Artificial intelligence (AI) is making its way into our daily lives, but technology is still surrounded by misunderstandings and skepticism. Ask the public and they can jump to dystopian scenarios where robots have taken over the world.
While this makes for a good sci-fi blockbuster plot, the reality looks different and more harmless. These products that Amazon recommended to you? AI. That TV series that you recommended on Netflix? AI. That self-driving Tesla car that you yearn for a jaunt? You guessed it: AI.
There is no industry that is not being reshaped by technology. Until recently, however, there was one notable exception: world trade. Fortunately, that is slowly changing.
The mechanism that underlies world trade – trade finance – is an industry that is largely paper-based and relies on manual processes. This $ 18 trillion a year industry is now being influenced by a new wave of technological innovation, including AI.
Explore the potential of AI in trade finance
AI refers to the use of computerized systems to help people make decisions or to make decisions for them. It relies on large amounts of data and models to understand information and gain insights.
In trade finance, AI is useful in analyzing quantitative data, and the repetitive nature of trade finance means there is a lot of non-traditional data available to us.
This means that AI models can be a very efficient tool for data analysis when trade financiers need to assess the risks of financing a transaction and uncover insights and risks related to small businesses.
AI is helping the industry move beyond traditional credit assessment processes, which are often outdated and still reliant on historical accounting records – a barrier that has kept small businesses from accessing trade finance and resulted in a $ 1.5 trillion global shortfall.
Overcoming the barriers
AI can address this deficit by creating accurate credit scoring models. This can include a company’s payment history, measure the risks of financing a transaction, identify supply chain risks, and compare them to their peer group.
Trade finance providers can use this information to effectively communicate with their SMB customers and ultimately help them build better business relationships.
On the way to a technological utopia?
The adoption of AI has the potential to do a lot of good for the industry, and the industry is at the beginning of a radical transformation.
Progress is driven by fintechs and the willingness to change. The industry is working together to create a new infrastructure to distribute trade finance assets to other investors in a transparent, standardized format.
The creation of infrastructure is possible due to technological improvements and is integrated into the entire retail ecosystem in cooperation with banks, insurance companies and other industry participants.
Collaboration at its finest: Together, the industry uses technology to reshape global trade as we know it.