When trade meets tech…
Over the course of this blog series I will try to share reflections and trends at the intersection of technology, economics, global trade and supply chains, trade finance, and other related topics.
In this first post I share my vision and ideal regarding the future of global trade and everything in between. as well as the reason why I joined AREA42, the first Trade Innovation Ecosystem.
2019 has been the beginning of a super exciting journey; an innovation journey.
During my journey from the university lecture halls of Paris and Nantes to the Singaporean high rise where I started my first banking job, one thing always fascinated me: trade. Specifically, how people interact as they exchange goods locally and globally. How trade impacts cultures and connects people. How we can export, transport or transfer goods, services and technology from one side of the planet to another.
Over the last centuries these goods, services and technology have changed, evolved and transformed whereas the flow, the logistics and the services around trade — transport, paperwork, financing and insuring — have not changed much…
As an export finance banker and a credit insurer who cut his teeth in Singapore, Jakarta, Paris and London, I have probably offered similar products and carried out my job in a similar way to how my peers have for the past few decades. However, as a consumer with the most advanced digital solutions in my pocket, I have already outpaced these services many times over.
The reason for such a gap is the high complexity of the global B2B trade and supply chain. Think about it; a single transaction involves loads of players from suppliers to importers, freight forwarders to customs, financiers to brokers and insurers, and other such stakeholders, all acting on different accounting, payment and legal systems. Ultimately, a lot of the challenges surface around data and the exchanging of it.
Despite these challenges, the digitalisation of the B2B trade and supply chain managed to launch a few years ago with SAAS accounting and invoicing solutions. Inspired by the success of Amazon in the B2C world, platforms emerged in the B2B world with the ambition to cut intermediaries, and to connect providers of goods and services with buyers. Loads of fintech have taken this approach, connecting liquidity providers and corporates, often SMEs who were not well served by banks and also facilitating the access to data and making transaction and processes more transparent.
Machine learning, artificial intelligence and blockchain — distributed ledger technology in particular — represent an opportunity to further digitalise trade, but it’s anything but straightforward…
First, there is the difficult access to data in the B2B context. To develop any relevant artificial intelligence model and/or risk underwriting model, you need to feed the beast with a tremendous amount of data which are, in most countries, only publicly available for listed companies. Only banks will have access to the data related to the non-listed companies that they cover. The huge cost of obtaining, updating and certifying such information made them focus on highly profitable clients, neglecting SMEs and resulting in the sadly famous 1.5 trillion trade finance gap.
Secondly, distributed ledgers could open the doors to a new digital global trade world. It could allow fully automated and secured multi-party trade transactions, exchange digital trade data and assets, peer-to-peer and in real-time! But this ideal has a cost — a financial one and also a philosophical one. A joint will to replace closed, disconnected systems and give rise to a smarter, more connected, more secured and more inclusive trade ecosystem. This could help financial institutions, businesses, service providers and all others involved in global trade dramatically cuts costs, eliminate friction, reduce risk, drive revenue streams and enable new ways of doing business.
Finally the combination of the above as well as the development of new technologies such as the internet of things (IOT) should bring new opportunities for businesses to create and capture value. B2B digital platforms will enable partnerships across vast ecosystems that will redefine industries and create new business models. These platforms promise more inclusive and diverse outcomes, while boosting market access and fostering innovation among participants.
Between the trade world I described at the beginning of this article and the aforementioned ideally fully digital world, there is an amazing innovation playground. My view is that such innovations will only happen in a collaborative manner. It’s in that context that I got involved in AREA42, the trade innovation ecosystem. This year I will focus more on ideation and co-creation to build AREA42’s Innovation Lab. Please get in touch if you want to re-code trade with us!
This is my first blog post ever, please let me know your thoughts, all constructive critics welcome!
Florent Bardy
