Upgrading Banking: The $1.7 Trillion Trade Financing Problem

Every year, a lot of banks and fintechs refer to the huge financing gap of $1.7 Trillion which mostly Small and Medium Business enterprises are not able to access and market their solutions would address this in a big way.

This always leads to the impression that existing banks are not financing properly and there is a huge untapped market which can be majorly resolved by "digitization".

However most of the "banking gap" is due to the below reasons listed by the Survey:

• Regulatory Requirements - Anti Money Laundering & Know Your Customer

• Capital Requirements (Basel)

• Low Credit Ratings in Emerging Markets

Digitization is not addressing the larger issues

Until there are also efforts to meet the regulatory requirements in a more efficient manner and develop new & reliable credit models, the larger gap would still remain.

Standardize KYC and Document through legislation

There needs to be larger acceptance of Legal Entity Identifier globally which would enhance transparency and work towards simplified KYC requirements. Also work on global standards and protocols on document flow needs to be adopted by governments as legislation to give more recognition to digital documents.

Access to Credit Data

The current credit models need more data from emerging markets to improve the assessment of risk and default rates

Unless the key points are also addressed the gap would keep widening and we would continue to see large number of clients not have access to liquidity to power global trade.