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Where are we going with trade finance?

At the Association of Corporate Treasurers Working Capital Conference on 4 December 2019 an excellent talk by Maurice Benisty, Chief Commercial Officer, Demica on Global working capital trends contained a useful insight into the dynamics and future of the trade finance market.

Market size and dynamics

The International Chamber of Commerce estimates that there was a trade finance gap, i.e. unserved need, of $1.5trillion at the end of 2018. No wonder ICC found that payables finance (SCF) is one of the fastest-growing areas of trade finance growing at 20% YoY.

Other key statistics included that:

  • the growth in open account financing continues to exceed the growth in overall trade
  • 13 banks currently provide about 90% of trade finance 

But the market is changing rapidly as new solution providers and new funders enter this booming market.

Current working capital finance market

Demica’s market analysis suggests that the working capital finance market can be segmented into six categories with the main players, as the figure below shows:

Source & Copyright©2019 – Demica

Note that the chart shows how there is a growing list of non-bank funders now active in the market as well as the traditional trade banks.

New technologies and platforms are coming

Benisty explained how new trade finance platforms employing the latest technologies are now being built incorporating:

  • Blockchain; accelerating reconciliation
  • Robotics Process Automation; improving accuracy and efficiency
  • Machine Learning; managing risk and calculating advance rates 
  • Cloud Platforms; enable flexibility and resilience

Demica believes that today’s corporate treasurer wants/needs a multi-product offering delivered through a state-of-the-art SaaS platform that brings everything together as shown below:

Source & Copyright©2019 – Demica

Demica is building such a platform, see below:

Source & Copyright©2019 - Demica

Demica believe that their new platform, which will be available in 2020, will provide corporate treasurers with a consolidated view of their working capital position and the ability to connect with  a wide range of trade banks and institutional investors. 

CTMfile take: This important presentation showed Demica’s vision of the future of trade finance in which corporate treasurers will be able to use any of the different trade finance products and techniques where appropriate, and also be able to use any type of funder(s) worldwide.

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