COVID-19 Disruptions is a blessing in disguise for the digital transformation in Trade Finance Industry
Battered by the COVID-19 crisis, large Indian companies are looking to their banks for digital solutions that can make their supply chains more resilient to pandemic-related disruptions. These demands are speeding the transformation of trade finance—one of the banking industry’s last paper-based holdouts—into a digital business.
The global pandemic hit global trade flows harder than the global financial crisis of 2008–2009. Now, the second wave of COVID cases in the United States and Europe are dashing hopes of early recovery. For large Indian corporates, that could mean a continuation of troubles experienced in the first half of this year, including supply-chain disruptions due to lockdown measures, industrial shutdowns and the resulting delays in shipping and transport.
In the crisis, operational agility and digital solutions are taking precedence over the traditional priorities of financing trades and meeting liquidity needs.
Unlike most areas of banking and business, the vast and diverse world of international trade and finance still relies heavily on the physical exchange of paper documents to function seamlessly. However, the results of a new Coalition Greenwich study suggests that the business in India is changing. In 2019, 88% of respondents ranked “competitive pricing” as a key criterion for trade provider selection, while only 11% considered the quality of e-banking and digital platform a relevant metric. However, in 2020, we observed a sharp shift toward digital solutions, with 60% of the respondents ranking digitization as a critical metric for evaluating a trade provider.
Although it is companies’ need for operational agility in the face of COVID-19 disruptions is driving this increased demand for new solutions, the emphasis on digital will outlast the pandemic. Once the threat of the pandemic begins to dwindle, things like end-to-end supply chain visibility and digital interoperability will become much higher priorities for corporates that have now started down the digital path. This, in turn, will compel banks to evaluate their digitization strategy and accelerate the digital transformation of trade finance.
Hence I think with this Pandemic coming into the picture, all the archaic systems are being repeatedly questioned and Trade Finance Industries are expanding to the idea of more digital methods. Transforming in global trade and commerce that is currently underway will require industries to increase their digitalization efforts and make end-to-end connectivity a reality. The prevailing environment affords all industries the opportunity to assess their current digitization drive, identify the gaps, and rethink and redesign for the future.