Digitization in trade finance to cope with the effects of Covid-19 pandemic

Abstract

Trade finance is an important impetus to international commodity flows. For long, trade finance has been conducted via a paper-based process. Since the appearance of the Covid-19 pandemic, quarantines and lockdowns have made it challenging for the traditional trade finance process to be carried out. This may result in barriers to international transactions between countries. Based on domestic and foreign secondary sources of information, this article studies the important role of digitization in ensuring the continuity of trade finance activities and global transactions. It analyses and points out challenges posed to paper-based trade finance process in the context of Covid-19 pandemic and provides some forms of digitization being applied by banks to cope with the new situation. Moreover, potential risks to digitization in trade finance are also indicated. Based on them, several suggestions have been made to commercial banks and banking regulators.