Adding intermediaries into an equation or chain rarely translates into efficiency, but leads to costs, complexities and increases the risk of errors and missteps. The vast transactional chains in the financial industry serve the livelihoods of many providers across the entire ecosystem, yet it does not always benefit the end users and their commercials.
Core Challenges in Trade Finance
Trade finance is a notoriously cumbersome process dominated by intermediaries and it is an area of financial services which has made little progress in terms of automation. Settlement can take weeks depending on the jurisdictions involved in the supply chain, and the process is notoriously opaque. Instructions for remittances and verifications and approvals are often authorised with limited visibility into the transactional chain, which can lead to oversights and duplications.
It is often contingent on unique rules and mechanics across different countries, at conflicting levels of development. Many of these processes involve a host of intermediaries including entities which lie outside of financial services such as customs agents, health and safety inspectors, and transport groups.
Analysis by the Organisation of Economic Co-operation and Development (OECD) estimated 15% of the overall value of traded goods comprised of hidden costs, much of it a result of manual processes. The OECD added this translated into losses of $100 billion per year. At a time when revenues are under significant pressure, this is a huge sum.