How APIs Can Reshape Trade Finance

Guest article by Oliver Belin, CMO, author of the book Supply Chain Finance Solutions and a frequent speaker on this topic.

When Tim O'Reilly who popularised the term open source stated “We're entering a new world in which data may be more important than software” he emphasized that information is the most valuable asset for any company. And it is no surprise that a growing number of businesses utilize data to enhance their trade finance solutions.

Entering the world of APIs (Application Programming Interfaces) that act as plug-and-play interfaces between different systems and the embedded data. These interfaces allow to pull out data that is located within numerous systems and send it to one destination.

APIs are not only improving efficiencies, but also create new opportunities such as creating new solutions or enhancing existing applications. As such it is crucial to understand the value of data to improve and create new trade finance solutions. In the past, some market observers may have contested that the industry is ready to use APIs. However, today, more and more feel that the trade finance sector is ripe for disruption.

The fact is that there are already early adopters in the market that are leveraging APIs as an enabler to receive and process customer data and share the information with other parties, while creating advanced products for financial institutions and their corporate clients. APIs can empower developers to add new features and introduce innovative trade finance solutions in weeks instead of years at a fraction of the costs. As a result, these early adopters are reaping key advantages in the digital transformation era.

Technology providers, such as TradeIX are early adopters in the market, working together with commercial banks and their corporate clients to work on a whole set of unique APIs, allowing participants to remove friction points within the trade finance ecosystem. This allows them to leverage agile technologies, including microservices operated in the cloud to improve operations with automated processes, and therefore increase the efficiency of doing trade. At the same, they help financial institutions to be part of this hyper digital change with their existing legacy system.

Companies that depend solely on their legacy systems will face challenges moving forward when adding new solutions, such as cloud-based trade finance applications. Such one-time, custom-made integrations can result in fallible and error-prone solutions, which can have negative implications for customers and partners. As highlighted before, APIs can help integrating these legacy data silos and integrate them efficiently.

To ensure security is maintained with the integration, single policy enforcement points can be used to guarantee information security and centralize the access of APIs across the different systems. In fact, this also allows to reduce fraud risk and enforce the segregation of duty with the ability to access and review data between multiple systems.

In terms of customer experience, APIs allow to achieve a ‘business as usual’ approach when introducing new product developments as digitally enabled touchpoints can be supported irrespective of the underlying technology. For the future of new trade finance solutions, APIs are becoming the vital cornerstone. Financial institutions can’t expect to emerge as the winners based on their size alone. They have to incorporate APIs in their service offerings in order not to run risk of playing catch-up in the upcoming future.

Similar developments have been recently observed in other tech industries where APIs are the secret ingredient to the success of companies such as Google, Yahoo, Amazon or eBay. APIs allowed these companies and their applications to build disrupted solutions for consumers and business and inject innovation into the market place.

Similar to Amazon Web Services, APIs allow financial institutions to plug and play their solutions to multiple different services such as card issuance, credit approvals, fraud monitoring, and customer support. In order to achieve this change, banks have to start to work on open APIs. This allows them to secure their leading position in the trade finance ecosystem with a clear vision and roadmap to reinvent themselves and use these new tools to make it a reality. Yet, more important than just the technology it is the organizational mentality that needs to change embracing innovation and digitalization of trade finance data not only within the IT deportment but throughout the whole organization.

Oliver has over 15 years of experience in supply chain finance and account receivable finance solutions. He has worked for numerous leading organizations in trade finance and had key roles with PrimeRevenue, GSCF and Sumitomo Bank. In 2008, he founded Swiss Commercial Capital, a company specialized in trade finance solutions, which was successfully sold to Macquarie Bank in 2011. Oliver is the co-author of the book Supply Chain Finance Solutions and a frequent speaker on this topic.