2022 ANNUAL ITFA CONFERENCE: 4THINGS WE LEARNED, Sep 2022

By Shannon Manders, ITFA Consultant

ITFA’s Annual Conference, hosted this year in Porto, Portugal from 7 – 9 September, brought together a record number of members of the ITFA international community. Conference delegates were treated to a diverse agenda, ranging from discussions on trade and supply chain finance market trends, fintech initiatives and sustainability efforts, to talks on the local port industry, the metaverse and NFTs.

In this post-event wrap-up, we outline some of the top takeaways.

The education effort remains central to ITFA’s purpose and ethos

The event in Porto provided a good opportunity for ITFA to showcase the ways in which it continues to evolve as a trade association as it works with, and for, its members.

Launched in the days before the conference and highlighted during ITFA chairman Sean Edwards’ welcome address, one of the association’s most recent initiatives, the Trade Finance Taxonomy, is an exhaustive and comprehensive diagram that maps out the different areas, techniques and instruments involved in trade finance.

The work was produced by the ITFA Market Practice Committee chaired by Paul Coles and the Komgo Secondary Market Workstream led by Izabela Czepirska.

“The taxonomy maps out every term in trade finance – so users can simply do a CTRL F search to find the instrument or technique, and then quickly understand its context within the world of trade. They can then also potentially refer to the various guides that exist for more information,” says Czepirska. “Given the overwhelmingly positive response to the taxonomy we’ve had from the industry since the launch, it’s clear that this is something that was missing in the market. Education about trade finance is a continuous process, and ITFA plays a key role in facilitating this.”

Also unveiled at the Annual Conference in a session led by ITFA deputy chair Lorna Pillow was the association’s new rules to enable the creation of a secondary market in digital payment obligation, the Uniform Rules for Transferable Payment Obligations.

ITFA members are harnessing new technologies for critical business cases

During ITFA’s pre-conference fintech sessions and in the main conference, delegates were presented with a series of panel discussions focused on some of the most relevant and recent technology-driven industry developments.

A key purpose of these discussions was to demonstrate the ways in which financial institutions have succeeded in making use of new technologies, such as blockchain, for critical business use cases.

One such case, which took place in the weeks leading up to the conference, involved Lloyds Bank developing a digital promissory note – a solution that works within contract law and utilises ITFA’s dDOC specifications – under the Digital Negotiable Instrument Initiative. The promissory note was issued using Enigio’s digital trade finance documentation product, trace:original.

Another case, which took place in July, involved the launch of Tradeteq’s TRADA Tokens, the first ever fully regulated, trade finance-backed fungible security token. The initiative is expected to deliver significant liquidity to the trade finance sector by securitising a traditionally illiquid asset class on the XDC Network, which is a public, decentralised blockchain. By using fungible security tokens with concrete collateral, Tradeteq has begun the process of ramping up on-chain transaction volumes of regulated, real-world assets and extending access to the trade finance market to both retail and institutional investors. During the event, Tradeteq gave away free TRADA Tokens to interested conference delegates.

“It’s worth pointing out that both these new initiatives include blockchain, but their purpose was not to apply blockchain per se – rather to achieve a tangible business objective,” says André Casterman, chair of ITFA’s Fintech Committee. “Much has been said about the application of blockchain in the trade finance space. When it comes to the origination and distribution of digital assets, blockchain is a key part of the recipe of success in terms of its ability to provide end-to-end traceability and attract retail liquidity, as is demonstrated in these two business cases.”

The visibility of ITFA’s Emerging Leaders continues to increase

A record number of ITFA’s Emerging Leaders (ELs) attended the Porto event and contributed to the conference programme.

EL speakers at the pre-conference educational seminar included Pouya Jafari from SMBC, who chairs the ITFA EL Committee, and Nigel Atta-Mensah from Crown Agents Bank. Theyspoke on the topic of ‘Fintech and distribution’, covering trade risk distribution and asset management. Atta-Mensah began the session by outlining the challenges faced by buyers and sellers of trade finance assets. Jafari then explained what digital innovations are taking place in trade risk distribution, referencing live examples such as the Trade Finance Distribution Initiative and Komgo’s Secondary Market offering.

Jafari also contributed to the main conference programme, joining a panel discussion on ‘The latest techniques and technologies to fight the many facets of trade-based fraud’ on day 3. Fellow EL Izabela Czepirska joined a panel on the Uniform Rules for Transferable Electronic Payment Obligations on day 2.

“Around 20 members of the ITFA Emerging Leaders community attended this year’s annual conference, the highest number to date,” says Jafari. “It is wonderful to see that the trade finance industry, led by ITFA, is so eager and consistent in its resolve to foster early talent in our industry. The EL Committee works hard year-round to offer our members a platform to increase their knowledge, build their network, and advance in their careers. We were proud to witness the results of those efforts at the conference this year and we leave Porto with lots of excitement to continue growing and strengthening the Emerging Leaders Initiative.”

The conference also saw the authors of the top two shortlisted projects in the ITFA Emerging Trade Financier Award 2022 present their ideas to the audience before delegates were encouraged to vote for their favourite.

The award was presented to Parth Damani from Bayes Business School, for his project on ‘Improving the UK’s balance of payments by increasing trade finance opportunities for SME businesses’. The runner-up was Harsha Mehta from Barclays for her project on ‘The Importance of the 2 ‘E’s in Trade Finance: ECA & ESG’.

“The Trade Financier Award is a unique opportunity for ambitious up-and-comers or aspiring trade financiers to present their ideas and showcase their skills to the entire industry,” says Jafari. “The quality of the submissions we receive each year, including this year, shows that people can start contributing to the industry at an early stage if they are encouraged to be proactive and creative. That was our belief when we created the Award in 2019 and in the four years since then, each year’s finalists have been living proof that no one should have to wait if they have a good idea they would like to share.”

Credit insurance is proving resilient as a credit risk mitigant

ITFA’s Insurance Committee has long called for regulators and policymakers to be mindful of the vital support that the private credit insurance market provides to the real economy through facilitating bank lending. Measures taken to date have included leading the charge for a better capital treatment of credit insurance under the new Basel 4 regulations.

A session on day 2 of the Porto conference brought together bankers and underwriters in a panel discussion led by Marcus Miller from Marsh, to examine current trends and the future direction of the political risk and trade credit insurance market.

The panel discussed the re-amplification of uncertainty since the start of Russia’s war in Ukraine as well as China-Taiwan tensions, sharing views on total exposure and claims, the potential for contagion risk in each of these scenarios, and the impact on pricing. Panellists also debated the alignment between sellers and buyers of political risk insurance, questioning whether the current use of the product truly corresponds with the inherent risks it mitigates against.

Picking up on another growing trend, the panel also discussed the need for more diverse portfolios as the market shifts away from an overdependence on oil and gas portfolios, with one speaker calling for greater innovation regarding environmental, social and governance (ESG)-linked policies in trade credit insurance.

“The credit insurance market continues to play a key role in a post-pandemic world and is providing critical support to the trade finance community in the face of unprecedented political and economic headwinds,” says Miller.

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