Fintech Initiatives

The 28 ITFA fintechs have demonstrated their willingness and ability to help incumbent financial institutions address most-pressing industry challenges such as (1) re-defining user experience through a flurry of digital solutions and (2) addressing the trade finance gap with institutional funding.

In 2019, ITFA expanded the scope of its Fintech Committee by establishing technology-centric collaboration initiatives. Goal is to address global market ambitions by combining various fintechs in order to define new market practices. ITFA acts as convenor and forum using its established ability in progressing legal and regulatory matters, community-building and lobbying towards policy makers.

This page introduces both the DNI Initiative, the TFD Initiative and the TERA task force.

In 2020, ITFA established a task force to support regulatory action around the world in order to increase trade digitisation and automation. The task force is entitled the “Technology Experts for Regulatory Action .

The Digital Negotiable Instruments (DNI) Initiative

Digitising negotiable instruments with DLT-based document technology

The need for more and better technology has never been clearer. The fragility of supply chains, SME finance and world trade has never been more exposed which is why as an association we continue to foster improved market practices and regulatory developments. The technological ingredients are of paramount importance as we experience in our daily lives.

The aim of the DNI Initiative is to fully digitise bills of exchange (B/E) and promissory notes (PN). In order to achieve this, we identified the need to combine advanced document technology with electronic signatures and distributed ledger technology (DLT) whilst developing the appropriate contractual schemes and, where needed, lobby to change the law.

The solution, referred to as an electronic payment undertaking (ePU), is an important step towards achieving full applicability of the 1882 Bill of Exchange act. The ePU delivers a digitally native irrevocable, unconditional and independent payment undertaking that fulfils all requirements of a traditional negotiable instrument albeit subject to contract law rather than common law. The technology set-up integrates easily within existing processes, front-to back-office systems and channels.

The principal obstacles we have encountered have been legal and not technical. It is unlikely that digital negotiable instruments would be valid under the current English law. ITFA is therefore lobbying the UK Government for a change in the law and is working with the Law Commission and ICC UK to achieve this. As a practical, but hopefully only interim, solution we have therefore, working with our legal advisers created digital equivalents of the Bill of Exchange and Promissory Note that operate as a functional equivalent of the same instruments under the English Bills of Exchange Act 1882.

Refer to the Member Area for more information.

The Trade Finance Distribution (TFD) Initiative

Creating the blueprint for global trade finance distribution

TFD Initiative is an industry-driven initiative that creates the blueprint for global trade finance distribution. ITFA is a partner to the TFD Initiative.

Institutional investors want to invest in trade finance but do not always have efficient access to the asset class. Banks want to expand the distribution of trade assets and the universe of trade finance investors  beyond today’s scale. To date, both sides are not yet properly connected, resulting in very limited participation of institutional capital in the trade finance space. 

The main innovations in trade over the past 100 years have been linked to standardisation. The shipping container was the most important development in that respect, significantly reducing loading times and costs, making the worldwide transport of goods dramatically more efficient. The TFD Initiative wants to have a similar impact on the distribution of trade finance assets.

Driven by leading trade finance banks and NBFI’s, TFD Initiative thrives on the insights of its members and is built to cater to their challenges and opportunities. We develop consensus built standardised best practices for the wider distribution of trade finance assets.

Membership in the TFD Initiative is open to banks and non-bank financial institutions. In addition, industry associations may join the TFD Initiative as observing members to benefit from the insight and knowledge of the world’s leading market participants.

Consult www.tradefinancedistribution.com for more information.

Trade finance digitisation faces a tipping point amid the coronavirus lockdowns. Banks are increasingly adopting various technologies to digitise and automating trade origination and distribution. However, some innovations can’t be widely adopted given regulatory restrictions. Examples include the use of paper original documents for bills of exchange and bills of lading, as well as restrictions regarding the use of cloud computing. 

Acknowledging those obstacles faced by both banks and their technology providers, ITFA has set up the “Technology Experts for Regulatory Action” (TERA) in Q2 2020 in order to help its global membership in their regulatory advocacy efforts around trade digitisation. The key focus areas include the digitisation of trade documents, the digitisation of negotiable instruments and bills of lading, the use of electronic signatures and cloud computing for trade document processing. The task force will coordinate a network of interested banks and banking associations around the world with the aim to bring short-term policy decisions around use of technologies in trade finance.

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