VIDEO | Lloyds and Cleareye on digitalisation and partnerships in trade finance

Estimated reading time: 5 minutes

The traditional, paper-heavy processes that once dominated the trade finance industry are now being replaced by innovative, automated systems designed to streamline operations, enhance efficiency, and reduce costs. 

This digitalisation is not just about adopting new technologies but also about addressing the long-standing challenges in trade finance—such as inefficiencies in document handling, operational complexity, and the need for global standards to enable seamless collaboration. 

Financial institutions, backed by emerging partnerships and robust industry standards, are spearheading this transformation to meet the demands of a rapidly evolving global trade landscape.

To learn more about how partnerships are reshaping the digital transition in trade finance, Trade Finance Global (TFG) spoke with Rogier Van Lammeren, Managing Director, Head of Trade and Working Capital Products at Lloyds Bank, and Mariya George, CEO of Cleareye.

Automating trade finance: structured data

The long-discussed transition from paper-based to digital trade documents has started to become a reality thanks to legislative changes such as the UK’s 2023 Electronic Trade Documents Act (ETDA), which allows digital assets to be treated as equivalent to their paper counterparts. 

This shift has far-reaching implications. Issuing, managing, and processing trade documents digitally eliminates much of the inefficiency associated with physical documents, simultaneously making processes cheaper and safer.

George said, “Digitalising trade finance is not just about transforming documents from paper to PDF. It’s about converting it to a structured format.”

This structured data can then be automated and processed, allowing financial institutions to manage transactions more efficiently and enabling a faster turnaround in trade operations. Automating these tasks plays a critical role in ensuring that trade finance operations can keep up with the speed and volume of global trade, which continues to grow in complexity. 

Van Lammeren said, “Regardless of how a transaction comes to us–whether the documents are digital versions or paper-based versions–they are examined by real people in our trade operations department. For us, digitalisation is all about making the job of the operations person easier, so they don’t have to manually sift through every page. Ideally, a system will highlight them and say, ‘Hey, there’s an issue here. Look at that.’”

George added, “At the end of the day, we’re talking about efficiencies. Can we significantly bring down the total turnaround time for processing a transaction? It’s the objective. And this digital data will enable banks, corporates and others to conduct ESG-compliant business in trade finance.”

By automating key processes, such as document examination, trade finance institutions are better positioned to handle increasing workloads while also reducing the margin for error, allowing them to keep pace with the increasing volume of global trade.

Standardisation and interoperability

A major factor in the successful digitalisation of trade finance is the establishment of industry standards. 

For digital trade finance to reach its full potential, there must be a consistent framework that ensures interoperability between the various players involved, from financial institutions and corporates to logistics providers and regulatory bodies. Without such standards, the digital trade ecosystem will remain fragmented, with different systems struggling to communicate with one another.

The International Chamber of Commerce (ICC) Digital Standards Initiative (DSI) has taken a leading role in this area by developing standards such as the Key Trade Documents and Data Elements (KTDDE), or the eUCP

The need for standardisation in both process and technology is evident, complicating what is required of solutions. Cleareye is compatible with eUCP standards, and has directed attention towards the ‘common data element’ as a result, ensuring interoperability between banks, corporates, and logistics providers.

George said, “The ICC DSI roadmap envisions a common digital trade environment by 2026. We have been following that very closely, and we are focused on three aspects: the digital standards themselves, the integration with eDocs, and sustainable trade. Finally, we are also keeping a close watch on DSI’s KTDDE project, which will be crucial to building interoperability in trade”

These frameworks provide clear guidelines on how financial institutions should handle trade documents, ensuring that the transition from paper to digital is seamless and compliant with existing trade rules and the green transition. Only with digitisation can document examination and compliance be automated: from the ingestion and classification of paper documents into the system, right the way through to data extraction checking against ICC rules and adhering to TBML guidelines.

As an added incentive, standardisation will open the door to interoperability. The ability for different systems and platforms to communicate and share data seamlessly is essential for a truly digital trade ecosystem. 

This is where partnerships become invaluable. Financial institutions working together with technology providers–like Lloyds with Cleareye–can develop solutions that ensure systems are interoperable and unlock the power of data. 

The role of data and future potential

With the digitisation of trade documents comes the opportunity to harness structured data in ways that were previously impossible. 

Data is power in financial institutions, particularly because it can elucidate patterns. This makes it possible, to an extent, to predict the future.

Van Lammeren said: “The potential value and insight that we can create from that structured data fascinates me, and it’s something that we can use to bring better quality insight to our clients.”

For example, data analytics can help financial institutions detect anomalies in transactions, enabling them to combat trade-based money laundering (TBML) and other forms of financial crime more effectively. It can also highlight where inefficiencies lie.

By combining trade data with other data sets, such as payment or market data, institutions can gain a more holistic view of global trade flows, improving operational efficiency and providing clients with valuable insights into their own trade operations.

George said, “With the process and technology standardisation, along with structured data, information shared between systems is consistent, accurate, and complete; data from multiple sources like banks, corporates, and logistics providers are easily accessible, which in turn increases trade efficiency and reduces cost, paving the path to future-proofing trade finance.”

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By embracing new technologies and forming strategic partnerships, institutions will be able to streamline their processes, improve regulatory compliance, and enhance the client experience. 

While standardisation and interoperability are key enablers, the heart of this transition is data. The ability to capture, structure, and analyse data from trade transactions unlocks new possibilities for financial institutions, from improving efficiency to bolstering security. 

The future lies in the integration of digital technologies, data-driven insights, and a commitment to collaboration across the entire trade ecosystem.