The COVID-19 outbreak is set to significantly impact trade growth for the year as countries limit physical movement to curb the virus spread. While the health crisis undoubtedly has vast negative implications for global trade processes, it is one that could be turned into an opportunity as it provides the political and social impetus to accelerate trade digitisation on a larger scale.
Trade services have traditionally centred around physically intensive processes involving the likes of paperwork, signatures and frequent manual data entries. In fact, it has been estimated that up to 15 per cent of the cost of shipment is paperwork in global trade.
In the current environment of COVID-19 related lockdowns, many of these processes that work to facilitate cross-border and international trade have been impacted and may temporarily have been rendered obsolete to a certain degree. Existing technological solutions are available for logistics and trade. Rapidly implementing them out of necessity from the current environment will be an excellent step in the right direction for trade digitisation.
This, however, requires collaborative approach between governments and industries to remove barriers by amending and aligning regulatory frameworks. In many of the 20 countries in which Standard Bank operates, there are stringent and specific requirements around the roll-out of digital solutions. Some of the countries have taken market-appropriate approaches towards moving to digitising trade. In certain places on the continent, if one wants to issue a guarantee, for example, the standard is to issue on a physical piece of paper.
While the core nature of trade is unlikely to fundamentally change in the near to medium term, future – financial institutions are on a journey to streamline these processes, very often through leveraging the ABCD (artificial intelligence, blockchain, cloud computing and data analytics) of disruptive technologies.
From the point of view of adoption of robotics/intelligent automation and Artificial Intelligence (AI) in trade business processing, Standard Bank has had good success in South Africa and Uganda. Ghana is not far behind in adoption. Purely by leveraging this technology, one could materially quicken up the issuance of a local guarantee, reducing the time taken to issue a guarantee, for example, by 80 per cent.
If we take it a step further and combine AI with Optical Character Recognition (OCR), we can bring increased operational efficiencies to the areas of manual document sorting and data entry, starting the journey of reducing the manual nature of trade processes. Such technologies allow for banks to take documentation needed to validate a transaction (sometimes 50-100 pieces of paper) and evaluate or validate that documentation against the letter of credit instrument in a much shorter time period.
Standard Bank partnered with Traydstream – a fintech that leverages OCR and machine learning – in 2019 to digitize the current manual process of checking the document against the Letters of Credit for Discrepancies. The OCR tech allows for us to get a response to a document within less than an hour in some of Standard Bank’s markets.
The typical validation process could take anywhere between three to five days, in fact the international banking norms, allows for five working days for this activity to take place.
Importantly, the machine learning system will continue to learn and evolve over time improving on its benefits. It also offers value-added services such as shipping vessels tracking, which is particularly useful for our clients who are importing from around the world.
A theme that is evident currently is a desire for quantum change. Trade has traditionally been paper based; with the document of title, such as Bill of Lading (BL) being the cornerstone of trade. Even there, those who were previously hesitant to accept an electronic bill of lading, for example, are now ready to embrace and adopt the technology for its benefits. The impetus that the virus has brought to trade digitization should therefore not be underestimated.
While initiatives focusing on adoption of electronic bill of lading (or e-bills) have been around for about 10 years and adopted reasonably successfully in some developed markets, the adoption of the same in markets in Africa has been intermittent. Without the legal and regulatory framework required to support the technology, the adoption cannot be on a mass scale. The impact of courier company’s inability to deliver trade documents to banks timeously – would have been mitigated, if e-bills had been adopted in our markets.
Another area that requires focus from regulators in our markets, is to create an atmosphere allowing industry to embrace cloud computing.
Standard Bank is currently in conversations with multiple regulators, exploring how we could go about amending regulations, even though it may be a temporary dispensation for the duration of COVID-19, to facilitate digital trade. These engagements are happening in multiple markets across our network. With the challenges brought about by the virus outbreak, there is now an exciting dialogue in markets that will help to influence some of the necessary changes.
It is hoped that by leveraging basics such as digitised signatures and documents and technological innovations such as data analytics, AI and automation to change and improve the way local and international trade is done today, we can reduce friction in the trade process, boost activity and through doing so, help to reduce the impact from reduced global trade, brought about by the global health pandemic.
. Madhavan is the Head of Trade for Standard Bank Group.