Digitalisation and Data Are Changing the Trade Finance Landscape

The banking sector is seeing a push towards digitalising trade finance. This is driven by the need to reduce the high costs of accessing trade finance and to simplify access for companies of all sizes. Many different players in the ecosystem are trying to make things quicker, more efficient and cheaper for banks and businesses.

Banks play a crucial role in driving the digital transformation of trade by providing financial services, risk management and technology solutions to enhance the efficiency and reliability of digital trade processes. This includes digital payments and transactions, where banks facilitate secure digital payments and enable businesses to engage in online trade seamlessly.

Increasing access to trade finance is a critical focus area for Absa. The potential to unlock significant economic activity at relatively low risk makes it a core pillar of the bank’s strategy.

Therefore, we are actively focused on enhancing our digital capability and are partnering with development finance institutions (DFIs) and fintechs to increase the level of financing and liquidity available. We continue to enhance our digital and data capabilities using a combination of technologies to realise our ambition around digital trade.

Using a mix of advanced technologies and innovative solutions is important for transforming trade processes into seamless, transparent and efficient digital systems. Absa’s approach to digitalisation is multi-faceted. We use a combination of technologies to digitise Trade Finance, driving growth and efficiencies through Optical Character Recognition (OCR), blockchain and artificial intelligence (AI) capabilities, supplemented by collaboration with selected fintechs, who provide us with access to new markets or products.

OCR automates document processing for Letters of Credit (LoCs) and associated documents, such as bills of lading and invoices. This reduces manual effort, speeds up processing time and minimises errors associated with manual data entry and document handling. It also ensures enhanced accuracy, as automated document verification and data extraction reduce the likelihood of errors. By accurately capturing and verifying data, the technology minimises the risk of mistakes that can lead to disputes or delays. Additionally, it allows for enhanced risk management by automating compliance checks and data validation, identifying potential risks and issues early in the process.

Absa has deployed this technology across multiple markets, thereby reducing the time it takes to check export LoC documentation by more than half and identifying duplicate invoices for trade loans. We are also in the process of automating trade-based money laundering checks through a combination of OCR and AI.

As a result of digitalisation, the quality and quantity of information has increased significantly in recent years. This has greatly improved our ability to gather, analyse and utilise trade data to benefit our clients. Big data management is enabling advanced analytics and enhanced risk management, while automating processes for scalability and flexibility and providing better reporting.

Absa utilises data to better manage risk and to make better business decisions, including proactively identifying early indicators of financial distress through the use of predictive models. We leverage various data sources to assess trade flows and corridors, particularly considering the shifts driven by the current geopolitical landscape. Furthermore, data analysis assists us in identifying potentially fraudulent activities, such as duplicate invoice discounting, thereby enabling us to mitigate associated risks.

As new trade corridors emerge in Africa and around the world, trade data is enabling the careful monitoring and identification of trends and opportunities. A variety of data sources provide insight into global trade flows and offer valuable information about how these flows and corridors are changing over time. Data is essential for identifying new trade routes by giving us insights into shifting import and export flows.

Those data sources are used to help the bank comprehend the different flows and opportunities related to global and African trade – and they include sources that offer a view of volumes and values of specific types of product flows, including LoCs, guarantees and collections. They provide us with insight into how the use of these instruments is changing and which markets have the highest volumes and values. We also use a supply chain intelligence platform that provides us with insights into global trade from both an opportunity and a risk perspective.

The digitalisation of trade finance is transforming the landscape, making it more accessible, efficient and secure. As trade continues to evolve globally and in Africa, Absa remains committed to being at the forefront of this transformation.