- An understanding of fintech, its relevance to global trade, and how it is making trade easier for businesses
- Resources and fintech solutions depending on the stage businesses are at in their trade journey
- Emerging trends in the global trade finance space and what this might mean for businesses
Who is this toolkit for?
Businesses that want to establish or expand the trade of their products/services to overseas.
Whilst it is more geared towards small and medium-sized enterprises (SMEs), we think businesses of all kinds (including fintech providers) would find this toolkit resourceful.
What is the toolkit's basis?
The CBI’s Seize the Moment campaign found that a new generation of SME exporters could create around £20 billion in additional UK export revenues by 2030.
With Finastra as our strategic partner for this toolkit, we've leveraged their global expertise and insights into cutting-edge open finance to bring this toolkit to life.
To understand the UK's global trade and trade finance business landscape, we carried out a survey of 204 respondents in September 2022 – detailed in this brief overview.
What does fintech have to do with international trade?
An increasingly great deal. Exploring and targetting new markets, conducting due diligence overseas, calculating import tariffs, minimising the risks part and parcel of global trade – these are just some of the stages of the trade journey fintechs are innovating for.
Delivered in partnership with:
(1) Embarking on your journey to expand overseas
For businesses of all sectors and sizes, going international means:
• innovating products and services
• identifying new opportunities
• understanding the rules of the road when doing business in target markets
• accessing the right products and services to manage risk and finance new business cost effectively
As a business, navigating an export journey can initially be complex, not to mention time- and resource-intensive.
Depending on your needs as a business there are a wide range of support services in the public and private sector, many of them great for if you're just starting out:
• GREAT.gov.uk is your first port of call for advice on exporting, including ‘how to’ guides, finding your local DIT adviser, information on events to attend, and links to wider resources.
• The Export Support Service (ESS) is a government helpline offering practical advice about exporting to specific markets, and will route through to relevant government officials where necessary.
• UK Export Finance (UKEF) is a government-led facility offering financial products for companies to fulfil export orders where the private sector is unable to do so.
• The Institute of Export and International Trade (IOE&IT) is an independent body offering practical advice on exporting, including issues such as customs and paperwork.
• The Department for International Trade (DIT) has a very busy agenda that is worth monitoring to understand new opportunities for your business.
• Our Global Trade Hub is regularly updated by CBI’s International team and overseas offices with the latest trade insights, the export strategy, and guidance on specific trade challenges. You can also become a member and start to engage with our work.
(2) Understanding the risks of trade and what fintech offers today to minimise them
As international trade takes place across borders and with companies that are unlikely to be familiar with one another, there are various risks to deal with. These include:
• Payment risk: Will the exporter be paid in full and on time? Will the importer get the goods they wanted?
• Country risk: A collection of risks associated with doing business with a foreign country, such as exchange rate risk, political risk, and sovereign risk. For example, a company may not like exporting goods to certain countries because of the political situation, a deteriorating economy, the lack of legal structures, etc.
• Counterparty risk: The risks associated with the company (exporter/importer): What is their credit rating? Do they have a history of non-payment?
To reduce these risks, financiers have stepped in to provide trade finance products. Traditional banks continue to play an integral role in the provision of trade finance. Alongside this, fintechs are also helping to create more finance options for businesses and helping them to access the most relevant financial product depending on their need.
(3) Strengthening people and tech ties for successful fintech partnerships
The demand for faster, more agile, and more tailored trade finance solutions across industries and sectors is driving corporate banks to embark on a digital transformation journey to change how they position themselves to meet new customer needs.
Traditional relationship models are being reimagined through digital transformation – creating a shift away from traditional relationship management to an increased focus on being connected to customers through digitally powered platform players, be they in-house or third party. The key is to meet the customer where they are doing business.
The objective is not to completely remove the relationship manager from banks, but to increase their ability to make informed, flexible, and bespoke decisions – fast. By developing their position as a platform provider, banks will be more able to automate and accelerate trade finance processes. Ultimately, this will lead to a more efficient financing ecosystem for businesses to obtain tailored finance products fit to their needs.
Gymnamo used HedgeFlows to solve its post-Brexit importing challenges (case study)
Gymnamo sells specialist rhythmic gymnastics products imported from abroad, making them more available and affordable to UK consumers. When Brexit’s new customs rules hit, Gymnamo could no longer get small quantities of orders shipped in quickly and regularly. The larger currency amounts meant delayed
shipping and ongoing volatility, leading to cost instability for Gymnamo.
With HedgeFlows, Gymnano could automatically track exchange rates whilst preparing its purchase orders. With most of its orders coming in from Europe and Japan, the team at Gymnamo used the HedgeFlows platform to book guaranteed exchange rates in advance. With this, Gymnamo no longer had to block any of its cash. Instead, they used their pre-booked rate to pay the invoiced amounts on orders that were placed weeks or even months before.
- More stability in costs despite an unstable pound sterling
- No more calls to and from FX brokers with every new shipment
- Easy-to-use platform that gave Gymnamo the autonomy it needed
- The pre-booked rate saved Gymnamo from having to raise its shop prices for UK customers