The Asian Development Bank’s estimates that the global trade finance gap has reached $1.5 trillion has jumpstarted a new wave of competition between banks and FinTechs working to address the biggest challenges to landing capital in the hands of global traders.
FinTech has identified a particularly large opportunity in the trade finance market, pegging traditional banks as too slow to innovate, without the agility to manage the complex processes often linked with financing trade with smaller businesses. Banks’ massive compliance burdens cannot be ignored, either.
However, analysts also note that FinTechs have their own regulatory requirements as well (albeit, often much lower than those of banks), and because they aim to address the financing gap for smaller businesses seen as less lucrative by banks, the due diligence burden is lofty as well. A 2017 report by the Asian Development Bank found that, despite its efforts, FinTech had not yet made a dent on that global trade finance gap. (more…)