How fintech can reshape global trade and the supply chain
Bank of America’s Faisal Ameen, head of global transaction services for Asia Pacific and Japan, recently shared his thoughts on how adaptive technologies will change the future of global trade and supply chains.
He confirmed big banks, especially his, are focused on client needs, increasing efficiency, and reducing settlement times. In his mind, this means digitising the supply chain journey. Doing so includes pursuit of financial integration to deliver a single customer platform enabling financing, invoicing, and payments.
Yet, even more is needed to combat a still struggling post-COVID trade landscape. Emerging market volatility brought on by the Russia/Ukraine conflict and inflationary central bank policies complicate things further. The current state of global trade leaves many desperate to secure and protect supply chain continuity.
As global trade and supply chains attempt to tackle an onslaught of challenges, streamlining processes and solving systemic problems has never been more important. Fintech advancements in blockchain, payments, and finance are all poised to offer a much needed helping hand. Such technologies, combined with innovations in 5G, have the power to revolutionise the way we conduct global trade and manage our supply chains.
To many, blockchain is an enigma – simply a byproduct of the cryptocurrency revolution. However, to those in the know, blockchain offers a decentralised ledger that can securely record and verify transactions. In this way, blockchain can fuel a transparent and tamper-proof framework for tracking goods, payments, and services across the entirety of the supply chain.
Imagine a trade environment where transactions are recorded in real-time from beginning to end. From the start of manufacturing to the end of point of sale, every move would be trackable and verifiable. The openness blockchain offers could have an immediate impact on counterfeit goods, fraud, and timely access to information.
Moreover, fintech solutions like blockchain can facilitate digitisation and automation of customs and border clearance. A shift to greater transparency, security, verifiability, and paperless processing would be welcomed by all. The burdens associated with manual processing would be a thing of the past, greatly improving accuracy and throughput.
While blockchain offers substantial improvement, so do fintech payment technologies. The ability to exchange payments quickly and securely is essential to trade relations as it establishes trust between parties. Supplanting slow, expensive, and error-prone conventional methods like wire transfers with fast, efficient, and cheap real-time payments is a win-win for everyone. Today’s geopolitical environment is in constant flux meaning trust and speed are crucial to keeping the lines of communication and supply open. Fintech innovations leverage multiple technologies to make transactions faster, more secure, and less expensive.
Cross-border payments are particularly challenging. Traditional cross-border payments can take days to complete and are subject to high fees and erratic foreign exchange (FX) rates. Several key players in the fintech space already offer real-time settlement systems, currency exchange platforms, and remittance networks that can coordinate and complete complex transactions in seconds. Not to mention, all these bells-and-whistles come at a fraction of the cost of the old-fashioned methods.
