Cash against data by AI

1.       What are the two main categories of goods in global trade and how do they differ in terms of financing?

The two categories are commodities, typically financed based on their inherent value as collateral, and manufactured goods, financed based on the buyer's commitment to pay. Manufactured goods trade is characterised by direct buyer-supplier relationships and smaller transaction values compared to commodities.

2.       What is the primary challenge in securing trade finance for manufactured goods?

The primary challenge is obtaining a hard commitment from the buyer to pay before delivery. Paper-based processes delay the availability of information needed for the buyer to make this commitment, limiting the access to trade finance for suppliers.

3.       How does digitisation address the limitations of traditional paper-based processes in trade finance?

Digitisation speeds up information flow, allowing buyers to make payment commitments earlier. It automates processes and enables electronic agreements between parties, facilitating faster and more efficient trade finance.

4.       Explain the concept of "cash against data" and how it differs from "cash against documents."

"Cash against data" allows suppliers to receive payment shortly after shipment based on digitised documentation and buyer approval. This contrasts with "cash against documents," where original paper documents are physically exchanged, leading to delays and higher costs.

5.       What are the potential benefits for buyers (importers) in implementing a "cash against data" model?

Buyers benefit from working capital efficiencies, potential cost savings on goods, and streamlined operations. Digitisation reduces manual processes, improves data accuracy, and enables better risk management through early invoice approval.

6.       What is the significance of the Electronic Trade Documents Act 2023 (ETDA) in relation to trade digitisation?

The ETDA 2023 enables the use of electronic versions of key trade documents, such as bills of lading, under English law. This legal recognition facilitates the transition towards fully digital trade transactions.

7.       What are some operational efficiencies that can be achieved through digitisation in the trade of manufactured goods?

Digitisation streamlines document handling, eliminates data silos within the buyer's organisation, and automates invoice matching and approval processes. This leads to reduced manual effort, fewer errors, and faster processing times.

8.       How does digitisation contribute to meeting increasing compliance requirements, particularly in relation to ESG?

Digitisation enables the efficient collection, sharing, and verification of information required for ESG compliance. By creating a single source of truth for supply chain data, companies can better track and demonstrate adherence to ESG policies and regulations.

9.       Describe the role of a digitisation platform like PrimaTrade in facilitating "cash against data" transactions.

PrimaTrade acts as a central platform for document digitisation, data validation, and secure communication between buyers, suppliers, and financiers. It automates the invoice approval process, facilitates early payment to suppliers, and connects them with trade finance providers.

10.  What is the estimated size of the global trade finance gap, and how can "cash against data" contribute to addressing this issue?

The global trade finance gap is estimated at US$2.5 trillion. By enabling earlier buyer payment commitments and facilitating access to trade finance for suppliers, "cash against data" can help bridge this gap, particularly for SMEs in emerging markets.