Enabling e-commerce rules to unblock trade and trade finance

Event report

Mr Michael Vrontamitis (Head of Trade, Europe and Americas, Standard Chartered Bank) spoke about a significant gap of USD$1.5 trillion between the need for, and availability of financing for international trade. This comes primarily from the rejection of financing by financial institutions for small and medium-sized enterprises (SMEs). A 10% increase in trade finance could raise employment by 1%; and to realise this, finance institutions need access to data to improve their learning models and employ new technologies; however, the world is stuck in paper. As stakeholders digitise their own piece of the supply chain, but fail to fix the connections between these pieces, it creates digital islands. As digitisation accelerates, the problem will exacerbate and fixing or improving the SMEs trade financing gap will become harder. Governments, financial companies, and bodies like the International Chamber of Commerce (ICC) need to work together to find a solution to digitising trade. 

Mr Sean Edwards (Head of Legal, Sumitomo Mitsui Banking Corporation) gave an overview of two important elements of digitalisation of trade: core trade enablers and trade finance enablers. Core trade enablers are sensitive, highly political questions that trade agreements have already started to address. These questions include issues regarding the removal of artificial obstacles to digitalisation, the equivalence of digital data and manuscript writing, paperless trading, and the legality of digital identities. Edwards then gave an overview of trade finance enablers, which include issues of transport documentation, payment obligations, origin, and transmissibility in a digital context. 

Ms Michelle Chivunga (Senior Regional Advisor [Africa], British Blockchain Association) spoke about blockchain as a tool for SMEs to access finances, information, data, and support. Blockchain enables SMEs to transact business without third-party interactions, providing a digital platform for SMEs to interact in a peer-to-peer, trustful manner. Blockchain enables inclusivity in the financial system, which is crucial for developing markets and countries and for providing access to new markets. Banks are not necessarily in the best position to finance SMEs, but they can refer them to new and emerging sources of financing, including digital money and cryptocurrencies. Blockchain reduces time and cost in trading and exporting, which is important for SMEs.Chivunga also stated that regulating these alternative sources of financing should be explored, but cautioned that regulation should not be a hindrance to innovation.

Ms Merisa Lee Gimpel (Director, Head of Trade Innovation, Global Transaction, Lloyds Bank) highlighted the work of regional and world initiatives that find solutions for issues in digitalising trade; these initiatives include Voltron, ComGo, and we.trade. She underlined that documents and interactions must be digitalised as much as possible to increase effectiveness. Lee Gimpel also drew attention to the possibility of generating digitally native information, stating that FinTech is exploring how the originality of such information can be guaranteed. However, the right framework for digitalisation of trade must be found, otherwise trade will revert to the use of paper, because paper generates trust.