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POLICY AND BUSINESS PRACTICES Banking Commission
POLICY AND BUSINESS PRACTICES
Banking Commission
ICC GLOBAL SURVEY ON TRADE FINANCE 2017
Selected Highlights
POLICY AND BUSINESS PRACTICES
Banking Commission
1. PROFILE OF RESPONDENTS
POLICY AND BUSINESS PRACTICES
Banking Commission
POLICY AND BUSINESS PRACTICES
1. PROFILE OF RESPONDENTS
2.3%
2.3%
3.0%
3.0%
3.8%
4.6%
4.9%
4.9%
6.8%
8.0%
8.0%
9.5%
13.3%
25.5%
0% 5% 10% 15% 20% 25% 30%
Russian Federation
Pacific
South America
India
Other CIS
Central America and the Caribbean
North America
China
Advanced Asia
Central and Eastern Europe
Sub-Saharan Africa
Middle East and North Africa
Developing Asia
Western Europe
Consisted of 255 respondents in 98 countries worldwide
Geographical region of survey respondents
Number of employees involved in trade finance
3.9%
9.8%
57.6%
28.6% No dedicated trade financeoperations centre
Trade finance operations centrebased in one country
Trade finance operations centrebased in one geographic region
Trade finance operations centresglobal in distribution
Structure of banks’ trade finance operations
40.0%
26.7%
13.3%
3.5%
1.2%
15.3%
0% 10% 20% 30% 40% 50%
<50
51-150
151-300
301-400
401-500
>501
• This year featured an increase in the proportion of banks from Western Europe
(6.3%) and Developing Asia (3.0%), but decline in those from North America
(7.3%), Central and Eastern Europe (4.2%), and Middle East and North Africa
(3.6%).
• More than a third of the respondents were banks with a smaller number of
employees involved in trade finance, reporting that 50 people or less contribute to
the delivery of trade finance. 40% of respondents employ between 50 and 300
dedicated trade finance professionals and 20% employ over 300 people globally.
2. STATE OF THE INDUSTRY
POLICY AND BUSINESS PRACTICES
Banking Commission
POLICY AND BUSINESS PRACTICES
2. STATE OF THE INDUSTRY
21.9%
56.8%
21.2% Traditional trade financewill reduce year over year
Traditional trade financewill remain relevant butshow static growth
Traditional trade financewill remain relevant andwill show growth
Increased
Decreased
Remained
the same
49.7%
17.0%
33.3%
While overall revenues are solid, traditional trade finance growth is generally expected to stagnate
Trends experienced in trade finance
revenues when compared to 2015
Growth of traditional trade finance business
6.9%
2.8%
5.6%
5.0%
27.1%
18.2%
16.9%
15.6%
38.9%
39.9%
40.1%
40.4%
25.0%
36.4%
30.3%
31.9%
2.1%
2.8%
7.0%
7.1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Financial institution
Multinational and large corporate
Middle Market/mid-Cap
Micro and SMEs
Significantly decreased Slightly decreased No change Slightly increased Significantly increased
Change in trade credit lines compared to 2015 by client type
• Nearly 80% of survey respondents express the view that traditional trade finance will exhibit little
or not growth, or decline outright year-on-year.
• Overall trade finance revenues, however, have generally increase, with banks in Developing Asia
being more likely to report an increase of trade finance revenues.
• Increases in trade lines across all client types were broadly similar, with some evidence that there
is slightly more of an increase for SMEs compared to other client types.
3. OPERATIONS
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Banking Commission
POLICY AND BUSINESS PRACTICES
3. OPERATIONS
2.7% 39.9% 31.8% 25.7%
0% 20% 40% 60% 80% 100%
Slightly reduced The same level Marginally improved Significantly improved
0.7%
14.7%
16.0%
24.0%
41.3%
64.7%
0% 20% 40% 60% 80%
Other
Partly outsourced
Traditional trade processing only, bycustomer group
Integrated with cash management orother transaction banking operations
Traditional trade and supply chainfinance or variations of that
Traditional trade processing only, byproduct or transaction typeMost respondents (57.5%) note an improvement in relation to
performance of operational risk and error rates compared to 2016
Performance of operational risk and error rates compared to last year
Configuration of global trade finance operations
• Banks experiencing an improvement performance of operational risk and error rates
were more likely to have seen an increase in their trade finance revenues from
2015-2016. At a regional level, most significant improvements were experienced
amongst respondents in Developing Asia (45.5%).
• Almost two thirds of respondent banks indicated that their global trade finance
operations are configured as traditional trade processing only, by product or
transaction type. These respondents tend to be banks whose trade finance
operations centre(s) is/are based in one country.
• Cost control pressures, a reduction in the global pool of senior technical specialists
and traditional technology are the biggest challenges faced by trade finance
operations units today. Cost pressures were cited most often by global banks.
6.7%
10.0%
10.7%
10.7%
18.0%
20.7%
23.3%
0% 10% 20% 30% 40%
Other
Limited opportunity for training anddevelopment
Productivity management
Narrow use of operations expertise in thebroader trade business
Limitations posed by traditional technologies
A reduction in the global pool of seniortechnical specialists in trade operations
Cost control pressures
Single biggest challenge facing trade finance operations units today
POLICY AND BUSINESS PRACTICES
1.4%
1.4%
4.8%
11.7%
12.4%
18.6%
20.7%
29.0%
1.1%
1.1%
4.5%
15.7%
9.0%
18.0%
12.4%
38.2%
7.1%
0.0%
14.3%
0.0%
35.7%
14.3%
21.4%
7.1%
0.0%
2.6%
2.6%
7.7%
12.8%
20.5%
38.5%
15.4%
0% 10% 20% 30% 40% 50%
Other (please specify)
Digitised channels to access trade financingsolutions
Increased transactional efficiency
Higher credit limits
Solutions across the trade transaction cycle
Cash flow and working capital solutions
Greater risk appetite and market coverage
Favourable pricing
3. OPERATIONS
Favourable pricing and greater risk appetite and market coverage were the services clients requested most often in 2016
Services requested most often by clients in 2016 by trade finance operations structure
• In 2016, banks note that clients were most likely to request
services in relation to favourable pricing (29%), greater risk
appetite and market coverage (20.7%) and cash flow and
working capital solutions (18.6%).
• Banks handling relatively higher values of trade finance
transactions were most likely to receive requests for greater risk
opportunity and market coverage and cash flow and work capital
solutions.
• At a regional level, respondent banks from Developing Asia were
most likely to have seen requests for favourable pricing, whereas
in Western Europe, requests for greater risk appetite and market
coverage were most common. Operations are global in distribution
Operations based in a number of
countries, but in one geographic region
Operations based in one country
Overall
4. SUPPLY CHAIN FINANCE
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Banking Commission
POLICY AND BUSINESS PRACTICES
4. SUPPLY CHAIN FINANCE
More than one-third of respondents consider SCF a high priority and predict significant growth
Position of Supply Chain Finance in banks at this time
• Banks processing relatively larger volumes of trade finance
transactions and of relatively larger values are much more
likely to describe their position on Supply Chain Finance as
‘High priority and significant growth’.
• At a regional level, Western Europe (64.3%) and Middle East
and North Africa (70.0%) are the regions where Supply Chain
Finance is most likely to either already be a high priority or
being considered. In other parts of the world, Supply Chain
Finance is less of a priority; CEE respondents indicate that
Supply Chain Finance is not a priority at this time (36.4%),
whilst in Developing Asia, banks are much more likely to
indicate there is a limited focus on this area (45%).
• Banks whose trade finance centres are global in distribution
are much more likely to say Supply Chain Finance is a high
priority (58.8%).
• Nearly four in ten banks have seen an increase in their
customers’ use of third party platforms. Those seeing an
increased trend tend to be global in trade finance operations.
POLICY AND BUSINESS PRACTICES
My bank is not familiar with
the suggested terminology
to date
My bank applies the suggested
terminology widely and is applying
most of this language
My bank applies the suggested
terminology partially and is
using some of the proposed
language
21.5%
52.8%
25.7%
Global banks and those in developed countries are more likely to widely apply the suggested terminology and language
4. SUPPLY CHAIN FINANCE
Statement most reflective of banks use of Supply Chain Finance Standard Definitions
• Banks whose trade finance centres are global in
distribution are more likely than other bank structures
to say they are using the terminology widely (45.5%).
• However over a quarter are not familiar with this
document; a response more frequently noted among
banks whose operations are based in one country and
who have less than 50 employees.
• Geographically, those least familiar with the definitions
are more likely to be from Developing Asia (30%) and
Middle East and North Africa (40%).
Visit http://supplychainfinanceforum.org/ to access the
document or ask questions to SCF subject matter experts
5. DIGITISATION
POLICY AND BUSINESS PRACTICES
Banking Commission
POLICY AND BUSINESS PRACTICES
5. DIGITISATION
4.1%
6.2%
9.0%
11.7%
12.4%
17.9%
38.6%
0% 10% 20% 30% 40%
None of the above
Remains focused on traditional products
Growth will come from SCF and FinTech
Hindered by regulatory barriers
Showing uptake in the market
Technology is ahead of business
Significant interest but limited progress
Almost four in ten banks report limited progress to date, despite the significant interest
Views on progress related to the digitisation of trade finance
Less than 10 years 10-25 years 26-50 years Over 50 years
50.0% 46.6% 2.7% 0.7%
Number of years away from having 60% or more of all trade flow processes digitised
• Almost 40% of respondent banks believe that while significant interest
in digitisation is evident, only limited progress has been made to date
(39%).
• Only 9% of banks believe the growth in digital trade will come from
Supply Chain Finance and FinTech.
• Banks are divided in the view of how many years away the industry is
from having the majority of all trade flows digitised. Respondent banks
from Central and Eastern Europe and Middle East and North Africa are
slightly more positive in their outlook, with over 60% feeling it is less
than 10 years away.
POLICY AND BUSINESS PRACTICES
5. DIGITISATION
0%
0%
0%
0%
.7%
.7%
1.4%
1.4%
2.1%
4.3%
9.9%
17.0%
29.1%
33.3%
0% 10% 20% 30% 40%
South America
Central America and the Caribbean
Russian Federation
Pacific
Middle East and North Africa
Sub-Saharan Africa
Other CIS countries
India
Developing Asia
Central and Eastern Europe
China
North America
Western Europe
Advanced Asia
17.3% Fuels
Telecommunications
equipment
Raw Materials 9.4%
12.9%
Automotive products 7.9%
Total fuels and
mining products 7.9%
Truly commercialised industrialised digital trade flows are first expected in Advanced Asia and Western Europe
Regions where respondents expect truly commercialised industrialised digital trade flows
to first occur
Industries where respondents expect truly commercialised
industrialised digital trade flows to first occur – Top 5 shown
• Looking to the future of digital trade flows, banks expect truly
commercialised industrialised digital trade flows to first occur
in Advanced Asia (33%), though Western Europe (29%) is
close in this regard.
• At an industry level, the top three industries where respondents expect truly
commercialised industrialised digital trade flows to occur are Fuels,
Telecommunications equipment and Raw Materials. Those citing Fuels are
more likely to have trade finance operations centre(s) based in a number of
countries, but in one geographic region.
POLICY AND BUSINESS PRACTICES
BENEFITS OF DIGITISATION
2.2%
1.4%
5.0%
3.6%
8.7%
15.1%
13.8%
18.8%
54.7%
57.2%
50.7%
25.2%
22.5%
16.7%
Facilitating KYC checks
Reducing costs of due diligence
Enhancing ability to assess risk ofsmall clients
Strongly disagree Disagree Neither/Nor Agree Strongly agree
Around 80% believe that financial technology could help facilitate KYC checks and reduce due diligence costs
The impact of financial technology on bank’s ability to do transactions
Potential for digital channels to materially impact sales volume
7.5%
6.2%
45.2%
38.4%
2.7%
Transformational potential
Significant potential
Some potential
Little to no potential
Unsure
Don’t
know
0.0%
0.7%
3.6%
• Banks handling relatively smaller volumes of trade finance transactions are more likely
to agree strongly that financial technology could benefit KYC checks.
• More than eight out of ten respondent banks feel there is some or significant potential for
digital channels to materially impact their sales volume.
6. TRADE FINANCE GAPS
POLICY AND BUSINESS PRACTICES
Banking Commission
POLICY AND BUSINESS PRACTICES
TRADE FINANCE GAPS
14.4%
14.9%
20.0%
21.4%
29.3%
Were rejected due to KYC concerns
Could have been financed with additionalcollateral or clearer financial requirements
Were completely unsuitable for finance dueto low quality of the applications
Were suitable, but profits were too low
Other
Over three quarters of banks agree that AML/KYC requirements are potential barriers to financial institutions serving the needs of the global market
Belief that there is a shortage in servicing
the trade finance needs of the global
market
Reasons for rejections of trade finance transactions in 2016
61.4%
38.6%
Yes No
• Approximately 70% or more of respondent banks agree with the potential
barriers to financial institutions servicing the trade finance needs of the
global market; namely, AML/KYC requirements, low country credit ratings
and issuing bank’s low credit ratings.
• Banks whose revenues increased are less likely to believe there is a
shortage in servicing the trade finance needs of the global market.
• Three in ten of rejections for trade finance transactions were a
result of KYC concerns.
• The highest levels of rejection relate to trade finance transactions
proposed from Russian Federation, Other CIS countries and
Middle East and North Africa. SMEs also remain more likely to
have their transactions rejected.
89
76
84
76
90
78
89
84
77
85
89
92
92
92
11
24
16
24
10
22
11
16
23
15
11
8
8
8
0 20 40 60 80 100
Central America and the Caribbean
Russian Federation
Pacific
Other CIS
South America
Sub-Saharan Africa
India
Central and Eastern Europe
Middle East and North Africa
Developing Asia
North America
Advanced Asia
China
Western Europe
Proposed trade finance transactions that were approved/rejected
7. FUTURE TRENDS
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Banking Commission
POLICY AND BUSINESS PRACTICES
FUTURE TRENDS
2.0%
8.2%
17.7%
19.0%
24.5%
28.6%
0% 10% 20% 30%
Other
Change in geographic coverage
Traditional trade
FinTech or Platform development
Digitisation
Supply Chain Finance
2.7%
3.4%
6.8%
7.5%
11.6%
29.5%
38.4%
0% 10% 20% 30% 40%
None of the above
Attraction of non-bank capital to createadditional trade financing/SCF capacity
New alliances between banks and FinTechs
Transformational technology, such asDigital Ledgers
Financing new sectors
Evolutionary technology, such as digitaltrade and online trade platforms
Supply Chain Finance
Supply Chain Finance is seen has having the greatest potential for the growth and evolution of the industry
Most important area of development and strategic focus for the next
12 months
Areas with the greatest potential for growth and evolution in financing
international trade
• Over the next 12 months, 24% of banks are concentrating on
digitisation and almost 20% on FinTech or Platform development.
In relation to the potential of technology, almost 30% of banks
believe that evolutionary technology such as digital trade and
online platforms have great potential for the growth and evolution of
the trade finance industry.
• Over the next 12 months, almost 30% of banks identify Supply
Chain Finance as the most important single area of development
and strategic focus. Further, for the long term outlook, almost 40%
of banks see this as the greatest potential for growth and evolution
of the trade finance industry.
POLICY AND BUSINESS PRACTICES
FUTURE TRENDS
Banks generally feel compliance requirements will most adversely impact their business in the short term
2.1%
1.4%
7.6%
9.7%
11.0%
17.9%
20.7%
29.7%
0% 10% 20% 30% 40%
Other
Competition and disruption from FinTechsand Non-Banks
Volatile commodity markets
Shifting trade flows and corridors
Capital constraints
Increasing protectionist and trade-restrictivemeasures
Increasing regulation
Compliance requirements
• In the short term, banks are most likely to be concerned that
compliance requirements, increasing regulation and increasing
protectionist and trade restrictive measures could adversely
affect their business.
• Although compliance is a common concern, it was particularly
noted by banks who are more likely to handle relatively higher
value transactions. When looking at results by region, CEE
(61.5%) and Western Europe (35.7%) are much more likely to
rank compliance as their number one concern.
• Perhaps surprisingly, a relatively low proportion (11%) pointed
to capital constraints as the aspect that is most likely to
adversely impact business in the short term.
• Despite the active discussion about the role of the FinTech firms
as potential disruptors of the market, only 1.4% of respondents
felt that competition and disruption from FinTechs was the major
concern in the short term.
Aspects most likely to adversely impact business in the short term
THANK YOU
POLICY AND BUSINESS PRACTICES
Banking Commission
For any further questions,
please contact Doina Buruiana
If you are familiar with Rethinking Trade &
Finance 2017, please give your feedback on the
report via this anonymous feedback form:
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Rethink-Trade-Finance-2017
