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Accenture report: overcoming challenges and finding competitive advantage in the trade finance sector

20th October 2022. Accenture released a report on findings from an online survey conducted to determine challenges banks are facing, both in retaining trade finance partners, as well as thwarting competition from fintechs.

Accenture received responses from 675 trade finance executives in 15 countries across North America, Europe, the UK, Asia-Pacific and the Middle East. 

Executives included heads of finance, heads of trade finance, CFOs, vice presidents of finance, as well as distributors, exporters, importers, wholesalers and manufacturers. 

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Conducted from August 2022 to September 2022, the survey polled respondents from companies with annual turnovers ranging from $5 million to more than $5 billion. 

Companies averaged an estimated $532 million in turnover in trade, supply chain and structured trade finance in the past year.

Key findings of the report included hurdles propagated by global macroeconomic conditions; readiness of borrowers to explore new trade finance partners and trade finance products; the striking gap between trade finance products offered and supplied by banks and the products their clients are demanding. 

Additional findings include the complexity of trade finance and resulting manual work; the need for banks to be adaptable to changing tech landscapes; the readiness of fintechs in supplementing or displacing banks.

Shifting the trade finance landscape

The survey found that two-thirds of borrowers globally reported that they were significantly impacted by rising interest rates. 

Thailand (93%) and India (80%) were two markets impacted most severely by rising rates, whereas 57% of borrower respondents from the UK and 63% of US respondents said they had been significantly impacted.

The current trade finance landscape has displayed a savviness on the part of commercial clients and their ability to seek out cheaper, more flexible, and more innovative trade financing products not on offer by traditional banks.

The result, in part due to the gaps in the product portfolios of banks, is an increasing demand for access to purchase order financing and higher pre-shipment finance, most notably amongst small- and medium-sized enterprises (SMEs).

According to the Accenture report, 67% of respondents stated they are planning to change their roster of partners in the next 12 months. 

76% said that they will change the number of partners with whom they work. 

With trade finance borrowers beginning to invest in emerging technologies, such as artificial intelligence (AI) and application programming interfaces (APIs), now, 90% are willing to consider receiving new trade finance products and services.

Respondents said that they are looking for efficiency and faster turnaround, more competitive pricing, ease of access to credit facilities, smarter and broader market and product offerings, and more seamless access to global markets from their providers.

Similarly, two out of three respondents noted the cost hike of credit from their trade banks in the past year. 

Two-thirds of respondents expect their company’s trade flows to change over the next 12 months. A similar number of respondents said that they expect their company’s use of trade financing to change during the same period.

With an increasingly diverse array of options available, companies are beginning to look to fintechs to help them reduce their credit risk, forecast cash flow, allocate working capital, and explore a broader customer and supply base.

Still, despite the trend of trade finance clients looking beyond traditional financing options from brick-and-mortar banks, most reported relatively high levels of satisfaction with their partners. 

Only 18% of the companies surveyed by Accenture were dissatisfied with their overall dealings with their banks. 54% of clients said that their expectations are being met and 28% responded in saying that their expectations are being exceeded.

Accenture on how banks can grow their market share 

Accenture’s report proposed three key actions for banks to grow their market share and improve their competitiveness within the trade finance market. 

First, banks will need to invest in digitisation and automation. Second, they must forge technology partnerships. Third, banks will have to adopt sustainable financial processes, solutions and advice.

As the survey found, borrower respondents are looking to trade finance companies for help with error-prone, manual pain points associated with cloud, blockchain, AI, and machine-learning tools. 

Each of these digitisation and automation technologies will allow traditional banks to scale up their operations and accelerate transformation for their clients’ needs.

Seamless connectivity was also important for respondents, who expect increased levels of transparency and quicker turnaround for all operations and procedures. 

Accenture suggests that banks consider leveraging the Open Finance opportunity via strategic tie-ups with bigtechs, fintechs, enterprise resource planning (ERP) software vendors and other platforms.

Borrowers reported that a lack of experience in measuring sustainability remains a barrier to ensuring sustainable supply chain initiatives. 

Digitisation-driven data insights should give clients confidence that their banks are working for them.

Go to the Source – Accenture report: overcoming challenges and finding competitive advantage in the trade finance sector

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Published 23 November 2022