Trust and security: New tools of the trade

The internet has changed how trade business is being conducted. And central to the internet are issues of trust and security. Daniel Boccara President and CEO of Coface North America considers how businesses are meeting such challenges.

International trade changes. But what about international trade products? Whatever its size and shape conducting business will never be the same again. The development of the internet has created a new set of standards specifically with the establishment of internet protocol internet browser look and feel and so on.

Is the web to blame?

Most of these institutions are involved in re-engineering basic business functions introducing internet-based services with the aim to deliver value-added service at lowered costs. Is the internet responsible for this or is our industry naturally undergoing due changes?

Letters of credit and intermediation have always been valuable tools for companies specifically exporters as well as a recurrent source of income for banks. Thanks to generations of investment in technology and telecommunication these processes have dramatically improved while document management has quickened.

Competition is increasing. Everyday trade products are designed around the world that would have been unimaginable 20 years ago. So according to today’s business models what tools do companies need today to grow gain market share and improve productivity? The global economy will take no prisoners.

The basis of trade is confidence and trust. Traditionally when marketing its offerings a company faces these challenges among those are:

Identifying potential business counterparts both suppliers and customers.
Negotiating deals and agreeing on the terms of trade transactions.
Searching for financing.
Delivery of products or services in good faith that business counterparts will make good on their financial commitments.

Certain information service companies such as Kompass or Veritas provide a cost-effective access to trade databases helping companies precisely identify manufacturers distributors and wholesalers very specific products. Once a trade counterpart is engaged and negotiation is closed the seller still faces trust issues.

But money can’t buy you trust. The possibility of offering open account terms compared to a letter of credit has been viewed as a competitive hedge by companies seeking to enter new markets. Credit insurers have been instrumental in allowing companies specifically those trading in emerging markets to conquer them. It is also interesting that sellers need to inspire confidence. This company is offering a product that is critical to my production process but will it still be here in three months time? Can it handle the volume of my orders? How can I be assured of these things?

In the new era of e-procurement e-supply and so on time is of the essence. The world is one click away: a credit manager needs to identify a buyer anywhere in the world assess its creditworthiness gain confidence and possibly inspire confidence in just a few clicks of the mouse.

To match these drastic requirements information service companies have tried to manifest solutions related to identification. Credit insurers have tried to extend their traditional approach online with a few new developments taking place last year. The most interesting initiative today in this arena is the @rating family of products launched by Coface.

Coface backs its ratings with trade-credit coverage making it the first protectable rating in the marketplace. Via @rating Coface becomes a convenient one-stop-shop for both buyers and sellers.

B2B market exchanges for example are now using the @rating product to increase volumes and average transaction size. “Through @rating participants in our exchange can now check the creditworthiness of a business counterpart then decide whether to buy coverage on that transaction – all in a fraction of a second ” says Jerry ten Brink CEO and president of GoTradeSeafood.com the world’s largest B2B exchange for seafood. “The result is far better marketplace liquidity.”

The environment of international trading has changed dramatically and the product required to support these new conditions is now available. What persists in the new environment is the appetite for new business broad expansion and profitability.

Originally published in e-mmerce