The Role of Technology in Streamlining Import Finance Processes
Technology and the ever-changing ability that it has affects every business in one way or another. The integration of technology across industries has resulted in people raising their expectations of speed and ease. These high expectations can be applied to the world of trade, where the impacts of technology are currently affecting the procedures of international trade finance companies. Shipping is becoming a more streamlined process, and many businesses are turning to trade finance companies for blockchain financing along with supply chain financing.
Technology creates an information bridgeRecent events have affected trade throughout the world. However, earlier information was not as available and trade wasn’t fluid as it is today. The news of the economy took longer to spread than the pace of the events which were occurring in real-time, and buyers were comfortable waiting for longer to receive the supply of their inventory.
On the other hand, when China recently halted its imports of soybeans from the US, other suppliers got wind of the news quickly. With the advancement of technology, the economic change allowed competitors to increase production and fill the empty spot in China’s import business. Supply Chain Finance companies are contacted to financially help the suppliers to mitigate the risk while increasing production and exporting larger quantities.
How Will Technology Help?One of the common things across the supply chain is the humongous data involved. The management of this data and deriving meaningful and useful insights from it is an area of concern for business owners. Technology eases the process of collecting, consolidating, and analyzing data for the benefit of businesses. Technology automates the process of SCF from start to finish, including, invoicing, approval, credit assessment, and even final settlement.
Role Of Technology In Streamlining Import FinanceThe major role of technology in streamlining the process of import finance has been listed here:
1. Easier accessibility to the informationImport finance by its true nature generates a lot of data, most of which is isolated and in different formats. Using technology aids in connecting the data and consolidating it in software. Once it is done, businesses can get consistent, reliable, and repetitive information very easily in no time. The technology helps businesses break down “information silos” and share information through internal passages to external agencies. This helps in avoiding inaccurate forecasts, flawed executions, and longer reaction times.
2. Improvement In The InsightsInsights help in the decision-making process. The use of technology in import finance makes the evaluation of the data easier, gain insights on various parameters, and take steps accordingly. These timely course corrections have direct and indirect effects on overall performance.
3. Improved AgilityMeaningful information and timely insights help businesses take corrective actions immediately. The improvement in the overall agility of businesses is its outcome. When there are multiple obstacles in the company’s supply chain system then the business can’t work with agility.
4. More CollaborativeIn large corporations with multiple people and departments, the key to a smooth working process is collaboration. The common thread that helps the organization accomplish its common goals is collaboration. In such circumstances, when the right technology is accessed, monitoring, and collaborative evaluation between individuals, departments, and organizations maintain a consistent flow of information, analysis, and choices.
5. Improvement In Customer LoyaltyIn this competitive world, businesses are looking for innovative ways to win customer loyalty. Organizations are eventually realizing that managing the supply chain finance effectively can help them keep customers happy and win customer loyalty.
Challenges For Traditional Import FinanceTraditional import finance brings in challenges that have been in business for years. So far this has mostly been manual which presents several challenges and operational snags. The major challenges faced in the process are:
1. Laborious and Inefficient Working ProceduresThe traditional process involves a lot of paperwork which results in higher costs and lower efficiencies. The manual input check makes the process costly and error-prone. This results in delays in invoice reconciliation as well as in payment receipts. As per an estimate, the cost of processing this paperwork has a cost of 5-10% of the transaction value.
2. Lack of TransparencyFor an import finance business to be successful, it needs complete trust, collaboration, and coordination across the stakeholders. The trust arises from having end-to-end visibility throughout the process. This transparency results in the stabilization of material flows, reduction in demand distortion, and increased efficiency. However, the traditional process is manual and paper-based making it easier to manipulate and not as trustworthy.
3. Higher CostsThe documentation process of the traditional methods requires paperwork involved and it also requires extra manpower to handle the process. Sending these documents physically from one place to another again requires time and cost. Hence, we can say that it requires cost and time more than the advanced methods, making it expensive.
Role Of Technology In Handling The ChallengesAs the world grows, we also see technology getting revolutionized, which updates the traditional methods of import finance simultaneously. This can automate the entire process from the start to the end ranging from invoicing to credit assessment and even the final settlement.
The different types of technological solutions implemented in the process are:
1. Internet Of Things (IoT)
2. Automation and Robotics
3. Enterprise Resource Planning Systems
4. Warehouse Management Systems
5. Transportation Management Systems
6. Supply Chain Planning Software
7. Data Analytics
Future of Technology In Import FinanceIf we look at the prospective future, we can see that technology can help businesses specifically MSMEs to lower their financial costs and improve business efficiencies. The commonly emerging trends in import finance are:
1. DigitizationThe future will see businesses flooded with a plethora of technology-based solutions. Along with giving short-term credit, the use of technology in import finance will help businesses with better flexibility in payments.
2. Building a Large Financing PoolIn the upcoming years, we can witness businesses having multiple options to choose from as far as financing their needs are concerned. From banks to NBFCs and other private players, they would be eyeing the growth of the MSME market. This means that the players in this market would have a large invoice financing pool to choose from.
3. Risk-Proofing and Driving Efficiency for BusinessMoving forward, the businesses will undergo compliance resolution to eliminate errors and inefficiencies of the existing process, which will create a holistic ecosystem with improved risk management and risk mitigation solutions.
The technological advancement of import finance has significantly reduced costs and made it cost-efficient. The optimized process can significantly increase sales by ensuring the timely and accurate delivery of the right products in the appropriate quantities. Trade finance companies worldwide are trying to adapt themselves to the fast-paced world by adopting new digital platforms, among other things. This provides intelligent trade financing methods to help their clients meet the demands and expectations within the evolving and fast-moving trade world.