Andrew Raymond, CEO of Bolero International, shares his advice with Finance Monthly.

Reliance on paper documentation and manual processes means banks are struggling to meet the needs of exporters and importers as we emerge from the COVID-19 crisis.

The demand for fast digital services with minimal human involvement is gathering pace as global trade prepares itself for the big task of recovery. The WTO (World Trade Organisation) estimates trade could plummet by anything between 13% and 32% this year alone.

The critical role of paperless trade systems in fostering recovery is recognised in the ten-point plan issued by UNCTAD (The United Nations Conference on Trade and Development), which makes their introduction a key priority.

Apart from sheer speed of transfer, electronic versions of essential trade documents have the distinct advantage of not being held up at borders or lost during movement restrictions. This has become a vital attribute. Bills of lading, for example, are crucial trade documents that serve many purposes. Created by carriers, they can be used by exporters to draw under letters of credit from the buyer’s bank payable at sight, or to obtain finance in case of deferred payment. As “documents of title”, they confer ownership of a shipment and are forwarded to the buyer’s bank in exchange for payment against the letter of credit. The buyer will also use the bill to claim the consignment, once delivered.

The demand for fast digital services with minimal human involvement is gathering pace as global trade prepares itself for the big task of recovery.

Clearly, severe consequences ensue if documents such as bills of lading go missing or are held up. Fees and penalties mount as cargoes sit in port longer than necessary. This is where the advantages of digitisation are most obvious. Exchanged on a secure, purpose-built trade digitisation platform, trade finance instruments, electronic bills of lading (eBLs) and other digitised trade documentation, take hours to process instead of days or weeks for paper equivalents.

This is why banks are more likely to invest in paperless systems in the aftermath of the coronavirus pandemic. Yet digital trade finance solutions vary hugely and corporates must take care they do not sign up to services that are poorly designed, lack connectivity or have little acceptance in the wider trade sphere.

Here, then, are five points for corporates to ask a bank when it comes to trade digitisation.

1. Can you manage everything end-to-end from a single interface?

Any digital solution in trade finance must be comprehensive in every sense. From a single interface it should be possible to manage all the documentation required to support a transaction.

A single interface should provide simple access to multiple banks for fast comparison of credit lines, rates, fees and offers. This is the primary means by which corporate treasuries will improve their cash flow and use of working capital. Fast access to a wide choice of credit lines also reduces the need for expensive bank instruments.

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2. Does the solution bring everyone together?

Buyers, sellers and carriers – they all need to be on one platform. There needs to be a good, secure flow of information between all parties. Your bank’s digitisation solution should connect seamlessly with your back-office and your own eco-system, giving access to alternative funders and third-party providers such as logistics companies, carriers, insurers and counterparties. This is connectivity that should be easy and open to increase efficiency and provide customisation.

3. Does the bank and its proposed solution have the necessary expertise in-built?

It’s vital to ask if a bank and its solution-providers have the necessary understanding of trade flows and how your business fits in. Does the proposed solution have a proven network of users among banks and significant corporates, and is it sanctioned by national authorities and recognised within the trade community? Many platforms focus on their integration with emerging blockchain solutions. This is important but still requires a current network of users and documents based on real working practices in global trade.

4. Is the platform secure, compliant and fit for trade after COVID-19?

A critical electronic document such as an eBL must be underpinned by a respected body of law, such as English common law, to give both yourself and customers greater confidence. A platform must also conduct compliance checking in line with international trade rules such as those prescribed by the International Chamber of Commerce eUCP which govern letters of credit.  For many corporates, the immediate post-COVID era will be one in which they cannot be certain of the solvency of their trading counterparties. Know Your Customer protocols need to part of the solution but not so laborious they become a barrier.

A critical electronic document such as an eBL must be underpinned by a respected body of law, such as English common law, to give both yourself and customers greater confidence.

5. Does the solution offer visibility of bills of lading as well as letters of credit from multiple banks?

A digital platform must give corporates access to electronic bills of lading (eBLs) as well as letters of credit and other trade finance options.  As we have seen, bills of lading are critical documents, but often subject to change, which requires visibility and vigilance.

Ideally, a bank’s trade finance digitisation platform should offer you the ability to use critical trade documents such as eBL under any transaction. With so much competition in some of the toughest conditions ever experienced, open account trading is set to continue its dominance in cross-border transactions, so having access to eBLs is an important requirement.

These are just five points but they cover the main areas that corporates need to explore. It is important to weigh up the options quickly, but also to take the right decisions on trade document digitisation in order to maximise revenues as the world recovers from the pandemic and new rules apply.