Fintech in trade finance: Important technologies to keep an eye on

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Fintech in trade finance: Important technologies to keep an eye on

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Fintech is quite a common term that is mostly used in a more generic sense, to describe any new financial products that are delivered through innovative technologies, from money transfer and e-payment services to the use of blockchain and bitcoin in complex transactions. In other words, fintech simply represents the delivery of any financial services through the use of software or other technologies.

When it comes to trade finance, however, fintech has quickly disrupted the entire sector. It allows banks, trading companies, and asset management firms to minimize the risk of fraud, avoid challenging regulatory pressures, and simplify the entire customer experience. To that end, here are some important technologies that enable this transformation to keep an eye on:

New IoT solutions

Internet of Things (IoT) solutions have been prominent in a number of industries for quite a while now, but they are slowly gaining traction in the world of trade finance as well, especially as businesses aim to improve their performances by utilizing quicker transfer of information. Companies around the globe are using connected solutions in an effort to track the movement of goods throughout the entire supply chain, promote more efficient communication, and collect reliable data that allows for improved decision-making.

And as the market continues to grow, we can expect the appearance and adoption of more sophisticated security solutions that will help to harvest enterprise data. Even commodity traders might begin exploring the possibility of implementing IoT solutions, as this will give them the opportunity to track updates of quality, inventory, shipments, and weather more efficiently.

Risk assessment options

Leading banks and asset management companies are now turning to risk assessment software that aims to identify non-compliance with legal requirements and prevent fraudulent activity. However, risk assessment also allows these organizations to increase their competitive edge and boost profitability, all while adhering to the necessary rules and requirements.

In most cases, this is achieved by crunching pieces of data from a number of different sources in order to get a better understanding of the repayment competencies and creditworthiness of borrowers, notice any warning signs early on, and predict the most likely outcomes. With the help of real-time data, any financial institution can accurately track their profits and losses in an effort to optimize their returns on investments.

Cross-border payment

The benefits of Trade finance solutions are well-known. From improving the cash flow and reducing payment risks to closing the working capital gap and accelerating business growth, this financing option is a great solution for any company needing to build and strengthen relationships with international and domestic suppliers. But a convenient line of credit might not always be enough.

For that reason, the best trade finance options will also incorporate the most attractive aspects of Fintech into their services. For instance, the most reputable companies offer cross-border payment platforms that make paying any invoice anytime and from anywhere an effortless process. As both the business and their suppliers can register on this secure online platform, adding funding, paying deposits, and submitting and tracking orders is now easier than ever.

Gateway solutions

As cross-border payments continue to rise in popularity, so will the need for more advanced gateway solutions. By coming at lower costs and offering reduced processing times, these technologies are currently allowing trade finance institutions to provide more convenience and benefit to their consumers.

The most sophisticated gateway solutions that provide the latest, most secure encryptions will likely push the gateway technology market into new directions. Nevertheless, application programming interface (API) gateways might still be the first choice for many financial institutions, as they allow for the automation of a number of different services as well.

High-frequency trading

High-frequency trading (HFT) technologies are able to improve execution speeds by approving any beneficial transactions automatically. As a tool, HFT can easily reduce costs for asset managers, banks, and investors, while providing more profitable prices for their customers as well. It seems like this aspect is driven mostly by the increase in independent worldwide hedge funds and trading firms.

But although the market is currently filled with trading companies utilizing HFT tactics, strict trading regulations and special new taxes have forced many firms to develop certain algorithms that aim to outbid their competitors. Due to these circumstances, HFT is only expected to become even smarter in the future, using the combination of price feeds and market data along with more unconventional sources such as sentiment, social media, and weather forecasts.

Matching technologies

With the increasing need for improved decision-making, eliminated human error, better data security, and minimized risks related to derivative trading, many businesses are now forced to opt for more refined matching technologies. This is arguably quite a revolutionary product when it comes to high-liquidity markets in which security, latency, and seamless scalability are all essential aspects of a business.

Matching technologies are slowly changing from manual to hybrid versions, where the built-in systems continuously measure possible outcomes and attempt to predict future behaviors. Solutions for identifying possible patterns in demand matching might also gain more popularity in the following years.

Fintech has evidently had a significant impact in the world of trade finance, with new and innovative technologies slowly revolutionizing common processes. It seems like this technological advancement will only serve to empower organizations through no data duplication, increased security, and shared digital ledgers that will help to streamline and enhance real-time processes.

 

Updated 12:41 PM UTC+8, 02 Jan 2022
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Keith Coppersmith
Keith Coppersmith
Contributor
 
Keith Coppersmith is a business and marketing expert who has experienced both the rise and fall of many businesses. As a regular contributor at BizzmarkBlog, he enjoys writing and providing insight of the marketing industry based on both practice and theory.
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