Business confidence is high, but lending infrastructure needs work

Trade Ledger’s CEO Martin McCann recently participated in a roundtable discussion at Global Trade Review’s UK 2021 virtual summit. The topic of conversation was business sentiment as we emerge from the pandemic and come to terms with Brexit.

Confidence is at its highest level since 2017. That was the first year that Santander published its Trade Barometer, an annual survey of over 1,000 UK companies about their attitudes to growth, risk and factors impacting on performance. Summarising the results, John Carroll, Head of International & Transactional Banking at Santander, told the roundtable that 65% of respondents had forecast growth over the next few years. 95% thought international trade would remain as important or become more important in the future, although regulation and bureaucracy were concerns. Europe remains the UK‘s biggest trading partner, but North America took over as the country with the greatest expected growth in trade for the first time.

When asked about access to trade finance, Martin described how the pandemic disrupted the market. Governments stepped in as the main issuers of credit, providing SMEs with valuable working capital. However, as lockdown restrictions have eased, business activity has recovered:

We’re seeing a strong bounce back and a much higher overall market size and demand for capital as businesses grow back and trade starts to resurge.”

Drivers of change in business lending

The capacity to distribute greater sums of capital in a shorter time frame has emerged as one of the biggest drivers in the business lending sector, so digitising processes like credit assessments has become a priority. Banks are busy upgrading legacy infrastructure to reduce the need for paper documents.

Since Brexit, capital expenditure is increasingly taking place outside the UK. While Martin expects London to remain a hub, he has seen a change in the way financial services are consumed:

One of the most notable trends we’re seeing is a lot more decisions about regional and global trade investment happening out of Asia, specifically in Singapore.”

Staying on the right side of the regulator

When the conversation turned to regulation, Martin pointed out that most banks are reluctant to change capital flows or the customer journey because they don’t want to end up on the wrong side of the regulators. But there are opportunities to streamline credit decisions by making greater use of data:

One of Trade Ledger’s strengths is showing banks different ways of doing credit assessments to provide more capital at the same or lower risk and cost to serve.”

On that subject, Santander’s Carroll brought up the United Nations Model Law on Electronic Transferable Records, which promotes the use of electronic records. At the moment, only 0.01% of Bills of Lading are digital, yet they’re an example of the kind of data banks could use to enhance credit decision-making.

Digital transformation was also a priority for the other two contributors to the roundtable. Sean Ramsden, chief executive of Ramsden International, a wholesale food exporter, said he recently approved an enterprise resource planning implementation with an emphasis on improving customer interaction on digital platforms. Paul Schaffer, managing director of active play specialists Plum Products, spoke about how his company is digitising everything from remote working to product development.

As Santander’s Carroll said:

25% of companies used the pandemic to embrace digital transformation. If you don’t, you‘ll miss out because everything has been brought forward by several years.”

Looking ahead, Martin believes the data and tech required to build the next generation of trade finance solutions already exist, but the underlying infrastructure needs further investment:

If the infrastructure is in place, the data and technology exist to come up with more innovative, next-horizon solutions – for trade finance in particular, and trading in services and digital products in general.”

Martin also argued in favour of greater interoperability of data across borders. Previous attempts to address this problem have neglected to include experts like data engineers.

Click here to listen to the roundtable in full. To talk with us directly about how Trade Ledger can reduce friction from your customer journey, get in touch. We love to talk about any aspect of business lending.

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