• Torben Sauer, CEO at Conpend


• 09.01.2023 04:30 pm
#trade

For over two years, Covid-19 disrupted global trade. Torben Sauer, CEO of Conpend, explains how, as traditional manual documentary checking became infeasible, AI and automation came to the rescue, ensuring trade finance and global trade could continue to flow – and fuelling the case for accelerated adoption of digital processes in trade finance across the world. 

The pandemic has triggered an entirely new way of working across the world, forcing temporary office closures and accelerating the use of technology to support remote forms of working. Such working practices – 

many of which continue today – are, however, at odds with activities that depend on paper. And that has been the case for global trade and trade finance. 

While financial institutions (FIs) largely transitioned seamlessly to remote working, the manually intensive, paper document-heavy processes involved in trade, meant it was this part of their business that had to make the most adjustments to continue to function effectively. 

The trade finance industry has long hoped for a more paperless system.   But the global nature of trade means that sizeable barriers to large-scale adoption persist; notably the sheer number of stakeholders within supply chains, a lack of standardisation of documentation, different regulatory systems, as well as the limited access to digital infrastructure in developing countries. Yet, as lockdown restrictions came into force, the urgency to drive automation became more critical. Indeed, working with paper-based documentation requires staff to be in offices, and the pandemic therefore risked endangering a system that had been operating successfully for decades.  

At the same time, it also became abundantly clear that innovating for the future by adopting new technologies could no longer be regarded as a convenience or “nice to have”. It was now a necessity.

A drag on efficiency

There is no question that trade finance is one of the most paper-based and laborious areas in banking. The International Chamber of Commerce (ICC) estimates that more than 4 billion pages of documents circulate in documentary trade at any one time; one trade finance transaction can involve over 30 parties, with more than 100 pages of documents needing to be checked and verified manually.

This can not only result in significant, costly delays and inaccuracies,  but the reliance on such processes also makes global trade and supply chains precariously fragile, especially when hit with a crisis – as the pandemic illustrated. Manual checks are impractical at the best of times, but become nigh on impossible when stakeholders are unable to physically move the paper documents. 

Banks and operations centres therefore needed to be relieved of the burden of human-eye, page-by-page document checking. 

The opportunity to reinvent 

So, what facilitated this and helped to ensure trade finance didn’t come to a grinding halt? Recent years have seen many banks investing in innovative, digital capabilities in order to enhance trade finance processes. And as the lockdown measures took hold, those that were equipped with artificial intelligence (AI) and machine learning (ML) automation software were effectively positioned to deliver uninterrupted trade finance services to their clients. 

These technologies are key for performing and optimising document checks, enabling the processing of documents without the need for physical paper. Such banks were able to implement flexible location strategies and have fewer offices performing specific functions. Not only does this significantly improve efficiency, as well as cost and risk reduction, but it also supports employee work-life balance and ensures workloads can be reshuffled in line with capacity and backfill employee absence. 

In practice, the AI process is simple but effective, and can be applied to both paper and electronic documents. Firstly, the documents are scanned into the AI application. The AI app then reads the content and checks it against a set of pre-defined rules and compliance stipulations, including ICC and the Bankers Association for Finance and Trade (BAFT) rules. What’s more, the rules against which the documents are checked can be added to on an ongoing basis, so that the AI app is always up to date with the latest regulations. This is particularly important in the context of a volatile environment.

Handling document checking in this way automates the otherwise people-based process that takes hours on end. Only anomalies, flagged by the application, are manually checked, at which point operatives can make the best use of their evaluation skills to add value to the process. In addition, through ML, the app builds “knowledge” from all the transactions it has processed, which automatically feeds into the updates – generating continuous improvement and ultimately increasing efficiencies exponentially. 

It is important to note that technology cannot completely replace human knowledge and experience in document examination. What it does is enable compliance teams to be relieved of monotonous tasks, allowing them to focus on applying their time to any discrepancies revealed by the automated checks. In turn, this makes for more rewarding work, an opportunity to build advanced skills within the organisation and a chance to capitalise on the digital skills of employees entering the workforce.

Ready for the future: ensuring business continuity

As trade finance banks quickly shifted to remote working, automation of trade flows became essential to the continuity of businesses. But the pandemic has potentially altered office working forever, meaning that the need to have digital capabilities in place to avoid the dependence on manual checking and paper documents is here to stay. 

Meanwhile, the pandemic was a much-needed push – one greater than could ever have been anticipated – to reshape the industry more quickly and profoundly. FIs can’t afford to rest on their laurels and return to viewing digital as a nice to have. Ensuring trade finance is digitally robust and prepared for future eventualities – which will inevitably come – is a necessity. And needs to happen now.