The transformational potential of open banking is not just restricted to the world of payments – it could also revolutionise trade, which has historically relied on paper-based processes. This involves many challenges – not least of which is slowing down transactions. But we are now seeing the development of a large number of digital platforms, many of which are collaborations between banks and fintechs, that are facilitating the digitisation of trade workflows and trade finance instruments, such as letters of credit.
While the digitisation of global trade processes still has a long way to run, it is possible to use APIs to create a digital trade ecosystem using shared data. This can help speed up trade transactions. APIs also enable companies to manage their financial supply chains almost in real time. For example, a treasury department could receive an alert about incoming funds from a client through an API, and then pass on this information to credit control so that the customer can have their goods released to them, or even plan an additional order, almost instantaneously.
As well as providing greater transparency about the financial flows linked to trade, APIs also offer the scope for greater clarity and data sharing when it comes to ESG measures.
Sustainability is becoming an increasingly fundamental part of corporate life, and organisations need to understand the ESG impact of their supply chains (read more on this topic here). APIs are a great way of ensuring ESG transparency.