Working Capital Innovations Power Trade Sector’s Journey Toward Efficiency

To eliminate paper checks and manual payment processes, you need to look for them first.

But once you see them, you’ll find them everywhere.

That’s why observers believe the B2B and trade finance sectors are especially ripe for digitization, because they are collectively knee deep (and sinking) within the confines of the paper check and the paper invoice.

This, as HSBC and B2B commerce platform Tradeshift agreed Tuesday (Aug. 1) to form a joint venture that will develop embedded finance solutions and financial services apps aimed at businesses and their suppliers within the global trade market.

The new joint venture is just one emergent innovation in a new generation of trade finance and working capital solutions that are already helping to reshape the landscape of global trade and empower firms to seize new opportunities and drive economic growth on a global scale.

Future-fit tools, platforms, and digital payment instruments that can streamline and digitize traditionally manual legacy processes, while providing better service to vendors and partners, are increasingly capturing the trade sector’s growing white space opportunities while providing businesses with the tools to thrive in across competitive international markets.

That’s because businesses within the trade and logistics sector are looking around at the many other industries that have successfully evolved and digitized their operations to capture 21st century efficiencies and coming to realize that they want the same for themselves.

Read more: Real-Time Insights Bring Clarity to Chaos of Global Logistics Sector

An Era of Ongoing Change Within Traditional Environments

But change isn’t easy. The trade and logistics sector moves about as slowly toward embracing innovation as, well, a container ship might.

That doesn’t mean the interest — and, most importantly, the intent — isn’t there, though.

PYMNTS data in “Reshaping Global Business With Connected Vehicles,” a PYMNTS and American Express collaboration, showed that nearly 3 in 4 (72%) of surveyed firms said reducing costs via connectivity is a high priority in their move to operate more efficiently.

It is estimated that nearly half (48%) of all fleets will be connected in some way by 2025.

That’s because asset-level supply chain insights around location and condition, powered by next-generation technologies including Internet of Things (IoT) and other innovations, is increasingly giving firms the predictability they need around previously unknown areas.

Expectations within the logistics and shipping sector, as well as the B2B trade landscape more broadly, are becoming increasingly consumerized as firms see granular, real-time insights as a key value-add and competitive differentiator, Will Hansmann, CTO at project44, told PYMNTS.

“The world is only growing more digitized, connected and efficient,” he added.

Behind the changing trade winds is a “generational takeover” in family owned and historically monolithic companies that is helping to drive growth and innovation as younger generations move into leadership roles, Fernando Olloqui, CEO and co-founder at Licify, told PYMNTS.

But where are firms getting the capital necessary to make these upgrades and invest in modernizing their own processes?

See also: Working Capital Gets Rebrand as CFOs Harness Solutions to Fast-Forward Growth

Innovations in Trade Finance and Working Capital

The rise of FinTech companies and digital trade platforms has transformed how businesses access trade finance and working capital.

PYMNTS research has found that embedded finance can help move B2B transactions beyond the confines of paper, and exciting innovations in trade finance and working capital are helping firms move confidently into the realities of today’s 21st century operating environment.

“This space in particular is the one the most active in terms of working capital,” Helen Jones, executive director of Visa Commercial Solutions Europe, told PYMNTS. “Historically, organizations have shied away from having debt on their book or accessing working capital … [but] embracing working capital as a way of growing your organization is what we’re seeing the most use case for.”

That’s because trade and logistics sector CFOs are leveraging working capital and financing solutions not to plug a cash flow gap — one of the finance vehicle’s historic uses — but rather to respond to change, respond to growth, and as a way of accelerating innovation around ongoing ecosystem digital transformations.

As seen across the rest of the commercial landscape, the payments occasion is where process and workflow digitization can have the greatest impact in beating back institutional inertia around manual processes that are traditionally burdened with inefficiencies and complexities.

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