With Asian economies booming, smart banks are capitalising on opportunities to boost their trade finance business. But how do financial institutions from the developed world ensure market share? If they are too slow to act, they may be left with the crumbs rather than a representative share of the trade finance pie.
To start with, banks must be sure to participate in local clearing and settlement mechanisms to get ahead of the pack. They should also leverage relationships with firms in developing markets to extend their global networks – local partners are essential to a lot of business in Asia. At the heart of a banks’ infrastructure must also be the global technology platforms that enable institutions to maximise the trade finance opportunity presented by the rapidly developing economies.
Financial institutions provide the financial lubrication for trade. Customarily it’s been American, British and Japanese financial institutions that have dominated the world’s trading markets. However, as developing economies go from strength to strength, the dominance of the traditional players are being challenged and long-held dominance is threatened with decline.
As developing regions continue to industrialize there will be a significant growth in the global market share of here to regional-only financial institutions. Trade flows are shifting and South-South trade already accounts for almost 25% of global trade. Now is the time, like never before, for banks from the developed world to step up and adopt new strategies to create and develop footholds in emerging economies.
Kitt Carswell, Senior Offering Manager – Trade and Supply Chain, CGI