools the
international trade finance, regulators may Financial Intelligence Unit (FIU) or another
wish to consider balancing privacy and authority could tap into a wider dataset to run
data sovereignty considerations against the its own anti-money laundering and sanctions
positive impact of data-sharing and data screening. This could even be further
storage across borders, with appropriate enhanced by implementing the recommended
safeguards in place. rollout of Legal Entity Identifiers (LEI) and
public company registries.
Cloud computing could unlock great value
through its potential to power artificial While most regulators are still exploring
intelligence (AI) and machine learning. the relative risks and merits of Blockchain
Such tools could simplify and automate technology, some are taking the lead and
documentary processing for trade loans, establishing supportive frameworks to develop
credit approvals and risk management, useful Blockchain solutions to trade finance.
including anti-money laundering and The Bank of Thailand has spearheaded the
sanctions controls. A comprehensive development of the Thailand Blockchain
regulatory framework for AI is still Community Initiative within its regulatory
outstanding, with the European Union sandbox. This initiative aims to digitise and
spearheading efforts to codify expectations eliminate paper guarantees from the Thai
that AI rules be auditable and explainable at government procurement system. Such
the forefront. digitisation promises to simplify the guarantee
amendment and cancellation process. With
Banking governments in South Asia and the Middle
Regulators are leading the charge on at East still often requiring the issuance of de
least one area: around the world, they jure or de facto open-ended guarantees, such
are beginning to force banks to open simplification through a central repository
their doors to new financial technology of guarantees could see banks improve their
providers (fintechs) through Open Banking capital allocation by more easily engaging
Application Programme Interfaces (APIs). with beneficiaries to cancel dud guarantees.
In the United Kingdom the FCA and the Elsewhere in Asia, the Hong Kong Monetary
competition authority are mandating banks Authority is partnering with banks to find a
to allow their clients to share their data with way to digitise trade documents. These are
other providers. Open Banking offers the clear examples of a well-defined problem
promise of financial innovation with the aim being road-tested to develop a solution in
of providing enhanced solution to clients. partnership with industry.
If they do not adapt and evolve, banks risk
disintermediation as fintechs encroach on Regulators from Mexico to India have
their business, or they risk being left to supported the development electronic
run the plumbing as utilities while fintechs platforms allowing companies to auction off
reap the benefit of higher value-add service their receivables in a bid to simplify access to
relationships with clients. working capital. Whereas certain jurisdictions
make it prohibitive for companies to assign
Open Banking can also help with building receivables, here is an example of regulators
the infrastructure for a truly integrated trying to bring together industry participants to
framework to fight financial crime. Today create an arm’s-length market for receivables.
banks are mostly left to their own devices to Likewise, recent progress in the ratification
identify and report suspicious transactions of the UN Convention on the Assignment of
based on their limited view of the end-to- Receivables in International Trade suggests
end transaction and payment flow. In 2020 further potential in this area.1
the UK government announced a new bank
and financial services levy to tackle money
1 www.mayerbrown.com/-/media/files/perspectives-events/publications/2020/05/the-un-convention-on-the-
assignment-of-receivables.pdf

Developing rules Pax Romana gave the world one of the first
Laypersons can easily identify producers systems of long-distance international trade.
as suppliers and consumers as buyers, and Over centuries, the Silk Road facilitated
most also understand that buyers can in exchanges between China and Europe.
turn be producers themselves. Practitioners European empires thrived from trade with
also know that surrounding this supply the New World. The Industrial Revolution
chain there lies a complex ecosystem of gave rise to specialisation of production on a
freight forwarders, shipping agents, insurers, global scale, with cotton from British colonies
financiers, quality inspectors, customs agents, feeding mills in Northern England. Along
and regulators. Digitisation of trade finance the way, how legislators regulate market
has been a long time coming, but roadblocks activity has evolved to reflect changing legal,
remain on this transformation. Some cultural and technological realities. Like cars
jurisdictions still do not accept electronic learning to drive themselves, trade finance
bills of lading, while others require paper is subject to digitisation and will require a
documents to support cross-border payments supportive regulatory framework to ensure it
as part of capital controls. Change can only can fulfil its potential, and the Digital Trade
happen if all parties in the trade ecosystem Roadmap set by the ICC establishes a helpful
move together in line with regulation. guide for regulators and industry to develop
this framework.

FEATURE
Stronger together: combatting trade-based money laundering

Richard Bunting, Principal Specialist, Intelligence Partnerships, AUSTRAC
(Australian Transaction Reports and Analysis Centre)
International trade has increasingly become a target for criminal

exploitation, and government and industry must join forces to combat
trade-based money laundering.
In simpler times, a business front would 40.3 million people forced into slavery
suffice to make illegally acquired money worldwide, a quarter of whom are children3.
appear legitimate. A chain of laundromats did
the job for Al Capone and is the origin of the For authorities and the trade financing
term ‘money laundering’. Over time, criminals industry, TBML can be difficult to detect amid
have turned to increasingly sophisticated the many processes, parties, transactions
methods to disguise the origins of dirty and jurisdictions. As with any disruption
money and integrate it into the mainstream approach, anti-TBML efforts need to be
economy. constantly refined to keep up with new and
emerging risks posed by criminals seeking
In trade-based money laundering (TBML), to harm the community and profit from their
criminals take advantage of the size crimes.
and complexity of international trade to
transfer money between parties and evade Collaboration is key
authorities. Techniques include mismatching Acknowledging that no single body can
the value of the goods and payment (over- tackle such challenges, the Australian
or under-pricing relative to market value, Government’s anti-money laundering/
quantity or quality), issuing multiple invoices counter-terrorism financing regulator and
for a single shipment, or sending no goods financial intelligence unit, AUSTRAC, takes a
at all. Money launderers may also seek to collaborative approach.
obscure their crime through constructing a
network of highly complex trade processes AUSTRAC is the Australian government
that mingle legitimately with illicit funds and agency responsible for preventing, detecting,
take advantage of governance gaps across and responding to criminal abuse of the
jurisdictions. financial system to protect the community
from serious and organised crime. AUSTRAC
TBML is big business. The profits of regulates more than 15,000 businesses to
international organised crime have been protect them, and the financial sector, from
estimated as 1.5% of global GDP, with more criminal abuse. These regulated or ‘reporting’
than half of these profits laundered through entities are at the front line in combating
the global financial system.1 Developing financial crime. They submit reports about
countries are particularly vulnerable, where financial transactions and suspicious matters
value gaps in reported international trade to AUSTRAC which become the building
have been estimated as USD 8.7 trillion over blocks of actionable intelligence. Each report
2008-17, and USD 817.6 billion in 2017 alone.2 contributes a piece of the jigsaw puzzle that,
The human consequences are grave, including when put together, allows a more detailed
picture to emerge.
1 OECD (2016), Illicit Trade: Converging Criminal Networks, OECD Reviews of Risk Management Policies, OECD
Publishing, Paris. dx.doi.org/10.1787/9789264251847-en
2 GFI (2020), Trade-Related Illicit Financial Flows in 135 Developing Countries: 2008-2017, Global Financial Integrity,
Washington DC. gfintegrity.org/report/trade-related-illicit-financial-flows-in-135-developing-countries-2008-2017/
3 ILO (2017), Global Estimates of Modern Slavery, International Labour Organization and Walk Free Foundation, Geneva.
ilo.org/global/topics/forced-labour/statistics/lang--en/index.htm

Figure 78
Trade-based money laundering techniques
Under-invoicing Over-invoicing
The exporter transfers value to the importer by shipping goods The importer transfers money to the exporter
that are worth more than the invoiced amount. through paying above market value of goods.
EXPORTER
EXPORTER IMPORTER
IMPORTER
Multiple invoicing Falsely describing goods

The exporter issues multiple invoices for a single shipment, The importer transfers value to the exporter through describing the goods as
and the importer transfers value to the exporter. being of a higher quality – and therefore of a higher value – than they actually are.
EXPORTER EXPORTER
IMPORTER IMPORTER
Obfuscation Phantom shipping

Parties structures a transaction to avoid alerting authorities. This No goods are shipped and al documentation is falsified.
may involve omitting, disguising or falsifying information.
EXPORTER EXPORTER
IMPORTER IMPORTER
Such information realises its greatest as partners learn from one another and
potential when understood within a larger synthesise knowledge. Fintel Alliance has
context. Suspicious matter reports and now formed a TBML working group that
financial information received by AUSTRAC includes front-line experts from industry and
are available to more than 5,000 designated law enforcement to develop indicators and
users within partner agencies to support typologies that can be broadened to other
national security and law enforcement jurisdictions and trade types.
investigations. AUSTRAC’s analysts also
use this information to identify new and The value of this interconnected approach
emerging risks and to develop sophisticated is becoming clear. Better intelligence and
in-depth intelligence reports on priority law information-sharing regarding child sexual
enforcement and national security matters. exploitation resulted in a 643% increase
AUSTRAC then provides indicators and in suspicious matter reports to AUSTRAC.
trends back to the businesses it regulates to This supported the detention or arrest of 73
help them further mitigate risks and respond persons and the protection or rescue of 35
to emerging threats. As the quality of reports victims in 2018‑2019.
increases, so does the intelligence that
leads to the detection and apprehension of To combat TBML, as with other serious and
criminals. organised crimes, we need to continue to
monitor and prepare for shifts in the risks
To further boost the benefits of collaboration, that criminals may pose to the financial
AUSTRAC established the Fintel Alliance system and community. Timely and quality
in 2017, the world’s first private-public contributions from industry are crucial for
partnership of its kind. Fintel Alliance’s 28 success. As financial crime becomes more
members include experts from financial complex across the globe, collaboration is
industry, intelligence agencies, law a critical foundation to overcome criminal
enforcement, and academic and research exploitation of our interconnected trade,
institutions. Along with improved operational financial systems and global communities.
outcomes, members’ capability increases

FEATURE
Combating money laundering: improving systems, enabling trade

Can Sutken, Relationship Manager, Asian Development Bank, Trade Finance Program
Catherine Daza Estrada, Workshop Secretariat, Asian Development Bank, Trade Finance Program
Increased trade helps bring developing be allowed to compromise the integrity and
countries into the global financial system. But security of the global financial system.
financing that trade can be difficult when the
process is sometimes stymied by systems It is worth studying, however, whether the
aimed to combat money laundering. regulatory regimes designed for KYC, AML,
and countering the financing of terrorism
Trade helps build inclusive growth and (CFT) could be streamlined so that the bad
reduces poverty. Trade finance helps facilitate guys get caught but the good guys still get
international trade and commerce by making financed.
it easier for importers and exporters to
transact business using financial instruments In terms of trade and trade finance,
and products. ‘following the money’ is thought to be more
challenging given that trade finance involves
Greater access to the global financial system complex transactions involving multiple
would narrow the gaps between developed parties, including correspondent banking
and developing countries. Without proper relationships that are thought to be of higher
financing, developing countries cannot risk from an AML perspective.
benefit from trade because they do not have
the money to build supply-side capacity To address trade-based money laundering
and trade-related infrastructure. Greater (TBML), the Asia/Pacific Group on Money
financial inclusion is key to achieving the UN’s Laundering Trade Based Money Laundering
Sustainable Development Goals (SDGs). Typologies Report 2012 recommended the
adoption of common formatting to record
In the latest study by the Asian Development and maintain trade-relevant statistics. That
Bank, the global trade finance gap was way, data could be analysed to identify trends
estimated to be USD 1.5 trillion. This related to trade-based money laundering,
persistently large market gap impedes the full instead of that data being lumped in with
potential of trade to deliver growth, jobs, and other forms of money laundering, as they are
poverty reduction. The ADB study identified now.
AML and KYC requirements as one of the
key reasons why trade finance proposals get For its part, the ADB Trade Finance Program
rejected. has convened multiple stakeholders from
international organisations, regulators, and
The United Nations Office on Drugs and major global banks to brainstorm on these
Crime estimates only about 1% of crime issues and present practical solutions.
proceeds laundered via the global financial
system are seized and frozen. Around 80– ADB is encouraging standard setters to
90% of the reports of suspicious financing consider adopting common trade data points
are of no immediate value to active law in suspicious transaction reports to produce
enforcement investigations, based on a poll higher quality, actionable intelligence from
conducted by the Royal United Services those submissions. It has highlighted the
Institute. need for a feedback loop between and
among regulated banks, financial intelligence
To be clear, this isn’t a choice between units, law enforcement, and other relevant
fighting financial crimes and improving agencies such as customs authorities.
financial access. Illicit money transfers cannot

To help address issues relating to non- Actively engaging the private sector
customer due diligence in trade finance, and in creating solutions to address money
a perceived misalignment in trade finance laundering, not just in trade and trade finance,
examinations by bank examiners, the ADB could be the missing piece in the fight against
has published “Trade and the Legal Entity financial crimes. The ADB is leveraging its
Identifier”, a paper discussing the Legal neutral position to enable the parties involved
Entity Identifier as a unique and secure to discuss and move forward with more clever
system to facilitate business transactions, risk solutions that are effective and support clean
evaluation, and money lending; and “Effective business.
Practices in Trade Finance Examinations”,
which provides bank examiners and This doesn’t need to be a choice between
regulators a better understanding of trade fighting financial crimes or improving
finance, how departments involved work, and financial access. Systems can be designed
how to align expectations on appropriate to be better at spotting illicit transactions
compliance related to trade and trade finance. while streamlining the process so that the
developing economies are not left behind.

DIGITISATION
Survey analysis
The Global Survey has already touched digital capabilities and those that currently
on several aspects of digitisation, from do not.
supply chain finance to SME inclusion to
regulation. Digitisation is not simply a trend Of the banks surveyed, 64% indicated that
in trade finance, but a singularly disrupting they have a digital strategy for trade finance
change to the way trade finance operates. (Figure 79). However, this number differs
Given the difficulty that many banks have significantly by bank type. While 83% of
had in accessing original documentation global banks have a digital strategy, only 46%
during COVID-19 (due to lockdowns and of local banks have one – a stark reminder of
quarantines), we expect the push to fully the challenges many banks face in integrating
digitise global trade and trade finance to digital solutions into their existing offerings.
gather further momentum. While digitisation Indeed, only 17% of respondents have
is widely seen as one of the most important – successfully implemented digital solutions
51. Does and
your bank have
promising a digitaltostrategy
– developments shape tradefor(Figure
trade80),finance?
with a surprising one in five
finance in the coming years, the survey shows not yet seeing any tangible benefits. 22% of
a clear divide between banks that have the banks said that they have tried to implement
vision, capacity and commitment to advance technology solutions but that it has been
Figure 79
Does your bank have a digital strategy for trade finance?
%
100
13%
31% 27%
50%
50
83%
Yes
49. Please indicate the maturity46%
of your bank in using technology solutions to achieve benefits
64% 64%
No
improved precision
Don’t know
0
Figure 80
Please indicate the maturity of your bank in using technology solutions
%
40
34%
22%
19%
20
14%
5% 4%
3%
0
Technology We have We are We have Technology We have Don’t know
solutions implemented currently successfully solutions successfully
implementation technology struggling to implemented implementation implemented
Note: 6.7% of respondents
is on our to thisbutquestion
solutions did not
implement include isthe
technology not type
on our ofsolutions
bank in buttheir responses and hence are only
above agenda for the there is room technology solutions, agenda at this benefits not
next 1-2 years for solutions resulting in a time yet evidenced
improvement reduction of
time and costs

imperfect, while a further 19% are currently Of the various digital trade technologies
struggling to even match that. This clearly looked at in the survey, the most common
highlights that the effort and expense of implemented by banks is an online platform
50. Whatupgrading
instruments and solutions
bank technology continuesis to
your
be bank using
for trade for (55%)
finance digitised
(Figuretrade
81). Thisfinance?
is
a key hurdle in digitising trade, and indeed unsurprising, and largely considered to be
for some organisations runs into hundreds of ‘table stakes’, given that channels represent the
millions USD when calculated in US Dollars.. ‘customer gateway’ to digital trade. High-quality
Figure 81
What instruments and solutions are your bank using for digitised trade finance?
%
75
55%
50
38% 36%
28%
23% 22%
25 20%
14%
11%
0
Online SWIFT Application Imaging Big data Distributed Electronic Other Bank
platforms MT798 Programm- and optical analytics ledger bills of Payment
48.
48. To what extent has your bank
for trade removed the use of
ing physical paper
character for documentary transa
technology lading and Obligation
48. To
To what
what extent
extent has
has your
your bank
finance
solutions
bank removed
removed the
the use
use of
of physical
physical paper
paper for
Interface recognition
technology
for documentary
documentary transa
transa other
electronic
documents
Figure 82
To what extent has your bank removed the use of physical paper for documentary
transactions?
Local Local
BanksBanks
Local Banks
Local Banks
Issuance/ advising 13% 54% 33%
Settlement/ financing 13% 54% 33%
Document verification 8% 54% 38%
Regional Banks
Regional
Regional Banks Banks
Regional Banks
Document verification 45% 55%
Global Banks
Global Banks
GlobalGlobal
BanksBanks
0% 50% 100%
0% 50% 100%
0% 50% 100%
To a great extent: digital fully implemented for all transactions
To a great extent: digital fully implemented for all transactions
To
To a great
some extent:
extent: digital
digital fully implemented
implemented for transactions;
for some all transactions
To some extent: digital implemented for some transactions;
To some extent: digital implemented for some transactions;
To no extent: digital not implemented at this time

digital channels are often a substantial value continues to receive, it likely represents the
differentiator, particularly in the MSME space fact that DLT is still often applied largely to
where host-to-host connectivity is largely non- pilot transactions and proofs of concept, with
existent. practitioners seeking to better understand
the scalability of DLT-based solutions and the
SWIFT MT798 (38%) and APIs (36%) were differentiated proposition around DLT-based
also frequently cited by respondents as technical architectures versus other options.
digital solutions offered by their banks. Only
57. What
22%is of the level ofindicated
respondents client that
usagetheirof digital channels
Digital is clearlyin
aneach of the
important topicfollowing
for banks, areas?
57.
57. What
What
banks
is the
is were level of
the integratingclient
level of client usage
usage
DLT-based
of digital
of digital
solutions
channels
andchannels
in
particularlyin
each
foreach
of
global of
the following
thebut
banks, following
there
areas?
areas?
in their trade finance operations; while this is limited end-to-end adoption of digital
may be surprising given the attention DLT solutions in trade finance. This is consistent
Figure 83
WhatLocal
is the level of client usage of digital channels in each of the following areas?
Local
Local
Local Banks
Documentary trade 9% 39% 52%
Supply chain 5% 29% 67%
Receivable finance 10% 29% 62%
Guarantees & trade loans 9% 39% 52%
Regional
Regional
Regional Banks
Regional
GlobalGlobal
Banks
Global
Global
53. What percentage of Documentary
29% Trade transactions
Supply chain
29%
Supply chain
38%
38% do you receive digitally? 33%
33%
Guarantees & trade loans0% 14% 50% 50% 36% 100%
0% 50% 100%
0% Significant 50%
Some None/Little 100%
Significant Some None/Little
Significant Some None/Little
Figure 84
What
% percentage of documentary trade transactions do you receive digitally?
100
64%
50
13% 11%
4% 3% 4%
0
0-10% 10-20% 20-30% 30-40% 40-50% 50%+

across bank types, although adoption is more The same trend emerges for zero-touch
limited among local and regional banks than processing transactions (i.e. no human
global banks. While most banks have removed intervention from start to finish), with
the use of physical paper for documentary an average of only 6–9% across the four
transactions to some extent (Figure 82), it is products surveyed (Figure 86). This is
more common among global banks. However, less surprising and a known challenge for
between half and two-thirds of local banks banks – while many components of trade
indicated that client usage of digital channels finance operations are being digitised (e.g.
across trade finance products is either minimal data capture, sanctions screening), very few
or non-existent (Figure 83). For global banks players, if any, have managed to create a fully
the number is closer to one-third. digital ‘zero touch’ end-to-end process (e.g.
to include document checking).
Further, most banks receive only a small
amount (0–10%) of documentary trade In terms of achieved benefits of digitisation,
54. What(Figure
percentage of Open
84) and open accountAccount Trade83%
trade (Figure transactions
of respondentsdoindicated
you receive digitally?
only a minimal
85) transactions digitally. This is rather reduction in costs over the past five years
surprising given the prevalence of digital due to digitisation (Figure 87). Given the
channels for transaction origination. prominent focus that digitisation has had in
Figure 85
What percentage of open account trade transactions do you receive digitally?
%
100
58%
50
17%
9% 6% 7%
3%
0
0-10% 10-20% 20-30% 30-40% 40-50% 50%+
56. What percentage of your transactions have zero touch processing (i.e. no human interventi
products?
Figure 86
What percentage of your transactions have zero-touch processing for the following
products?
Average % stated
20
15
10 8% 9%
7%
6%
5
0
Import L/Cs Export L/Cs Loans for import/ export Performance guarantees

the industry over the past decade, it may be reduction in costs that most banks have
surprising that so few banks report much experienced over the past five years has
benefit (at least from a cost perspective). This reduced their appetite for investment, or
may be due to the fact that we are still far off conversely the lack of adequate investment
from system-wide paperless trade, and hence may be limiting cost reductions.
there is still a long way to go in terms of cost
reduction from digitisation. Alternatively, The differences between bank types in the
these findings may speak to the challenge survey go beyond technology adoption to
and cost of implementing technological how they view the fundamental utility of
solutions – reducing returns on investment. digitisation. Looking beyond cost savings,
digitisation can bring improved product
Looking ahead, 66% of respondents expect propositions, more advanced channels,
at least 10% in cost savings from digitisation enhanced customer experience and retention,
over the next five years. However, again this and superior risk mitigation - amongst other
differs by bank type, with 91% of global banks benefits. This could shape the future of
expecting a meaningful reduction to their trade finance, with banks that can build and
cost base from digital solutions (Figure 88), implement digital solutions taking greater
but only 55% of non-global banks expecting market share, and banks that are unable to do
the same. so entering partnerships or withdrawing from
the market.
60. Over the past 5 years what % cost savings has digitisation of trade provided for your divisi
Of banks surveyed, 80% spent only
USD 0–10 million in 2019 on developing or Respondents from banks with successful
acquiring digital solutions for trade finance digital trade finance solutions said that the
(Figure 89). This may be because the limited solutions with the most benefits were online
Figure 87
Over the past five years what % cost savings has digitisation of trade provided?
%
100
83%
50
61. Over the next 5 years what % cost savings do you expect digitisation of trade to provide fo
13%
3% 1%
0
0-10% 11-20% 21-30% 31% +
Figure 88
Over the next five years what % cost savings do you expect digitisation of trade to provide?
%
100
9%
34% 35%
55%
45%
50 39% 35% 0-10%

11-20%
36%
45% 21-30%
26% 26%
1% 4% 9% 31% +
0

platform offerings to customers, digital For banks that are finding it hard to
processing and approval processes, and implement technological and digital solutions,
automation of operations. One respondent 61% cite the challenges (financial, logistical,
cited “use of machine learning/ artificial and technical) of building internal capabilities
intelligence to automate processing in (Figure 90). A further 51% answered that both
operations” as an example of how their bank regulation and client needs were hampering
has integrated digital solutions into their wide-scale adoption of digital solutions.
offerings. Another respondent noted that
“[digital products] do not replace people, but When asked to evaluate the benefits of
help people operate more efficiently”. digitisation, answers vary again across bank
types. While 57% of global bank respondents
The cost reduction impact of digital solutions agreed that digitisation will enable banks
suggests strongly that the case for investing to serve their customers significantly
in these technologies must be built upon a better (Figure 91), only 42% of local bank
wider foundation – a combination of factors respondents felt the same way. The divide
such as client expectation and satisfaction, was even starker when respondents were
reductions in operational and fraud risk, and asked if digitisation would benefit their trade
the ability to refocus trade finance specialists finance operations – 59% of global banks
from mundane, lower-value tasks that can be agreed, while only 32% of regional banks and
addressed through technology to activities 25% of local banks agreed (Figure 92).
52.How that
muchgenerate business or client relationship
has your bank spent in 2019 on developing/acquiring digital solutions for trade
value. Despite these responses, global banks expect
ahead)? that it will take longer for digital trade finance
to replace current models and practices
Figure 89
How much has your bank spent in 2019 on developing/ acquiring digital solutions for trade
finance, including future spends (3-5 years ahead)?
%
100
80%
50
55. What are the main barriers, including future ones, experienced and anticipated by your bank
solutions? 9% 6% 3%
0% 2%
0
USD 0-10M USD 10-20M USD 20-30M USD 30-40M USD 40-50M USD 50M+
Figure 90
What are the main barriers that are preventing a wider adoption of digital solutions?
%
80
61%
60
51% 51%
40 32%
20
10%
0
Building internal Regulation Client needs/ Low value Other
capabilities/ expectations proposition
expertise

than do other banks. Only 43% of global understood to encompass more than cost
banks expect this to happen before 2030, reduction.
compared to 59% of local banks (Figure 93).
Further, 13% of global banks expect that pure Limited investment capacity, local regulations,
digital trade finance will never fully supplanta small customer base, and the inherent scale
traditional trade finance. This could be challenges of technology are all particularly
driven by global banks’ first-hand knowledge acute for smaller trade banks. If these
of how challenging, expensive, and time- smaller banks fail to capture the advantages
consuming it is to modernise legacy systems of technology, there is a material risk of
and associated processes across multiple their being disadvantaged in a two-speed
jurisdictions. market. However, in today’s market there
are emerging alternatives to the prohibitive
The disparity in sentiment towards costs of technology solutions, from forming
digitisation between global, regional, and partnerships with non-bank players to
local banks is somewhat concerning. It is adopting white-label digital platforms that
clear that smaller banks have had less success will give smaller banks the opportunity to
63. To what extent,
in reaping if any,ofdo
the benefits yousolutions,
digital think that digitisation will
keep up with the enableworld
changing your bank to
of trade better serve it
particularly when we consider the reality finance.
that benefits of digital solutions must be
Figure 91
To what extent, if any, do you think that digitisation will enable your bank to better serve its
existing clients and attract new clients?
%
100
10% 13% 13%
45%
41% 30%
46%
50
Not at all/ very little
55% 57%
49% To a moderate extent
42%
To a significant extent
62. How would
0 you
Total
rate the benefits
Local
of digitisation
Regional
to your
Global
bank’s trade finance operations?
Figure 92
How would you rate the benefits of digitisation to your bank’s trade finance operations?
100
9% 14%
19%
29%
27%
43% 59%
50 46%
Little/ no benefit
59%
38% Moderate benefit
25% 32%
Significant benefit
0
above

59. When would you predict pure digital trade finance to completely replace traditional trade
Figure 93
When would you predict pure digital trade finance to completely replace traditional trade
finance as known today?
%
100
15% 9%
21% 17%
36% 26%
34%
38%
50 By 2025
43% By 2030
41% 50%
33%
After 2030
10% 8% 13% Never

0 5%
above

FEATURE
Digital trade and COVID-19: maintaining the crisis-driven momentum

Alisa DiCaprio, Head of Trade and Supply Chain, R3
Chris Southworth, Secretary General, ICC UK
Introduction to digital is an enormous task that requires

By April 2020, most banks across the globe coordination from the private sector and
had implemented Business Continuity Plans government. It isn’t that no one wants to
(BCPs) in response to local quarantines do it, it’s that there is so much to do, no
and lockdowns. Common to many of these obvious way to prioritise, and no single
BCPs was the scaling up of existing digital global institution tasked with coordinating
solutions. Indeed, 55% of respondents to the the agenda. The roadmap can provide this
supplementary ICC COVID-19 Survey report coordination on both a local and global level.
rolling out new digital solutions during the
pandemic. None of this was easy or without What does the roadmap tell us about
significant adjustment challenges. But many digitisation in different jurisdictions?
are asking what is going to happen to this In addition to guiding actions, the roadmap
progress when we return to business as usual? also gives us a way to estimate national level
digital trade progress.
This is where the ICC can play a role. The ICC
Digital Trade Roadmap is a tool to continue Digitisation is a global challenge that requires
the digital gains made during COVID-19. We patient and persistent cooperation. At the
need this because we can expect the digital inter-governmental level, we have a good
strides we have made to regress back to understanding of what needs to be done to
paper when the crisis eases. The reason why make a difference. But at the national level,
is the same reason that digitisation hadn’t the picture is more nuanced because of the
progressed this far earlier: the stubborn different legal frameworks and different
persistence of paper-pushing norms and makeups of economies. Figure 94 offers a
regulations. view into 12 ICC member economies. They
include a mix of developed and developing
What is the roadmap? economies.
The ICC Digital Trade Roadmap is a simple
framework for governments, institutions and Figure 94 tells us three important things.
industry. It presents a list of specific policies First, that most countries are doing relatively
and actions that would progress the digital well in implementing the WTO Trade
agenda over time. It does this by advocating Facilitation Agreement. Second, that progress
action in three pillars: on Electronic Single Window initiatives is in
evidence, albeit slowly. And third, we learn
1. Modernising outdated laws and that the WTO E-commerce negotiations,
regulations, while broadly inclusive, could benefit from
more markets participating. These insights
2. Supporting standards that enable can be used for greater advocacy on these
interoperability of digital platforms, and topics.
3. Changing industry behaviours and norms The roadmap also allows us to see that
around paper progress on digitisation isn’t only about
modernising regulations or establishing
Harmonisation of action across digital standards. Equally important is systems
advocates will be key in 2020. Few believe change within the industry. This points to
that we should be using paper originals and the need for more focus on pillar three in
handwritten signatures in 2020. But moving

the roadmap: helping industry upskill and respondents included: Insurance policies
modernise systems and processes. (51%), import/ export declarations (52%),
commercial invoices (65%), Letters of Credit
Before we can change practices around (69%), payment confirmations (70%) and
paper, we need to understand why paper order forms (71%).
is used in the first place. We asked ICC
respondents to tell us – for their region – Figure 95 also reveals the inconsistency
which documents were required to be paper across different legal jurisdictions. Smaller
and which could be submitted digitally. countries, without legacy systems like
Figure 95 shows these results. Georgia and Singapore, can often act as
hotbeds of innovative new practices and
Of the ten document types included in the be a useful bridge between developed and
survey, there were four where more than less developed countries. If mobilised, this
50% of respondents reported that they group could be a powerful force for change in
must be issued in paper form. These are institutions like the World Trade Organization,
Bills of Exchange, Promissory Notes, Bills in the same way the Friends for Ecommerce
of Lading and Certificates of Origin. Ideally, for Development were in the lead up to
governments need to create the conditions the WTO Ministerial Conference in Buenos
where all documents operate by digital Aires in 2018 and the consequent start of
means to prevent a return to paper, but these ecommerce negotiations.
results are helpful in identifying a specific
area of law where governments can make a
tangible difference to digitising trade, similar
to what is happening in the UK.
Most positively, documents that could be

paper or digital with more than 50% of
Figure 94
Digital progress in three areas
Implementation of the WTO

Trade Facilitation Agreement Use of Electronic Participation in WTO
(%) Single Window Ecommerce negotiations
Brazil 95.8 operational yes
China 96.2 in progress yes
Germany 100 operational yes
India 72.3 in progress no
Netherlands 100 in progress yes
Nigeria 15.1 in progress yes
Russia 100 in progress yes
South Africa 100 operational yes
UAE 90.3 no no
UK 97.1 operational yes
US 100 in progress yes
Sources: TFA database, World Bank, EC database

Figure 95
65. Which
Which of these
documents aredocuments are
legally required legally
to be required
paper (by region) to be paper-based in your home jurisd
Import/
Commer- Payment Export
Letter of Bill of cial Order Insurance Promis- Bill of Certificate Confirmati Declar-
Country Credit Exchange Invoice Form Policy sory Note Lading of Origin on ation
APAC
Australia
Bangladesh
China
Hong Kong
India
Singapore
Sri Lanka
Vietnam
Middle East
Afghanistan
Qatar
Saudi Arabia
UAE
LATAM
Argentina
Brazil
Ecuador
Mexico
Panama
Central & Eastern Europe
Armenia
Belarus
N Macedonia
Russia
Turkey
Ukraine
Uzbekistan
Western Europe
Belgium
France
Germany
Italy
Serbia
Spain
Sweden
UK
Africa
Egypt
South Africa
Tunisia
Must be paper Paper or digital Unsure
Note: The above chart has been developed directly – unedited - from Global Survey responses, and does not represent an
official ICC view. Please treat as an indication that requires further validation

How COVID-19 reinforced the need for a The roadmap can be used to identify where
roadmap guidance is most needed.
COVID-19 accelerated the digitisation agenda
in ways that were unimaginable a year ago. Second, emergency response measures made
Companies, governments, and institutions it clearer than ever before what is achievable.
all scrambled to implement ad hoc practices In some cases, they also illustrated what it will
in order to keep trade flowing and teams take to get there. The ad hoc digital practices
working while isolated at home. This implemented by banks aimed to address five
reinforced the applications for the ICC Digital challenges: deal origination and distribution,
Trade Roadmap in two important ways. negotiable instruments, document
transmission, authorised signatures, and
First, it made it clear that guidance is needed shipping delays. Banks managed to keep
even for temporary measures. Business trade flowing despite these hurdles. Now that
Continuity Plans (BCPs) were rolled out we know it is possible to go digital, the direct
before most government or regulators had a actions promoted by the roadmap can help
chance to offer any guidance. And even then, introduce greater collaboration among trade
fewer than 30% of ICC’s COVID-19 Survey participants.
respondents report receiving support from
their governments in relaxing requirements Conclusion
for paper (although anecdotally, this appears We have a framework available in the
to have improved over the course of the roadmap, a better grasp of where we need to
crisis). However, there are clearly authorities act to move the agenda forward to digitise
that have issued direct guidance. As an trade documentation, and a global crisis on
example, both the Indian Bankers Association which minds are focused. There is a clear case
and the Bank of Algeria suggested that for action in order to set the conditions for
electronic or scanned documentation economic recovery – digitisation is a solution.
was acceptable where presentation or
transmission was not feasible. For the first time in living memory, we have
all the tools available at the same time to
Today’s environment – as we saw in Figure capture the opportunity if, as industry, we
92 and Figure 93 – isn’t yet conducive to fully mobilise and cooperate across jurisdictions.
digital trade flows. To have the confidence to ICC has a central role to play as the neutral
try untested solutions, banks need regulators rallying point but so does the finance
and governments to show their support. industry as a facilitator to help bring all the
stakeholders to the table.

USING THE ROADMAP TO MAKE
PROGRESS: THE UK EXPERIENCE
The UK is the second-largest services exporter, third-largest ecommerce market, and a global
centre for finance, innovation, and international business. It is thus surprising the UK hasn’t
already taken the opportunity to position itself as a global leader in the digital business
environment.
The answer lies in the complexity and age of the UK legal system, coupled with the fact that
there is no single point of leadership in government and no trade body singularly focused on
making the case for change.
We have identified three specific pieces of legislation that act as a brake on progress.
• The Bills of Exchange Act 1882,
• Carriage of Goods by Sea Act 2002 and,
• The Statute of Frauds Act 1695 (Northern Ireland).
The need to modernise underscores a deeper issue in UK law: how title of ownership is
recognised. In trade, title refers to goods. But the legal definition goes much further and covers
everything from ownership of assets to pensions and power of attorney. Several attempts have
been made to review the UK situation, but all have failed to make significant progress.
The good news is there is genuine alignment and a real appetite to address the issues from
across industry and government. ICC has stepped in to act as the neutral convener using the
roadmap to rally the different stakeholders. They have included the UK Law Commission,
Ministry of Justice, Department for Digital Trade, the Commonwealth, and a host of experts
from finance, law, academia, shipping, insurance and trade. All agree the time is right and there
is a real opportunity to move the agenda forward.
As the home of English law and the Commonwealth, the general consensus is that if the UK can
fully digitise trade documentation, it sets an important precedent across all 54 Commonwealth
countries and all contracts that use English law. The UK could also become the first G7 country
and lead the way for others to follow.
Multilateral and bilateral trade dialogues are another place that the UK can show leadership.
The UK is also an active participant in the WTO Ecommerce negotiations and is in the midst of
trade negotiations with the EU and US. Brexit and now COVID-19 have accelerated the agenda
and opened up a window of opportunity that has remain unchanged for hundreds of years. It’s
an enormous opportunity that the UK must take.
Using the roadmap, the ICC can act as a neutral convener for industry, to bring all the parties
to the table and to step in as the body that makes the case for change. If we can do this across
the ICC network, we will be able to accelerate the digitisation of global trade.

FINANCIAL INCLUSION
Survey analysis
One of the most pressing and challenging due to KYC concerns, suitability, and low-
issues facing the trade industry today is quality applications (Figure 98). While
financial inclusion broadly defined, as well as this rejection rate is low on the whole,
more specifically in making sure, that trade there is a discrepancy across geographies,
finance products are available to businesses with applications from Africa, and
of all sizes and across geographies, and that Central and Eastern Europe, receiving a
by extension, the benefits of trade in terms disproportionately high number of rejections
of enhanced standards of living can be more relative to their representation in trade
equitably distributed. Survey respondents finance applications (Figure 99), contributing
overwhelmingly believe there is a shortage to the well-documented trade finance gap,
in servicing the needs of the global which persists at about USD 1.5 trillion
market (Figure 96), and that multilaterals, annually according to ongoing analysis by the
governments, and export credit agencies Asian Development Bank.
have a role in helping to close this gap.
Additionally, while public–private partnerships In addition to these geographical
can help banks close the trade finance gap, discrepancies, MSMEs are more likely than
there is a wider set of tools available, and the other customer segments to be rejected for
onus of expanding access to trade finance is trade finance support (Figure 100). These
shared by both industry and public bodies. businesses represent 29% of total trade
finance applications and make up 36% of
The majority of banks only rejected a rejections, again highlighting the extent of
small percentage (0–10%) of trade finance unmet demand (i.e. the trade finance gap)
41. Do you believe there is a shortage in servicing the trade finance needs of the global market?
transactions in 2019 (Figure 97), primarily that exists in the market, and the degree
Figure 96
Do you believe there is a shortage in servicing the trade finance needs of the global market?
20% 19%
28%
Western Asia 40% Other
Total
Europe Pacific %%
% Copyright © 2020 by Boston Consulting Group. All rights reserved.
% % 60%
72%
81% 80%
16. Of the total value of trade finance transactions your bank received in 2019 (provided in the
reject/not support? Yes No
Figure 97
Note: 1.3% of respondents to this question did not include the location of their bank's headquarters bank in their responses and hence are only
Of thein the
included total value
total column of trade finance transactions your bank received in 2019, what percentage
above
did your bank reject/ not support? 94
100
62%
50
10% 10% 13%

5%
0%
0
0-10% 10-20% 20-30% 30-40% 40-50% 50%+

17. Of the rejected/not supported transaction applications, please rank the most common rea
in 2019
Figure 98
Of the rejected/ not supported transaction applications, please rank the most common
reasons that your bank did not support applications in 2019
Rejected because of KYC concerns 8% 35% 57%
Completely unsuitable for support.

4% 40% 56%
Transaction was not reasonable to process
Support might have been possible, but was not

6% 39% 56%
due to the low quality of the applications
Could have been financed

10% 42% 47%
with additional collateral
Could have been financed (risk was

16% 41% 43%
acceptable), but not profitable enough
Could have been supported,

19% 50% 31%
but unprofitable
18. In 2019 what Quality

was of the percentage
the banking proposal breakdown
31%
of trade
37%
finance 31%
applications and
wasrejections
poor and deemedper region1, client segment and transaction type?
unbankable
0% 50% 100%
Note: ‘Rejected because of KYC concerns’ – not that the (potential) client was suspicious,
Less common but that the Most
More common KYC regulatory
common
requirements were too costly and onerous
‘Could have been supported, but unprofitable’ –regulatory capital on trade finance made supporting the transaction
unprofitable
1. Rejected because of KYC concerns - not that the (potential) client was suspicious, but that the KYC regulatory requirem
2. Figure
Could have 99
been supported, but regulatory capital on trade finance made supporting the transaction unprofitable
In 2019 what was the percentage breakdown of trade finance applications and rejections per
region?
7%
North America
5%
Latin America 9%
and the Caribbean 12%
17%
Western Europe
12%
11%
Central and Eastern Europe
17%
19%
14%
Africa
10%
Middle East
12%
29%
Asia Pacific
22%
0% 15% 30%
Average %
As a % of total transaction application values

As a % of total rejected transaction values
Note: Region selected is where respondents' banks would have assumed the most risk in the transaction (in mo
located). 2020 ICC GLOBAL SURVEY ON TRADE FINANCE 99
to which MSMEs face a disproportionate Banks generally do not receive trade finance
challenge in accessing trade financing. support from government or other public
institutions to help provide financing to
Further, there is little variation in the rejection MSMEs (Figure 102). However, Asia Pacific
19. In 2019 what was the percentage breakdown
rate of various trade finance products relative of trade with
is an exception, finance
62% of respondents
applications and rejections per region1, client segment and transaction
to their share of overall applications (Figure indicating they receive some publictype?
support
101), although there are small spikes in for MSME financing. In light of this, it is
rejections for loans or advances against both interesting to note that Asia has the lowest
inventory and receivables. rejection rate of all regions relative to the
Figure 100
In 2019 what was the percentage breakdown of trade finance applications and rejections per
client segment?
Micro, small and 29%

medium-sized companies 36%
27%
Multinational and large corporate
21%
23%
Middle market/ mid-cap
22%
13%
Financial institutions
12%
6%
Other
20. In 2019 what was the percentage breakdown
7% of traditional trade finance applications and re
0% 20% 40%
Average %
Figure 101
In 2019 what was the percentage breakdown of traditional trade finance applications and
rejections per transaction type?
34%
Commercial letters of credit 33%
16%
Guarantees
14%
11%
Collections
10%
9%
Standby letters of credit
7%
7%
Receivables discounting
Note: Region selected is where respondents' banks
7% would have assumed the most risk in the transaction (in most
located). Loan or advance against inventory 5%
7%
3%
Factoring and its variations
4%
4%
Payables finance 4%
5%
Pre-shipment finance 3%
3%
Forfeiting
4%
Loan or advance 3%
against receivables 4%
Distributor finance 1%
2%
0% 20% 40%
Average %

values of their trade finance applications agencies providing important resources
(Figure 100). This may be due in part to theto help banks reduce unmet demand in
public support offered to MSME financing. the trade finance market (Figure 104). The
positive reception of these public-private
Unsurprisingly, respondents overwhelmingly partnerships is encouraging and evidence for
indicated that government support for MSME further public support to work with industries
42. Doesfinancing
your bank receive any type of support
would help close the trade finance
for MSME trade financing from the
to close the trade finance gap.
governmen
gap (Figure 103), even with multilateral
development banks and export credit
Figure 102
Does your bank receive any type of support for MSME trade financing from the government
or other public institutions?
%
100
62%
50 41% 45%
37% 40%
32% 34%
28% Yes
21% 24% 21%
14% No
Don’t know
0
Total Western Europe Asia Pacific Other
43. To what extent do you agree that government funding assistance/partnerships for MSMEs
finance?
Figure 103
To what extent do you agree that government funding assistance/ partnerships for MSMEs
would help in fulfilling demand for their trade finance?
%
40
28% 28%
23%
20
9% 9%
Note: 1.3% of respondents to this question did not include the location1%of their bank's headquarters bank in their r
column above0
Strongly agree Slightly agree Netural Slightly disagree Strongly disagree Don’t know

Indeed, amid the COVID-19 crisis, we expect at dampening the damaging effects of
both the need for MSME trade finance and COVID-19.
the scale of the trade finance gap to grow,
adding to the urgency of government support The digitisation of trade finance and
– both to keep businesses viable today, and technology solutions are seen as major
to help them recover in a more uncertain tools to help banks close the trade finance
future. The ICC has issued an urgent call gap. A significant challenge for trade banks
for decisive action to ‘Save Our SMEs’, and is serving MSMEs profitably. A small ticket
the Banking Commission has contributed letter of credit typically carries a fraction of
with a specific call for governments to the fees of a higher value corporate letter of
44. To what
keep extent do you
trade finance agree
in mind, that
as they multilateral
design credit,development
but often has the banks
same – ifand export
not higher – credit agenc
(unmet demand) for trade
support programs finance? aimed
and mechanisms operational cost given less publicly available
information for KYC, credit assessment,
Figure 104
To what extent do you agree that multilateral development banks and export credit agencies
help banks like yours to close market gaps (unmet demand) for trade finance?
%
45
31% 29%
30
24%
ositioning itself 15to maximise the potential to service more

8% MSMEs and close8%market gaps (unmet dem
0%
0
Strongly agree Slightly agree Neutral Slightly disagree Strongly disagree Don’t know
Figure 105
Is your bank positioning itself to maximise the potential to service more MSMEs and close
market gaps (unmet demand) through technology?
27%
Yes
% No
55% Don’t know
18%

and other due diligence or regulatory disproportionality indicated that they are
requirements.As result, digital trade with self-
not positioning themselves to do so. This is
service sales channels and straight-through-worrying because it is precisely these types
processing operations could open material of banks that could have the best reach into
opportunities. the MSME market. This is a further example
45. To what extent do you agree that technology will enhance
of how digital trade is notyour bank’s engagement
yet sufficiently with
Survey respondents are positioning widespread, and many of the local and
themselves to service more MSMEs, with regional banks that could serve these MSMEs
b 26.Jun.20: 55% using technology solutions to do so are behind the curve in its adoption.
EXAMPLE (Figures 105–106). Regional and local banks
Figure 106
To what extent do you agree that technology will enhance your bank’s engagement with
MSMEs in the following ways?
%
100
21%
39% 36% 35% Strongly agree
19% Somewhat agree

Neutral
50 17% 28% 32% Somewhat disagree
36%
24% Strongly disagree
17% 17%
5% 11% Don’t know
3% 11% 7%
12% 8% 9% 11%
0
Evolution of new Facilitate easier, Deepen the data Reduce the rejection
products for cheaper, and mapping of rate of funding
MSME exporters quicker KYC, AML MSMEs for better requests coming
and importers and compliance client profiling and from MSMEs
checks on MSMEs risk assessment

FEATURE
SMEs and the trade finance gap: it’s a data problem...

Catherine Nomura, President and Founder, Kountable
The lack of inclusion of SMEs in global trade reliable suppliers and investment-grade end
is often referenced by the SME trade finance payers.
gap, and much has been done to study and
try to improve access of SMEs to finance, What data is missing in trade involving SMEs?
especially loans, to try to address this gap.
Through Kountable’s five years of partnering 1. Who the best SMEs are. We need a
with SMEs in East Africa who struggle to reliable source of data on which SMEs
finance trade deals, it has become clear that can execute, not just pay bills. Execution
there is a much larger underlying problem, ability is different from and not always
one which also points the way to practical correlated with credit-worthiness. KYC
solutions if we address it head-on. Inclusion data and measures of execution ability are
shows up and is measured globally as a key risk-mitigating data points.
finance problem, but at its heart, it is a data
problem. 2. Who the end-payers are. KYCC (Know
Your Client’s Client) is also needed but is
The lack of digitisation of SME-involved often obscured by contract terms set up
trade, the lack of access to ERP (Enterprise in tendering processes that require goods
Resource Planning) capabilities and a system to be purchased onshore from SMEs who
of record capable of capturing the trading must first procure them abroad.
activities of sub-enterprise scale businesses,
makes trade involving SMEs more difficult 3. Is the trade transaction properly
to transact and fund on many fronts. constructed to mitigate predictable
Exclusion extends beyond finance to difficulty risks, like those associated with currency
accessing the best global suppliers and fluctuations, contract terms mismatches,
competitive pricing for trade services such as inspections, KYC/ KYCC related issues
insurance and logistics. for all parties to the trade, and vetting
and verification of contracts and key
Put simply, capital flows based on the documents?
assessment by its owners of risk and return.
4. Real-time project management data,
The completion of due diligence on trade including tracking of milestones and
transactions involving SMEs, and on SMEs financial flows comparable to what an ERP
themselves, has been notoriously difficult. system integrated with enterprise-grade
However, this failure to measure, this lack of accounting and treasury management
reliable data on which to assess the merits systems provides for larger entities.
of a trade, disguises the fact that much of
this business is very investible on commercial With reliable data on all these aspects of an
terms, especially with data not just for due SME-involved trade transaction, capital can
diligence, but also to manage projects to flow to this activity at scale because trustable
further mitigate execution and performance risk profiles can be built and monitored.
risk. On the flip side, failing to address the data
problems will hobble any attempt to solve
Lack of access to finance is one result of financial inclusion at scale. Unmitigated risk
this absence of data and affects even the will continue to lead to casualties that sink
best SMEs (with outstanding demonstrated programs. Guarantees can be part of the
execution capabilities) in the presence of solution but are not a substitute for de-risking
high-quality, enforceable contracts with transactions at an operational level through
better business practices, validation of data

integrity, transparency, and timely and secure Fortunately, the basic technological ability
data flows between the various stakeholders. to gather this data now exists through
smartphone proliferation and fairly
With regard to exclusion from quality widespread internet connectivity. The trade
supplier relationships, which we have seen activity that SMEs are involved in, properly
have national and even global implications recorded and supported through the use
in the face of the current pandemic and of currently available data collection and
governments’ reliance on SMEs to procure management systems and tools, makes for
medical products, data also helps. With data, an attractive investment option. It is usually
SME buying activities can be aggregated to short-duration, often supportive of the UN
increase purchasing power to competitive SDGs and ESG goals, high-margin, and offers
levels, influence policy and take advantage of tremendous diversity across geographies
economies of scale as the cost of servicing and sectors to fit the goals of a wide range
trades skyrockets. Their inclusion at this of investment objectives and mandates. If we
time is critical to the pandemic response can solve the data problem, there is every
of any country that tenders out healthcare reason to believe the market will respond
procurement. at scale to the financial opportunity that is
currently hidden.

FEATURE
How to increase the professionalisation of trade finance

Dominic Broom, Member, ICC Banking Commission Executive Committee;
Executive Consultant, The London Institute of Banking and Finance
Training and trust approach to trade finance. Outsourcing

At some point in the process of international was in full swing and supply chains were
trade, one of the parties involved will have to lengthening. With plenty of demand, banks
be trusted to handle someone else’s money. did not necessarily seek out, or train, as many
But who should be trusted? Even in open technical specialists as in the past. Instead,
account financing, making sure that the they outsourced many of their own functions
paperwork is correct and enforceable requires to third parties. Graduate recruits, too,
an objective and expert third party. focused on more high-profile jobs in banking.
That meant that, as trade finance bankers
It is not always easy for companies that who had been trained under the old system
export and import goods and materials started to retire, an expertise gap opened up.
to know which third party really brings Arguably, a trust gap also appeared.
objectivity and expertise to the table. And
companies are not the only stakeholders Then came the financial crisis and, as a trade
with an interest in ensuring honest, fair and finance gap opened up around the world,
efficient global trade. Governments, financial regulators started to look more closely at
regulators, investors and, increasingly, NGOs how banks were being run. What they saw
also pay close attention to how trade is was sobering. Today, they want to see solid
conducted. They want to reach a number of evidence of up-to-date professional standards
critical goals including: preventing money across the industry.
laundering and the financing of terrorism;
ensuring that business is carried out in a Those standards can be hard to meet.
fit and proper manner; boosting fair and In trade finance, in particular, there are
sustainable trade; and closing the trade technical rulebooks – the Uniform Customs
finance gap. Those are only a few important & Practice for Documentary Credits (UCP
goals from a much longer list. 600) and the Uniform Rules for Demand
Guarantees (URDG), agreed by the ICC – that
The banks engaged in trade finance have practitioners need to understand and apply in
a long-standing tradition of upholding the detail.
sector’s professional standards. They required
their staff to undertake ongoing training and Trade finance bankers also need sound
to sit rigorous exams that demonstrated their business judgement. They need to know
expertise. The Certificate for Documentary their customers, their customers’ customers,
Credit Specialists (CDCS) set by The London and to be able to gauge whether what is
Institute of Banking & Finance, for example, is being proposed makes ‘good honest sense’.
a globally recognised benchmark. Banks and That goes beyond having a level head and
their clients can be confident that someone personal integrity – important though they
who has passed the exam knows what they are. Trade is multipolar, so assessing trade
are doing. Qualifications like the CDCS were deals takes experience and expertise, a
part of the reason why banks were trusted knowledge of the world economy, and
over many decades to support and advise ongoing professional development.
firms in global trade.
The real costs
No more easy money What regulators want to see at trade finance
So, what’s the problem? Financial services banks is good governance, operational
firms were able to make a lot of money in the stability, environmental sustainability,
1990s and early 2000s with a ‘good enough’ and excellent compliance. None of those

are feasible over any period without What may help even more is the value
professionally trained staff. that younger employees place on access
to training and expert qualifications. They
Training staff, of course, comes with a cost, know that they need to demonstrate
which is why it has often been neglected. professional excellence and to constantly
However, loss of client trust, poor regulatory update their skills and knowledge. They know
compliance, increased regulatory oversight, that automation will transform banking.
and high staff turnover are ultimately Blockchain and smart contracts, for example,
even more expensive. Outsourcing certain are often cited as the future of trade finance.
functions is not the solution. Regulators
now want banks to be able to demonstrate It is certainly true that, over time, many
that their systems are fit for purpose and routine tasks in trade finance will be
sustainable. For most that means more trade automated – as they have been in other
finance professionals in-house. industries. However, what cannot be
automated is trust in expert support and
Staff are your business advice. Focusing on that will be imperative
Finding those professionals will not be easy in banking – particularly when net interest
in the short term. A generation of bankers margins are low.
largely turned its back on training for a career
in trade finance, despite the ever-growing Professionally trained staff will remain vital
need for trade and supply chain financing. to the bottom line for two main reasons.
That means expert advisors and mentors can One, regulators are much less intrusive
be thin on the ground, which has arguably when they know that a bank is carefully and
exacerbated the trade finance gap. However, appropriately staffed. That cuts compliance
specialist educators, like The London Institute costs. Two, and just as importantly, customers
of Banking & Finance and the ICC Academy appreciate access to trusted expertise. After
in Singapore, can help. Their qualifications all, people will shop around if they are buying
are recognised industry benchmarks and a commodity product like broadband access.
their staff and examiners are all longstanding They quibble about the bill much less if they
industry practitioners. Both offer online are having their kidney taken out. All they
qualifications and classroom-based training really want to know then is that they are
programmes that support banks and their going to be alright.
employees with flexible ways of studying.

FEATURE
Successors in Trade: “Is it time to isolate or time to reach out?”
The Successors in Trade (SIT) programme The Outreach Initiative is guided and
was established by the Executive Committee mentored by a panel of experienced trade
of the ICC Banking Commission following finance professionals, who are either
a recommendation by Mr. Ruediger Geis of members of the ICC Banking Commission
Commerzbank in Frankfurt, a long-serving Executive Committee or the Advisory Board.
member of the ExCo. The Program was They include Dr. Rudolf Putz of the EBRD, Mr.
launched in 2018 as a strategic programme Vincent O’Brien of the Executive Committee,
to identify and develop the next generation Ms. Ana Kavtaradze from Bank of Georgia,
of specialists to support trade finance and and Mr. Huny Garg from SWIFT.
SCF practitioners.
In this section, SIT team members currently
An exciting sub-stream of the SIT programme active in the Outreach Initiative share their
is the Outreach Initiative. Young, talented experiences and insights and how they can
trade finance professionals are challenged to bring new members from new countries
devise and implement strategies to attract a into the ICC Banking Commission and the
new wave of trade professionals as members ICC itself.
of the ICC Banking Commission and to
reach into countries where the ICC Banking The team is composed of Ms. Irina Chuvakhina
Commission is not represented or connected. (Priorbank Belarus), Ms. Innesa Amirbekyan
(ID Bank Armenia), Ms. Antonija Koceva
. (Komercijalna Banka, North Macedonia), and
Mr. Samuel Ansah (Ecobank, Africa).

Ms. Irina Chuvakhina, Priorbank, Belarus
Like many trade finance professionals around trade finance club evolved into a more formal
the world, I experience ICC every single day association, we could join as direct members
of my working life as so many trade banking of ICC.
transactions are based on the application of
ICC rules. However, the possibility of playing With this progress in hand, we had a
a part within the ICC Banking Commission delegation of five trade finance professionals
would not be something that I would have in attendance at the ICC Banking Commission
considered a real possibility. But with the Meeting in Tbilisi, Georgia in October 2018.
support of my bank and the EBRD Trade
Facilitation Programme (TFP), I was invited I am pleased to advise that with the guidance
to participate as a guest at the ICC Banking of our mentors, the key steps have already
Commission Meeting in Jakarta, Indonesia in been taken to form the Trade Finance
April 2017. My participation was a small but Association of Belarus with direct membership
historic step; this was the first time that a in ICC. A well-attended meeting of trade
trade finance professional from Belarus was finance professionals from commercial
included as a delegate in the history of the ICC banks and the National Bank of the Republic
Banking Commission. of Belarus endorsed this approach on 18
February 2020 in Minsk, Belarus.
This amazing event and my knowledge about
the keen interest of my colleagues from It is fair to say that COVID-19 has slowed
other Belarusian banks in ICC activity whet our advance but it will not stop us moving
my appetite for the engagement. I returned forward, and I hope that we will join the ICC
home to Belarus inspired to do something to family sooner or later and our delegation will
help trade finance professionals contribute to attend the Dubai meeting in Spring 2021 as an
and benefit from participating in ICC Banking ICC member.
Commission.
Unfortunately, there was no immediate path to

help the trade finance professionals in Belarus
engage with ICC. We had the idea to establish
an informal Trade Finance Club in Belarus
among the participants of EBRD TFP, and
with the assistance of one of our mentors, it
was agreed with ICC Paris that if this informal

Ms. Inessa Amirbekyan, ID Bank, Armeni
The SIT Outreach Initiative has empowered This situation creates a barrier for the
me to do what I have always wanted: to younger and keenly interested trade finance
build a local and international network of professionals in Armenia to engage with
trade finance professionals so that Armenia ICC. However, this challenge was turned
can prosper in international trade. For me, into an opportunity and a step towards full
having good relations with other technically membership for young trade professionals
competent trade finance professionals makes as I established the first Trade Finance
business easier and a lot more rewarding. Club in Armenia. We recently held our first
oversubscribed meeting in Yerevan, Armenia
ICC Armenia was formed in June 2018 at the offices of ICC Armenia.
and our Banking Commission took its first
steps in October 2018. In fact, I was the Given our love of trade finance I felt it
first formal representative of ICC Banking appropriate to hold the meeting on 14
Commission Armenia to join Banking February 2020. This ‘Valentine’s Day’
Commission Meetings, with the first one meeting was very successful and led to a
in Tbilisi in October 2018, followed by the delegation being formed to attend the April
Annual Meeting in Beijing in 2019, and finally 2020 meeting in Dubai. While the Dubai
the Paris meeting in October 2019. I was all meeting may now be temporarily postponed,
set and registered to participate fully at the our activity locally and with the other SIT
Dubai meeting in April 2020 with a young team members continues by digital means.
delegation from Armenia, but COVID-19 put I can honestly say that being part of the
an end to that. This was a disappointment SIT outreach team provides a tremendous
as the Dubai meeting had an amazing opportunity to make positive change and we
agenda and the theme reflected what the SIT have already come up with a range of
Outreach Initiative is all about: Connecting new ideas.
the Trade World – shaping the future!
Trade finance professionals in Armenia, as
The challenge in Armenia is probably typical in many countries in the region, are familiar
of the challenges facing the ICC Banking with working with the development banks
Commission all over the world in bringing such as the EBRD, IFC, and the ADB. These
in young talent. Without a doubt there development banks are partners of ICC in
are lots of interested young trade finance Market Intelligence and in many other areas
professionals wishing to interact with and of trade development and facilitation. These
be part of the ICC Banking Commission. multilateral development banks can provide
However, decisions for membership are a bridge to bring in new young talent to the
generally made by senior executives who ICC Banking Commission, and this is one core
are not familiar with the workings of the ICC area of activity on which we intend to focus.
Banking Commission and, in many instances,
not familiar with the work of the ICC itself.

Mr. Samuel Ansah, Ecobank, Africa
Given that I am a trade finance professional this is the time to think outside the box. My
working at Ecobank, and responsible for recommendation is simple but effective.
smooth operations and trade technology When there is no ICC National Committee
across 32 countries, I have a keen interest in within a country, trade finance professionals
the integration of a new wave of tech-savvy should be able to join through the multilateral
trade finance professionals into the important development banks that have been working
work for trade development of the ICC in partnership with the ICC for many years.
Banking Commission. Should an ICC National Committee be
established in a particular country, the
However, based on my initial research, the membership would revert back through the
catchy slogan of the ICC, “We make business more natural channel of the typical local ICC
work for everyone, every day, everywhere”, National Committee route.
may not yet be an accurate reflection of the
reality on the ground in Africa. Just think about what can be achieved if we
integrate young trade talent from the African
However, with the support of my Outreach continent into the ICC Banking Commission.
Initiative team members and mentors I The raw numbers speak for themselves.
intend to change that. Given that Africa is
a continent of 54 countries, all eager for AfCFTA can create a market with GDP of USD
trade expansion, the fact that there are 2.5 trillion and a population of over 1 billion,
fewer than 10 ICC National Committees on 60% of whom are below the age of 25. Surely,
the continent is considered by some to be a these figures in themselves are a call to action
major disappointment. However, I see it as a for the ICC Banking Commission and our SIT
great opportunity for the outreach team and outreach team.
the ICC itself.
I have not yet had the honour of attending
The time to act is now. In March 2019, African an ICC Banking Commission Meeting like my
leaders took a major step forward and now other SIT outreach team members, although
all 54 African nations signed the African I was all set with flights booked for Dubai
Continental Free Trade Area (AfCFTA), the 2020. However, it is always good to see and
biggest trade agreement signed since the hear my team members in the virtual world,
World Trade Organization was established. which is now becoming our norm and it is
working well.
With the AfCTFA in place, this challenge has
become an opportunity for the SIT outreach
team, and even amid the COVID-19 pandemic

Ms. Antonija Koceva, Komercijalna Bank, North Macedonia
The leading trade finance banks in North within the trade finance community in North
Macedonia are members of the EBRD’s TFP. Macedonia.
Many of these banks have won international
recognition for their services by international Thankfully the EBRD TFP took the initiative
financial institutions and many of the trade of agreeing to host a trade finance training
finance professionals themselves have and information event in our capital city
achieved exceptional results under the Skopje on 17 March 2020. I am glad to advise
electronic learning programme of the EBRD. I that this event was highly successful with the
have also graduated and hold my EBRD trade participation of commercial banks, the central
finance certificates with pride. bank, and a highlight being a presentation by
ICC North Macedonia on the benefits of being
In North Macedonia there is an ICC National part of ICC.
Committee but until now there has been
no active Banking Commission within its The Dubai meeting being postponed was a
framework. Recently there has been tangible major disappointment for my SIT outreach
progress in forming this commission and we team members and me, and the COVID-19
are looking forward to the launch and active lockdown and distancing temporarily derailed
participation of the highly motivated trade our momentum in the SIT programme and the
finance professionals in North Macedonia. Outreach Initiative.
By being part of the SIT Outreach Initiative However, we are now re-energised, re-
and actively participating at ICC Banking focused and making maximum use of
Commission Meetings in Beijing and Paris, videoconferencing and other communications
I have learned about the essential activities technology to achieve our objectives.
of the ICC Banking Commission. I have been
inspired to mobilise local trade finance talents The next substantive step of the SIT Outreach
for an active ICC Banking Commission in North Initiative will be to host an Outreach Initiative
Macedonia. Webinar with participation of the respective
ICC National Committees and the soon-to-be-
Through special arrangements facilitated formed Trade Finance Association of Belarus.
by our mentors and the ICC UAE I had
put together a small but highly interested With our dynamic mindset and drive to be
delegation to attend the Dubai 2020 meeting. real Successors in Trade we will take every
With the Dubai meeting postponed, I urgently opportunity to turn the challenges of evolving
needed an event to maintain the momentum global isolation into a reality of a dynamic
and interest in the ICC Banking Commission and inclusive ICC Banking Commission global
outreach initiative

The mentors for the SIT Outreach Initiative commend the team for
their commitment and innovation in the pursuit of their team objectives and believe these
young trade finance professionals are showing the way forward for the expansion of the
important work of the ICC Banking Commission.
Successors in Trade Final Successors in Trade Outreach Initiative

Outreach Initiative Team before COVID-19
Ms. Irina Chuvakhina, Priorbank Belarus On 17 March 2020, the Successors in Trade Outreach
Ms. Ana Kavtaradze, Bank of Georgia Initiative with the support of the EBRD held an educational
Ms. Innesa Amirbekyan, ID Bank Armenia and informational event in Skopje, North Macedonia where
Ms. Antonija Koceva, Komercijalna Banka ICC presented the benefits of ICC membership.
Vincent O’Brien, ICC Banking Commission

FEATURE
Mind the gap: why we need to think about small exporters

Dr. Rebecca Harding, CEO, Coriolis Technologies
The World Trade Organization’s latest outlook Because I am looking to have an invoice
for global trade makes grim reading. The financed rather than a loan, I may fall outside
COVID-19 pandemic could cause a drop many of the support structures currently on
in world trade of between 13% and 32% in offer globally.
2020; this largely mirrors BCG’s own analysis
presented earlier in this report. The trade So, is the solution a digital one? The sector
community has been watching inventory has been talking about the need for big data
stock plummet since February, and while and artificial intelligence to create compliance
at the outset of the crisis this was simply a and onboarding solutions; blockchain is
supply chain disruption, the complete global regarded as one of the most effective ways of
lockdown of our daily lives has caused a drop moving from manual trade finance processes
in global demand for goods and services like to secure digital transactions. As a result,
no other in recent memory. Even the IMF, there are many fintech solutions out there in
which has been one of the more optimistic the market that have sought to digitise trade
global forecasters over the last decade, is finance from the supply side. They streamline
predicting a drop in global growth of up to 3%. transactions and payments securely and
generally save banks time and money, making
Within all this mayhem, spare a thought for them more efficient and effective.
the smaller businesses that form part of the
global supply chains that define the way in The COVID-19 pandemic has revealed the
which global trade works. These businesses importance of the demand side – in other
are at the end of the supply chains and reliant words, the need for trade finance among
on payment of invoices for their finance. a group of very small businesses who are
They may well have contracts to supply currently excluded from existing, largely
goods or services to players further along the corporate, solutions. The legacy of the
chain, but if the whole trade system grinds global financial crisis was to push trade
to a halt, then these invoices are not paid, finance providers away from these smaller
and the contracts are not honoured – very companies because, in an environment where
simply because the goods at the end are not unorthodox monetary policy was keeping
delivered to the client. yields low, the due diligence and onboarding
costs relative to deal size for the smallest
Here is the problem: if I am a small businesses were simply unsustainable. Many
exporting business with a turnover below, of the digital solutions that have evolved
say, GBP 5 million, then I probably do not since then have either directly or indirectly
know about export credit agencies, and I sought to close the SME trade finance gap by
almost certainly fall outside of the banks’ offering quicker onboarding and compliance
commercial banking reach. I therefore rely on tools to banks so that they can provide
the contracts I have and the swift payment money to these businesses more readily.
of invoices to fund my business through
cashflow. Even if I am supplying an essential There is limited evidence that digital solutions
good or service, I will find it difficult to access are substantially closing the gap, however,
support schemes because I am too small and and COVID-19 is likely to widen it again. This
reliant on my invoices, not working capital is because these solutions do not address
loans or turnover. If the invoices against the demand side. That is, many of the SMEs,
a contract stop being paid because the according to the OECD , are micro businesses
goods at the end of the chain aren’t being that contribute to value added trade – that is,
delivered or even demanded any more, then to critical value-adding parts of supply chains.
my business runs out of cash very quickly. So, while these businesses may be tiny, they

add to global trade in terms of innovation and marketplace solutions that are beginning
supplying a very specific part of the supply to emerge, but the urgent pressure now
chain, but do not necessarily even know that is for the SMEs themselves to understand
trade finance solutions are available to them. that trade finance is a viable solution in the
current global lockdown if they have invoices
The technology challenge for the sector that or contracts. Rather than a supply-side digital
emerges from this crisis is to develop digital marketplace, this is a demand-led Open Trade
technologies that are almost akin to trade Finance solution – much as Open Banking
finance marketplaces – where demand and has been in the retail sector. Unless this type
supply can meet securely and where the of solution can be found, the supply in the
SMEs drive the type of finance that they need market will always outstrip the demand.
with full transparency of how they appear to
the banks in terms of risk. There are indeed

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Boston Consulting Group (BCG) plays questions and challenges such as market
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BCG is a global management consulting firm insight, commercial, and technical industry
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private, public and not-for-profit sectors
in all regions to identify their highest-value Beyond the ICC Global Survey, BCG continues
opportunities, address their most critical to actively support the trade finance
challenges, and transform their enterprises. community with thought leadership, including
releasing a publication with SWIFT ahead
BCG’s expertise in the Financial Institutions of SIBOS last year: Digital Ecosystems in
sector spans all major topic areas to give Trade Finance. In addition, BCG once again
global, regional and local banks detailed supported the ICC and its editorial board in
insight, knowledge and analysis across co-authoring the 2019 ICC Trade Register.
markets. Trade finance is an established and
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and Transaction Banking practices. BCG company with more than 90 offices in
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finance-related projects globally on industry visit bcg.com.
TXF
We would also like to thank TXF for their For more information on the TXF’s data used
continued contributions, including a feature in in this feature, please contact:
this year’s report based on market sentiment Dr Tom Parkman, Head of Research; TXF
data collected from TXF Research’s global at tom.parkman@txfmedia.com
Export Finance Industry Report 2020, Alfonso Olivas, Head of Data; TXF Data
scheduled for release at TXF Global in 2020, at alfonso.olivas@txfmedia.com
and closed deal data from TXF Data. Along Sergio Lopez, Analyst; TXF
with TXF Essentials, the market leading at sergio.lopez@txfmedia.com
platform for in-depth news and stories in Max Thompson, Editor; TXF
the export, trade and commodity industries, at max.thompson@txfmedia.com
these three strands make up TXF Intelligence,
TXF’S new business intelligence platform For more information on TXF Intelligence,
please contact: Vanisha Meisuria, Senior
Business Development Manager; TXF
at vanisha.meisuria@txfmedia.com

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EXTENSIVE TRACK RECORD IN TRADE
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to financial institutions since 1899. We were
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and an Internet-based trade execution
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and reporting platform. BNY Mellon has
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capabilities in trade and transactional
Solutions for
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label offerings for financial institutions.
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SUPPORTING THE TRADE NEEDS OF BANKS
Staying competitive in today’s global trade
environment typically requires significant
Institutions
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constraints, BNY Mellon offers banks the
opportunity to leverage its global network,
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© 2020 The Bank of New York Mellon Corporation. All rights reserved. BNY Mellon is the corporate brand for The Bank of New York
Mellon Corporation. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial
Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London
branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority.
Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Products and
services referred to herein are provided by The Bank of New York Mellon Corporation and its subsidiaries. Content is provided for
informational purposes only and is not intended to provide authoritative financial, legal, regulatory or other professional advice.

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Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available on
request. © Deutsche Bank AG 2020

ICC BANKING
COMMISSION
The world’s essential rule-making
body for the banking industry
The International Chamber of Commerce Rules
The ICC Banking Commission produces universally accepted rules
(ICC) is the institutional representative and guidelines for international banking practice. ICC rules on
of more than 45 million companies in documentary credits, UCP 600, are the most successful privately
drafted rules for trade ever developed, serving as the basis of
over 100 countries. ICC’s core mission USD 2 trillion trade transactions a year.
is to make business work for everyone,
every day, everywhere. Through a unique Policymaking
The ICC Banking Commission is helping policymakers and
mix of advocacy, solutions and standard standard setters to translate their vision into concrete programs
setting, we promote international trade, and regulations to enhance business practices throughout the
world.
responsible business conduct and a
global approach to regulation, in addition Publications and market intelligence
to providing market-leading dispute Used by banking professionals and trade finance experts
worldwide, ICC Banking Commission publications and market
resolution services. Our members include intelligence are the industry’s most reputable and reliable sources
many of the world’s leading companies, of guidance to bankers and practitioners in a broad range of fields.
SMEs, business associations and local

Dispute resolution
chambers of commerce. The ICC Banking Commission and ICC International Centre for
Expertise administer the ICC Rules for Documentary Instruments
Dispute Resolution Expertise (DOCDEX) to facilitate the rapid
settlement of disputes arising in banking.
Education and certification

The ICC Academy is the world business organisation’s ground-
breaking e-learning platform. Its industry-relevant Global Trade
Certificate (GTC) provides an extensive overview of trade finance
products and techniques.
Specialised training and events

In addition to its bi-annual summit, gathering over 300
international delegates every six months, the ICC Banking
Commission organises regular seminars and conferences around
the world, in partnerships with ICC national committees and other
sponsors.
Strategic partnerships
Well-established collaboration with leading policymakers and
trade association, including WTO (World Trade Organization),
ADB (Asian Development Bank), Berne Union, EBRD (European
Bank for Reconstruction and Development), IDB (Inter-American
Development Bank), IFC (International Finance Corporation), IMF
(International Monetary Fund), SWIFT, the World Bank and others.
33-43 avenue du President Wilson, 75116 Paris, France

T +33 (0)1 49 53 28 28 E icc@iccwbo.org
iccwbo.org @iccwbo
GLOBAL RISKS IN trade finance 124

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ICC GUIDING DRIVING

BANKING INTERNATIONAL CHANGE IN

State of trade: tension, transition, and turning point 8

Introduction to the Global Survey 10

Key findings of the Global Survey and the COVID-19 Survey 12

Market Outlook on Trade Finance: COVID-19 and Beyond 15

Scenario analysis on the impact of COVID-19 on trade finance 22

The economic impact of COVID-19 on supply chains 25

SWIFT Trade Traffic: the year in review 39

TXF on Export Finance 50

Supply Chain Finance 57

Supply chain finance: evolution or implosion? 62

ICC: accelerating progress on sustainable trade finance 68

Regulation and Compliance 71

Regulations in a digital world 77

Stronger together: combatting trade-based money laundering 81

Combating money laundering: improving systems, enabling trade 83

Digital trade and COVID-19: maintaining the crisis-driven momentum 93

How to increase the professionalisation of trade finance 106

Successors in Trade: “Is it time to isolate or time to reach out?” 108

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 1

For more information please visit: iccwbo.org

Boston Consulting Group

Printed in July 2020

No part of this work may be reproduced, copied, distributed, transmitted,

Visit the ICC Banking Commission website:

2 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

Tailored cover, wherever

For further information please contact one of our team directly.

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 3

• Dominic Broom – ICC Banking Commission

4 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

John W.H. Denton AO,

6 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 7

8 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

Note: trade-weighted average for effectively applied tariffs.

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 9

bank headquartered? 42%

10 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 11

In summary, the two surveys have provided relate to consequences of regulation

What has ICC done...?

12 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

3. Supply chain finance • There is a clear desire, however, for more

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 13

• Industry stakeholders have reacted 7. Financial inclusion

14 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

2020 ICC GLOBAL SURVEY ON TRADE FINANCE 15

16 2020 ICC GLOBAL SURVEY ON TRADE FINANCE

Traditional trade finance 70% 16% 7% 8%

Emerging technology, digital trade and

Supply chain finance 53% 33% 10% 5%

New alliances between banks and fintechs 43% 35% 13% 9%

Organisational structural reform

Investments in cash management

Increase in geographic/ client coverage 32% 30% 12% 25%

Financing new sectors 26% 45% 12% 16%

Attraction of non-bank capital to create