Automation Revamping the Indian Trade Finance Market

Trade finance is an integral component of the exports and imports segment of businesses. It encompasses the process of the introduction of third-party solutions providers to make the transactions so as to eliminate the payment and supply risks. As per NSIT, in the present times, 80-90 per cent of global trade heavily relies on trade finance. It is estimated that every second an exchange of goods or services is happening on trade finance at the global level. As far as the Indian trade market is concerned, the merchandise exports from the country supposedly hit a record of $35.2 billion in July 2021. This is the highest monthly figure in the country’s history ever!

The challenges faced due to manual management of operations in trade investment

The trade finance business process has four stages before the transaction closes completely and relies on banks for the same. The bank receives the documents including application forms, exchange bills, transport documents, insurance documents, purchase orders, debit/credit notes, etc. It then scans and analyzes these documents and stores them in its process infrastructure. Every activity throughout this process is being done manually so far!

The trade finance process presently faces various challenges ranging from being a labor-intensive procedure, highly dependent on paperwork, time-consuming and error-prone process to lack of standardization and fragmented information. It also experiences various roadblocks pertaining to regulatory and compliance policies as well as is under huge operational risks due to the manual screening process by banks.

Automation: The feasible solution for the sector

Even the businesses specifically the Indian export houses and SME’s have been fed up with paper-based, TAT less, and zero customer visibility banking behavior ever since the pandemic came into the picture! But they are now looking out for digitization and bank support for business expansion and management. Since banks have a major role to play in the complete corporate and SME trade finance lifecycle management, they are keen to undergo digital transformations as well.

There are many solutions available that are digitizing not only the front end of the banks but are also offering blockchain-based networking solutions for automating the trade finance process.

The tech-based automated solutions offering intuitive and intelligent workflow exclusively designed for the sector are gaining popularity as the ideal solution to resolve the challenges faced in the trade finance procedure. They enable a centralized and decentralized functioning of banks along with fostering a fully automated platform and offering flexibility in regulatory reporting. When automated, every aspect of the trade finance transactions happens online in the web-based interface. These solutions also provide a customer trade portal with internet banking integration. Their technology stack is scalable and possesses the capability to support a portfolio of trade finance products.

How is it transforming the trade finance sector?

The automation trade platform is one of the most important operational tools. One can opt for the basic trade platform for document processing or an advanced platform that seamlessly integrates with all trade applications such as AML check, OFAC screening, vessel tracking systems, treasury systems and most importantly Core-Banking System. The advanced automation platforms of today are capable of handling various systems by means of API (Application Programming Interfaces), scheduling automated tasks, sending timely alerts and notifications, and even automated reports.

The automation is primarily used to monitor and manage requests in real-time based on various business rules, priorities and exception scenarios. It helps in faster TAT (Turn-Around-Time) to customers, improvement in SLA (Service License Agreements) and also provides faster ROI (Return on Investment).

RPA helps simplify and ease out the trade finance workflow by automating manual, intensive, and repetitive tasks. It enables using intelligent OCR to digitize and upturn unstructured documents into readily available data sources. Application of AI and ML along with natural language processing rules helps seamlessly conduct documentation checks. These new-age tech solutions can also be leveraged to run compliance checks on name screening for instance.

The automation of the process is not to cut down on the processors (operations team), rather it needs to be looked at as a solution that would enable the processors with providing information in real-time. It helps by removing the fatigue and stress involved in doing repetitive tasks with more efficient processing, thereby, improving productivity. The banks can look at doing more business with existing strengths.

Automation is all about allowing systems to do best what they are good at and empowering processors with decision-making information in real-time. It is also a cost-effective solution that helps reduce regulatory and compliance risks. It enables swift application and verification of compliance documents via the assistance of an NLP-based entity. It renders a helping hand in the validation and screening of entities for automated compliance checks and risks as well.

The trade finance-based automation solutions also help in managing the complete customer trade transaction life cycle right from the initiation to the regulatory submission as well as certification stages.

Summing up

The trade finance automation tools come with 360-degree integration capability that allows them to seamlessly collaborate with multiple systems. They can be implemented across banks for various stages, be it for innovative functionalities, new compliances, or quick integrations with financial partners.

To be an industry leader, banks should embrace automation to switch their trade finance operations to auto-pilot.  It will soon be the only way to remain competitive in this growing but challenging business.

Authored by: Manish Bharucha, CEO, Kyzer Software