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Data for today’s episode is provided by Mercator Advisory Group’s report – Financing Commercial Trade: The Search for Liquidity.
Traditional Trade Messaging Is in Decline:
- Trade FIN messages have a compound average growth rate of -4% over the last 6 years.
- In 2019 alone, traditional trade messages declined 10.9%.
- In contrast, SWIFT transactions have a compound annual growth rate of 8.2%.
- In 2019, Payment FIN Messages (SWIFT) grew by 5.4%.
- The most important criteria for supply chain finance is improved: working capital management.
- The most widely used supply chain finance tool is reverse factoring, where a buyer makes an arrangement to finance a seller’s receivable.
- Reverse factoring is in use in approximately half of supply chain finance tools.
Mercator Advisory Group’s latest research report, Financing Commercial Trade: The Search for Liquidity, provides a direct view into the latest trends in technology and tools in the trade finance space. Traditional trade finance remains a primary method for managing risk and creating liquidity, especially for international commercial merchandise exports and imports. There are now more methods than ever before to access liquidity and promote both domestic and international flows of goods and services.
“One of the interesting things we discovered during discussions with industry participants has been a marked uptick in the recognition of working capital management effectiveness, particularly as the coronavirus sledgehammer policies hit businesses,” commented Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service, author of the report, “so expectations for the adoption of these and other digital solutions have greatly increased.”