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Tradeteq calls for government action to improve trade finance distribution

Trade Finance in 2020

Our client Tradeteq, the London-based provider of technology and software solutions to the trade finance industry, has today published a whitepaper titled Trade Finance in 2020: Asset Distribution – A Macro-economic Necessity. The paper not only highlights how the current Covid-19 pandemic is putting greater strain on SMEs, but how a greater distribution of trade finance assets to non-bank investors will help small business weather this storm. 

Unsurprisingly, Tradeteq has identified SMEs amongst the worst hit by the current lockdown measures. As these businesses are less likely to receive Letters of Credit from banks during this period, the need for other options must be considered in order for these organisations to continue to operate during this period. Tradeteq’s solution is to distribute trade finance assets to non-bank investors helping both banks and businesses continue to function in this uncertain climate.   

Trade Finance in 2020: Asset Distribution – A Macro-economic Necessity

The paper also emphasises how distributing assets to alternative investors has the potential to unlock millions of dollars in liquidity, helping to plug the trade finance gap which currently stands at least US$1.5 trillion. This in turn will greatly reduce the risks banks have on their balances, creating new avenues for growth in the market. 

The distribution of assets to investors comes as a natural extension of Tradeteq’s credit scoring service.  The machine learning and Artificial Intelligence (AI) tools that enable Tradeteq to provide a rigorous, evidence-based credit score are also subsequently applied to gauging the risk of trade finance assets for investors when they purchase.   

This also coincides with the rapid growth of the Trade Finance Distribution Initiative (TFDI), for which Tradeteq is the technology infrastructure provider and which has nearly doubled its membership to 30 since launching in 2019. Through growing the members of the TFDI, the trade finance industry is making yet another vital step towards the improving the accessibility of liquidity to small businesses.  

Previse secures backing to end late B2B payments with the help of AI

Small businesses are the backbone of the UK economy, generating some 50% of private sector turnover and employing three out of five private sector workers.

However, these businesses are held back by late payments from their large corporate clients. With 60% of SMEs paid late by corporates, businesses are left strapped for cash to meet their own payment obligations, such as wages, stock and rent. This cash flow crisis forces 50,000 UK companies a year to go to the wall. 

Banks play a role in easing the problem, offering larger suppliers short-term financing or buying the invoices directly from suppliers for a substantial discount, a practice known as factoring. Both these solutions are expensive for the supplier, however, which pushes up prices for the whole payments chain. In addition, given the fragmented and high-risk nature of the SME credit market, only the largest suppliers are able to secure credit.

This means that, according to the world bank, there is $2.4 trillion in unmet demand for financing from SMEs globally.

Enter Previse. The company, which this week announced the successful completion of a £2 million seed round, is harnessing the power of artificial intelligence (AI) technology to allow banks to meet the financing needs of SME suppliers in a scalable and low-risk way.

Previse uses advanced AI and hundreds of millions of data points to score the likelihood that a corporate buyer will be able to pay a supplier’s invoice. This score is then provided to banks and other funders who use that information to instantly pay the SME on behalf of the large corporate. The supplier receives their money the day they issue their invoice, giving them complete cash flow confidence.

The effect is that “instant, frictionless and efficient payments become the new standard for B2B payments,” according to Paul Christensen, co-founder and CEO of Previse.

The rest of the payments chain benefits as well. By offering such a service, buyers can negotiate a discount on their purchasing costs and banks can reach much deeper into the SME credit market without blowing their risk exposure. The net effect could be a several billion-pound boost to the UK economy every year.

To find out more about Previse seed funding please click here