ICC’s global survey on trade finance for 2017 shows boost for SCF and digital, pain elsewhere

News | 4 July 2017

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The ICC Banking Commission’s global survey on trade finance for 2017 contained in its report “Rethinking Trade & Finance 2017” paints a mixed picture for trade. The survey confirms the imbalance between global supply and demand for trade finance but shows the rise of digitisation and supply chain finance.

Now in its ninth year, the survey, which received 255 responses from banks in 98 countries, showed 61% of banks report more demand than supply for trade finance in the global market. That’s the same proportionate shortfall that was reported in the previous year’s survey. Only 21% see traditional trade finance showing growth in the future. Indeed, 57% of respondents believe traditional trade finance will remain relevant but have static growth while 22% think it will decline outright annually.

Unmet demand for trade finance is reported as US$1.6trn a year, the Asian Development Bank’s estimate, a figure now accepted by the UN General Assembly. The survey does not point to good news for the trade finance gap for SMEs and medium sized companies. Nearly half of banks (46%) identify multinational and large corporates as the highest priority client segment for their trade finance business. A focus on middle market clients and less than 20% identifying micro, small and medium sized enterprises (MSMEs) as their priority. John Danilovich, ICC Secretary General, said: “Results of the survey underscore the chronic shortfall of trade finance for small business – as recently recognised by the United Nations. Addressing the trade finance gap must be a central priority for the G20 to deliver on its commitment to support inclusive growth and enhanced job creation.”

On a more positive note for banks themselves, however, overall trade finance revenues are rising. Two thirds of survey respondents report that top line revenues for their trade business had remained static or increased. Separately, ICC partner Boston Consulting Group’s trade finance model (included in the report) predicts revenue growth of around 4.7% a year.

Potential for SCF and digital

Around 68% of respondents saw potential for SCF and digital technologies as having the greatest potential. Breaking that down, some 38% of survey respondents saw the greatest potential for growth and evolution in the financing of international trade as supply chain finance (SCF) while evolutionary technologies such as digital trade and online trade platforms were seen as the having the greatest potential by nearly 30% of respondents.

Indeed, half of respondents expect most of trade flow processes to be digitised in 10 years. The other half, however, expect that to take between 10-25 years.

Regulation the big drag

Regulation is a drag on trade finance business, the survey said. Around half of respondents saw the combination of compliance requirements and increasing regulation as the most likely aspect to adversely impact business in the short term. Meanwhile, increasing protectionism was seen as the most constraining by nearly 18%. Only 11% pointed to capital constraints as a matter of significant concern. A tiny 1.4% saw competition and disruption from fintechs and non-banks as a big threat.

Meanwhile, things are improving operationally in terms of trade. More than 57% of respondents report an improvement of their operational risk management and reduced error rates.

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