All PostsArticlesBlogDigitalisation & TechnologyFinanceTrade Finance

How fintechs are advancing the digitalization agenda

todayMarch 17, 2022


SMEs are often at a disadvantage when it comes to accessing affordable trade financing, but the sands are shifting as leading fintech players step in with solutions to bring about equal opportunities.

By Carl Wegner, CEO, Contour 

Trade is at the heart of the global economy, with the potential to reduce poverty and inequality. And trade finance is an important element of global trade – the flow of goods and services across borders simply cannot happen without the liquidity that it provides.

Traditional methods of trade finance, however, are obsolete and heavily reliant on paper, creating significant barriers for trade growth. Even with digital forces at play, the global trade finance gap widened to a record US$1.7 trillion in 2020, according to the Asian Development Bank

In plugging this hole, the financial industry needs to help small and medium-sized enterprises (SME) or even micro-SMEs by bringing them opportunities for financing so that they can expand and help their communities. 

Fintechs narrow the gap

Leading fintechs like Contour can help advance the digitalisation agenda for SMEs and it all boils down to three areas: EVA – Efficiency, Veracity and Availability.

First: Efficiency. Fintechs such as Paypal, were first born through B2C ecosystems, where scaling and low-cost processing were the only way to compete with the banks – using technology like the internet was the tool to level the playing field. 

For SMEs to get financing, the first requirement is to automate the process. Fintechs have made it more efficient so that the cost of acquisition of a customer and processing of information can be automated as much as possible. This has been done to a certain extent by some consumer banks. They’ve learnt how to automatically rank customers on intersecting data points, but this is now an area where fintechs can help by bringing in the data for the bank to decide on risk levels. Some companies might do that risk analysis themselves for the bank, if the bank is willing to accept or define the risk parameters. Being able to make credit decisions on these new data points will certainly take a different level of bank risk approver in the future, but this is going to be the way going forward.  

Second: Veracity. Having electronic data throughout the transaction will not only be more efficient for all sides, but from the financier’s perspective, it will also provide better clarity on the documentation details. When blockchain is added to that, it allows the information to be verified earlier and consistently in the process, which brings down the risk as well as the cost of processing.  Which blockchain system is being used is not a key factor as long as it can be accepted by the financial institution and the regulatory authorities. 

Finally: Availability. While not everyone has internet access, a significant number of the unbanked SMEs or micro-SMEs at least have internet access. Having a browser-based technology, eventually even going to the smart phone screen, is a way of democratising the data flow to banks and the financial system.  Internet access is already a key target for economies to achieve. 

Driving digitalization for SMEs

At Contour, we are making our network more accessible to SMEs by providing easy access through our SaaS-based trade finance solution. We are also making adoption a lot easier through Contour Import, a new and simplified way of allowing importers (or buyers) to join Contour by making the need for beneficiaries to be on the network optional – allowing the buyer to use Contour for all their import LC needs with a multi-bank platform. 
The ability of fintechs to lower the barriers to adoption will certainly help drive financial inclusion for SMEs, and in turn, narrow the trade finance gap.  The last two years have been about the digital transformation of industries, and this will remain topic number one for years to come.  

If you would like to explore how Contour can help you with your digital trade journey, reach out to us here

Written by: admin

Previous post

Get Commodity Trading Premium Content to Your Inbox!
Enter your details and topics of interest and we’ll send you fresh commodity news and insights weekly!
Get Weekly Commodity Trading Premium Content to Your Inbox!
Enter your details and topics of interest and we’ll send you fresh commodity news and insights weekly!
You are Subscribed!
Thank you for your subscription. Commodity news & insights will be coming your way soon!
You are Subscribed!
Thank you for your subscription. Energy News will be coming your way soon!