Insight & Analysis

ICC Banking Commission launches working group to drive digitisation in trade finance

Published: Jun 2017

The group, co-chaired by Michael Vrontamitis, Global Head of Trade, Product Management Transaction Banking at Standard Chartered, aims to accelerate the progress towards greater digitisation.

The ICC Banking Commission’s working group to help coordinate all work relating to the digitisation of trade finance officially launched earlier this month.

Comprised of industry leaders from banking, fintech and corporates, the overall objective of the working group is to identify strategies to overcome the constraints in the digitisation of trade finance. These include the reliance on paper-based practices, a lack of recognition of the legal status of electronic documents, uncertainty over standards and a general lack of clear legal and regulatory frameworks.

Three pillars

To achieve this, the working group has created three focused workstreams. The first concentrates on the ICC rules and ensuring they act as an enabler of digitisation. “We will also merge any existing rules around digitisation within the ICC’s main rules,” says Michael Vrontamitis, Global Head of Trade, Product Management, Transaction Banking at Standard Chartered and co-chair of the working group. “This is a statement of intent to say that digital is the rule, not an exception to it.”

The second workstream is focusing on increasing the acceptance of digitisation within financial institutions and corporations. “There is lots more that banks can do to scale up their acceptance of digital documents,” says Vrontamitis. “We will work with the banks to ensure they are aware of these opportunities and how they can take advantage of them.”

The working group’s final task, and perhaps the most challenging, is what Vrontamitis calls solving the digital island problem. “There is a lot of digitisation happening across the trade ecosystem,” he says. “Most of this though is in silos, as fintechs are building various networks that do not talk to each other or connect with the core financial system. We want this to change and to accelerate the time it takes for all these networks to connect.”

To achieve this, the working group is to establish a set of ‘minimum standards’ that fintech companies innovating in this space can adhere to. The standards will focus on areas like liability clauses, legal structures of contracts and information security. In doing so, Vrontamitis hopes that these digital platforms will be able to connect with the core financial infrastructure in more rapid fashion.

“We are building these standards so that the banks can be comfortable working with and connecting to fintechs more quickly than they do now,” he says. “Banks set the highest bar because they are so heavily regulated so we expect that if a fintech meets the requirements of a bank then it will meet the requirements of most corporates.”

Mutual benefits

There are clearly many reasons to digitise trade finance. Vrontamitis says that one of the most compelling is that corporates and financial institutions are under increasing cost pressure and could benefit from cost savings. “Commodity traders have the potential to save millions in various charges if the speed of data flow is as quick or quicker than the speed of shipment,” says Vrontamitis. “The flow of data will increase visibility and transparency leading to better decision making and the chance to improve working capital metrics.”

For banks, the benefit is clear, says Vrontamitis, as they can reduce costs and drive efficiency. Also, greater transparency will reduce risk and can potentially increase the availability of financing for SMEs, reducing the trade finance gap.

Want to get involved?

If you are interested to learn more or participate in this this group, please contact the ICC Secretariat.

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