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S&W Breakfast Briefing: Digitalisation of trade finance

In the latest edition of law firm Sullivan & Worcester's Trade Finance Breakfast Seminars, partner Geoffrey Wynne discusses whether digitalisation can end paper-based trade finance, and to what extent that is happening now.

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Comments (4)

  • William Laraque
    William Laraque, US-International Trade Services 15 November 2016

    The Digitization of Global Trade Finance If one thing was made clear as a result of the recent US presidential election, it is that the media has no idea of what is really going on in the world. The digitization of global trade finance is no exception. Not a day transpires that we are not regaled by tales of blockchain, BPO and other financial institution initiatives purported to "revolutionize" global trade. This revolution is most significant because it addresses the full engagement on the part of entrepreneurs and SMEs in the $85 trillion in global trade flows by 2025. This engagement represents a broadening of both opportunity and wealth by participating in a process which has traditionally been elitist, aristocratic and exclusionary. The effort to make global trade a more democratic and participatory process began in 1979, with Guy Tozzoli of World Trade Center Associates. This evolved into Tradecard, Then GTNexus and now Infor. By purchasing a minority stake in Infor, Koch Industries recognizes what I have been preaching for at least 3 years. Global trade finance and its digitization are the conflation of some 33 processes and support services, all of which are essential to the progression and evolution of the digitization of global trade finance. Koch Industries is nearing a deal to acquire a minority stake in enterprise-resource planning software giant Infor. Inc. (Industrial Distribution)

  • William Laraque
    William Laraque, US-International Trade Services 15 November 2016

    Far more significant with regard to the digitization of global trade finance is the following. I will explain why in a future comment. Koch Industries is nearing a deal to acquire a minority stake in enterprise-resource planning software giant Infor. Inc. (Industrial Distribution)

  • William Laraque
    William Laraque, US-International Trade Services 15 November 2016

    Far more significant with regard to the digitization of global trade finance is the following. I will explain why in a future comment. Koch Industries is nearing a deal to acquire a minority stake in enterprise-resource planning software giant Infor. Inc. (Industrial Distribution)

  • William Laraque
    William Laraque, US-International Trade Services 15 November 2016

    Alibaba, Amazon, Alabbar and Open Sesame Revolution One of the surprising facts about political revolutions is that they go from flash to bang in an average of 21 days. An AIG study revealed that from start to climax revolutions evolve in a relatively quick time span. This rapid development calls on corporate and national management to be flexible and capable of responding rapidly in mitigating the obvious risks. The Digitization of Global Trade Finance Now that I have your attention, I wish to refute the "company man" view of how the revolution in the digitization of global trade finance is proceeding: WSJ: Alabbar, Saudi Sovereign Wealth Fund Launch E-Commerce Firm Noon Noon will initially operate from and focus on the U.A.E. and Saudi Arabia before expanding across the region By NICOLAS PARASIE Nov. 13, 2016 9:08 a.m. ET DUBAI—Emirati businessman Mohamed Alabbar on Sunday launched an e-commerce business with Saudi Arabia’s sovereign-wealth fund at an initial investment of $1 billion, as he seeks to tap the Middle East’s small but growing online sales market. The new venture called “Noon” will offer 20 million products—ranging from fashion to electronics—to Middle Eastern households starting in January in a bid to create a homegrown version of Alibaba and Amazon. Ant Financial Services Group is expanding overseas. Ant is an affiliate of Alibaba Group Holding Ltd. It is forging partnerships in the US, Europe, Asia where it is building a global network of merchants that accept its payment services (Alipay). It has created a relationship with Ascend and Charlene Pokphand Group in Thailand. Alibaba is looking to challenge MasterCard and Visa in payments. Ant Financial was created in 2004 to support transactions on Alibaba's Taobao online shopping site. Alipay is linked to bank accounts. The money from bank accounts is moved to Alipay in order to pay bills, invest, pay for movie tickets, etc. Services include loans, market funds and credit scoring. Alipay is bigger than Paypal which has a $50 billion valuation. Ant Financial has a $60 billion valuation. Alipay is Ant Financial's biggest business. It has 450 million users. Ant is responsible for half of the $738 billion that the Chinese spent online last year. Alipay processed 153 million online transactions a day in the first quarter of 2016, which is 10x the volume processed by Paypal, nearly what MasterCard processed and 60% of the volume processed by Visa. Ant and Alibaba paid more than $500 million for a 40% stake in online payment and e-commerce firm Paytm in India. In France, Ant teamed up with in-store payment system Ingenico Group SA, which has widespread use among merchants in Europe. My Drift You get my drift. TXF recently published an article which purports to explain the evolution of digitized global trade. The article has references to Bolero, Blockchain, BPO, all the usual suspects. This view of global trade "digitization" is naive to a degree which reminds me of what it must have felt like to be the commander of the Maginot Line and to be told that German armored units had bypassed the fixed defenses, the imposing but useless "monuments to human stupidity" as de Gaulle described them. The above references from the WSJ describe how "digitization" of global trade finance is advancing through e-commerce platforms. Using Western capital markets, Alibaba and others are financing convenience and accessibility. The conflation of e-commerce associated marketing, sales, logistics, payments and some 30 other support services are completely upended the "formal," bank-based structure of global trade finance. I suppose that bankers can take solace in the fact that this evolution will take more than 21 days to fully develop.

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