What will digitalisation mean for trade finance? The answer here, too, looks to be the creation of big platforms that offer much more functionality and inclusion, albeit platforms that are rather more complex than those in the music industry.

But trade finance is also a powerful gatekeeper because accessing its expertise and protection is expensive – particularly for small companies and those in emerging markets. There is a large ‘trade gap’ – now, during Covid, estimated at around $3.5tn – that existing practices cannot close. Will digitalisation start to make trade finance more like a music platform and less like a set of record labels?

A wider service offering looks like a given. For example, the International Chamber of Commerce (ICC) and Africa investor (Ai) announced in December 2020 that they are launching an eTrade initiative to help five million enterprises in Africa digitise. The companies will range from micro to medium-sized. One aspect of the work will be setting up a ‘Digital Sustainable Procurement Champions Community’, formed of leading multinationals and domestic companies active in Africa. They will help the SMEs in their supply chains to digitise. But the project has other strands, including lobbying governments.

That is important because digitising trade finance will effectively be a full-scale fourth industrial revolution shift. The ICC has a road map with three pillars for supporting digitsalisation, says Chris Southworth, secretary-general of the ICC United Kingdom. These are focused on: governments modernising laws; the ICC itself setting global standards; and getting adoption and transformation across the industry. There are a lot of moving parts, but things are now progressing more quickly.

“We surveyed banks to get a feel of where they were in digitalisation in February and March of 2020,” says Southworth. “At the time, over 50% had actively been digitising their processes. It’s safe to say it’s a lot more than that now.”

The discussion partners include Bigtech companies such as Amazon, Google and Apple. “There is a role for everybody,” says Southworth. “Google and Apple, for example, have a huge contribution to make in things like cyber policy. But politics is a threat [to collaboration], where it demands changes of networks, systems and companies based on political allegiance.”

Covid is not the only issue that has concentrated minds on the benefits of working together. Digitalisation of trade finance holds out the prize of a big surge in growth and productivity. It could be worth hundreds of millions to the UK alone, Southworth says. The UK is mapping its whole digital trade system to find points of failure and to see whether those need government or private sector intervention, with a report due this year.

“We need to do that globally and in a way that is fair and equitable,” says Southworth. "Poorer countries could get left behind. We have to work in a global fashion.”

He wants countries across Asia to be as much a part of the dialogue as the western world is and says that the choices the world makes now about systems and regulations, such as the WTO’s e-commerce rules, will dictate trade for the next 30 to 40 years.

“We use distributed ledger technology to let the buyer/seller/insurer/customs officer/port authority, etc, access data without having to give it to an intermediary,” says Mendonca. “The inter-operability would be much more challenging if it were a value exchange. We are only using the technology as a way to communicate.”

But blockchain can’t overcome what Mendonca says is the main challenge to the digitalisation of trade finance: lack of standards. “A lot of digitalisation is backed by individual contracts, or by standards agreed by companies. But if you want to get to the next stage where an SME with no resources to pore over contract law can use the systems, you need standards." Industry players are very willing to work together, he says. "The challenge is fragmentation; will there be a winner, will they consolidate... People want to avoid a digital island."

Southworth is confident real progress can be made. “I suspect that we will be looking at quite a different system in five years,” he says. “There will probably be a lot more technology partners for banks and I would expect a lot of new players.”

He is also positive about the role technology will play and doesn’t see it as a job killer. “You can’t replicate a human being in terms of sophistication of judgment,” he says. “Technology has quite a lot of limits.”