global trade finance market size
By type, letters of credit dominated the market in 2019 with a share of 39%.
BANGALORE, INDIA, Jan. 13, 2022 /EINPresswire.com/ – According to a recent report published by Valuates Reports, titled The global trade finance market size is expected to reach $ 10,987,510 million by 2027, up from $ 7,616,520 million in 2020 at a CAGR of 5.4% during 2021-2027. The main drivers of the trade finance market include rapid globalization and increasing trade volume, leading to a growing need for safe and secure trading activities to mitigate payment and procurement risks associated with export activities. and import.
In addition to this, the covid 19 crisis has led to the emergence of new platforms in the trade finance industry such as artificial intelligence (AI), blockchain, machine learning (ML) and IoT. that are expected to stimulate trade growth. financial market in the years to come. In addition, the digitalization and increasing use of electronic systems such as QR codes, RFID readers and the increase in trade agreements are also driving the growth of the market.
In addition, the increasing adoption of trade finance by small and medium-sized enterprises (SMEs) in developing countries will provide enormous room for growth in the market in the years to come.
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TRENDS INFLUENCING THE GLOBAL TRADE FINANCING MARKET
Globalization and increased business activity leading to safety and security concerns
Rapid globalization has increased the volume of trade, resulting in increasing complexity in international business practices. Importers and exporters face a series of problems related to payment and the supply of goods. Exporters never know whether or not they will receive a payment and importers are afraid to make payments before receiving the goods. Here, trade finance allows for an easy transaction process by providing an easy credit facility for making upfront payments and providing a certain period of time to settle the final balance. On the other hand, the commitment to pay by a financial provider on behalf of the buyer instills courage and peace of mind in the seller, and the goods are shipped securely covering the risks associated with receiving payments. In addition, trade finance also helps protect against currency risks. Thus, the offered safety and security benefits are expected to drive the growth of the trade finance market during the forecast period.
Impact of Covid 19 and emergence of advanced technologies
Covid 19 has impacted the trade finance market during a time of transformation. The emergence of advanced technologies such as AI, ML, blockchain, and DLT technology have reduced operating costs and improved the overall customer experience. Automation of the compliance review process, identity management, and cross-channel marketing opportunities are just a few promising benefits of AI and blockchain technology. On the other hand, Distributed Ledger (DLT) technology enables stakeholders to digitally share accurate and reliable business information and DLT-based smart contracts enable automated payment execution by meeting pre-defined terms in contracts. . This makes the reconciliation process easier for banks as the general ledger is shared and updated in real time. So, in a pandemic world, banks and financial institutions adopt emerging technologies to lower costs, increase efficiency and attract new business, ultimately accelerating the growth of trade finance market during the forecast period.
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Increase in trade agreements, digitization and increasing use of electronic systems
Growing competition among major market players and increasing trade agreements result in huge physical paper documentation which constitutes the bulk of trade finance costs. Digitization enables banks to automate the exchange of financial and transactional information through DLT and smart contracts. Other electrical systems such as optical character recognition (OCR), radio frequency identification (RFID) tags, and rapid response (QR) codes read container numbers, identify and track shipments, improving also the process of scanning business documents, making it flexible and economical. efficient and fast ultimately creating value for customers. Thus, increasing digitization and increasing use of power systems are expected to drive the growth of the trade finance market during the forecast period.
Adoption of trade finance activities by SMEs
Small and medium-sized enterprises (SMEs) contribute significantly to the growth of global trade, but face many barriers related to scalability, treasury obligations and payment risks. Trade finance companies and banks can help provide trade credit solutions, insurance, mitigate payment risk, and simplify the complex documentation process. Other banks may act as intermediaries to provide trade credits and insurance to buyers, sellers and other business parties. Thus, SMEs offer enormous potential for the growth of trade finance, especially in developing countries, which will create lucrative opportunities for the trade finance market in the years to come.
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ANALYSIS OF MARKET SHARES TRADE FINANCING
By type, letters of credit dominated the market in 2019 with a share of 39%. On the other hand, the supply chain finance segment is expected to offer lucrative opportunities for the growth of the trade finance market share and will experience the highest growth during the forecast period as the companies will benefit efficient working capital and benefits of SCF’s cash conversion period. Other banks form long-term partnerships and cross-sell products.
Based on the region, APAC segment is expected to provide lucrative opportunities for growing trade finance market share due to increasing government funding for improving trade finance and increasing exports. On the other hand, Europe will experience the fastest growth during the forecast period due to strong government policy facilitating trade and export credit agencies leading foreign trade. In addition, North America and LAMEA jointly generated high revenues, with LAMEA dominating the market in 2018 in terms of revenues due to high oil production, large-scale exports and presence of agency financial services. .
Trade Finance Market Segment by Type
Letters of credit
Guarantees
Supply chain finance
Factoring
Documentary collection
Other
Trade Finance Market Segment by Application
Finance
Energy
Energy production
Transport
Renewables
➣Metals and non-metallic minerals
Other
Trade Finance Market Segment by Regions / Countries
North America
Europe
China
Japan
South East Asia
India
Central and South America
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