A world of advancements

Delivering a competitive edge for your business

Ross Jones and Divyesh Modi analyse the positive impact that new solutions, regulations and standards will have on payments and trade finance. From greater speed and efficiency to improved trust and security, Corporate Treasurers should be best placed to take advantage of these changes.

The world of the Treasurer is evolving

Rather than treating changes in the payments landscape and trade finance space separately, Treasurers are uniquely placed to integrate these into a seamless activity that unlocks value to support:

New ways to conduct trade

Trade digitisation has been moving at a very slow pace but this is about to change on the back of the UNCITRAL Model Law on Electronic Transferable Records (MLETR) – a uniform model law that was adopted by the United Nations Commission on International Trade Law in 2017. It allows the use of transferable documents and instruments such as bills of lading, warehouse receipts, bills of exchange and promissory notes in electronic form. A number of countries have already adopted this into local law and the UK joined this group in July 2023. It will remove the need to courier documents and enable:

a reduction in working capital as goods are no longer waiting for the paperwork

less fraud by creating more transparency over the flow of goods and information

faster settlement as certain aspects of workflow can be automated

greater transparency to suppliers and customers.

The use of paper-based processes places a burden on businesses seeking to trade internationally. According to a recent International Chamber of Commerce UK report¹, the introduction of the MLETR ruling will provide a number of benefits for companies:

The Treasurer will be involved in some element of trade financing in most companies. It may be light touch – just dealing with foreign currency, settlements or cash forecasting or they may be more heavily involved with selecting financial counterparties and supply chain finance. With the passage of the Electronic Trade Documentation Act 2023 by the UK Parliament, Treasurers in the UK should anticipate an impetus in the digitisation of trade instruments not only from their bank, but from suppliers like ports, logistics providers and custom authorities also.

Developments in the payments landscape

Cross-border payment systems play a crucial role in the global economy. But many Corporate Treasurers are beginning to find their payment systems are stuck in the past, with systems becoming embedded with manual, fixed and slow processes.

Changes in the payments landscape are happening today, driven by a cocktail of technological advances, evolving customer and supplier expectations, regulatory developments and the need for improved efficiency and clarity. Historical rigidity is being replaced with greater flexibility as new payment methods are being rolled out.

A variety of alternatives

The greater range of payment options mean that Treasurers in the future will have a greater level of choice for settlement, depending on factors such as value and urgency.

These choices may affect cashflows and working capital and coupled with the Treasurer’s responsibility for ensuring efficient, secure payment processes, it is essential they understand key aspects when reviewing their systems.

• Do payment options integrate seamlessly with other corporate systems, such as TMS or ERP systems?
• Are they providing valuable insights?
• Do they deliver clear visibility over cross-border transactions?
• Are they secure, but do they also offer the flexibility demanded by trade partners around the world?
• Will they be fit for purpose tomorrow and have the flexibility and adaptability to keep pace with changes?

Building an integrated solution

Developments in both trade and payments means increased transparency and visibility for Corporate Treasurers. Managing trade and cross-border payments effectively is vital to any business, so exploring alternative payment options that can offer competitive fees, exchange rates and even the opportunity to negotiate price based on settlement currency is incredibly important.

Commercially driven Treasurers will give their companies greater confidence to scale their international activities. Reduced friction, greater transparency and faster payments will remove barriers to such operations, which can often leave businesses in limbo between delivering goods and services and receiving payments. The same will naturally apply to paying suppliers, improving their resilience and creating the ability to offer better terms.

It makes business sense to continually think about trade and payments solutions together and understand the advantages they can bring to a successful company.

Four things to consider