A continuous economic and geopolitical ‘poly-crisis’ is creating a powerful incentive for companies around the world to invest in trade finance and supply chain management capabilities.
Data analytics, automation and emerging AI applications streamline operations, optimise inventory management and make supply chains more visible and efficient. For companies that integrate these technologies, the results include lower costs, improved transparency and a heightened ability to respond effectively to changing conditions and crises.
“These potential benefits are speeding up the digitisation of trade finance,” explains Crisil Coalition Greenwich Banking Analyst, Toby Miarka. “The focus on digitisation is also driving selection criteria when looking for a banking partner.”
Inga Kudzmaite, Treasury and Tax Director Asia at Carlsberg Group says it has become more important to be able to conduct at least some trade finance business through digital channels.
“We do not rely heavily on trade finance products as our business is largely localised,” she explains. “However, where we use such products we have a strong preference to use digital channels for process efficiencies as well as mitigation of fraud and security risks.”
More than one-third of the large corporates across the Asia region surveyed for the Coalition Greenwich 2024 global corporate trade finance study cited ‘digital capabilities’ as one of the key reasons for choosing a bank for transaction banking services.
According to Miarka, banks can help companies modernise trade finance and supply chain management by expanding and upgrading their digital offerings, ramping up marketing and education efforts that inform companies about solutions that are available and educating treasury staff on how to use them.
“Broadly speaking, companies want a seamless digital journey with no manual intervention, fewer physical documents and submissions and user-friendly and intuitive processes, as well as more trade finance products available online, including documentary trade (letter of credit, bank guarantee), supply chain finance and integration with other systems such as cash and FX,” he says.
Miarka suggests companies will not be looking to just digitise existing processes but also to experiment with digital tools to re-engineer trade finance and supply chain management, in the process creating new solutions efficient and flexible enough for an era of continuous poly-crises.
One-third of the Asian corporates who responded to the Coalition Greenwich study experienced financing issues in 2024 – up 12% from the year before – and these issues appear especially acute in China, where financing has become tougher to secure and more expensive.
“Carlsberg Group has established a revolving credit facility and define the banks that participate in it as group relationship banks. These relationships are generally long standing, which somewhat secures access to financing and other banking products at all times” says Kudzmaite.
“Otherwise, the majority of our financing locally in Asia is arranged via diversified sources – which ensures price competitiveness – and structured around business needs and specifics addressing the sensitivity to foreign exchange, interest rate fluctuation or similar,” she adds. “Last but not least, it is reviewed regularly to ensure it meets business needs.”
Over the past 12 months, foreign banks operating within China (especially European banks) appear to have become more conservative in extending their balance sheets.
Almost half (48%) of the corporates surveyed by Coalition Greenwich referred to ‘availability of trade credit’ as a key selection criteria for trade finance providers compared to 40% of US companies and 31% of European firms.
