International Chamber of Commerce Annual State of Trade Report

The ICC recently released their Rethinking Trade & Finance report and there is some interesting data inside the 90 pages. The bulk of the information for the report comes from an ICC global trade finance questionnaire that was distributed to the ICC Banking Commission’s 600+ members and institutional partners in 150+ countries. They received 298 replies from 127 countries.

It’s an interesting survey, being released as many large global and regional banks now look at their trade finance business more as a specialized lending business and less as a self contained unit. This is particularly the case as more Corporate investment bank units are now calling the shots.

The survey of bankers contained both hard data estimates as well as perception questions. I always find the SWIFT trade messaging trends the most compelling part, as that is where the hard data lies. Here are a few highlights, but suggest for those interested, download the copy.

Hard data

  • South-South exports now represent 46% of the global exports, up from 35% in 2001 and it is expected that this trend will continue, though perhaps at a slower pace.
  • During 2013, the SWIFT trade volumes (Collections, Guarantee, Letters of Credit) did not increase but experienced a decrease of 0.65% despite an overall increase in trade flows.
  • A particularly telling figure is that during 2013 the Renminbi (RMB) became the second most used currency in trade finance SWIFT messaging, overtaking the Euro.
  • Asia-Pacific continues to register far greater volume of MT 700 messages (a proxy of Letter of credit traffic) with 68% (import) and 75% (export) of the world traffic in 2013. Top countries in volume of MT 700 are China, Bangladesh, Hong Kong, Korea, India.
  • The region that shows the highest annual decrease (of MT 700 messages) is North America.
  • The average value of a Letter of Credit (MT 700 only, amount converted to US$) in 2012 was US$616,000.In 2013, it is US$653,000 (+6%).

Qualitative summary

A big part of the survey is more qualitative. For example, 41% of the respondents reported that they perceive a shortfall of trade finance globally. They also believe supply chain finance may soon be reaching a tipping point within the bank-mediated trade finance industry, with 66% of respondents underlining the increasing importance of supply chain finance within their banks (side note - what are the other 34% thinking?). The problem with these replies is it’s hard to know what these perceptions mean (and of course, who replied on the survey).

Misys did a nice infographic summary of the study.

I think one of the clear messages is that open account trade continues to accelerate. This is no surprise. See You want a Letter of Credit, Really? Part 1  Factoring, especially international factoring, is growing at a five-year compound annual growth rate (CAGR) of 24.8%. This is far above the 13.1% CAGR for domestic factoring. In addition, we are in boom times for various early pay initiatives (dynamic discounting, pcard, approved payable finance) and the various platforms that offer suppliers access to early payment.

Source:   ICC 2014 Rethinking Trade Finance Report

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