This is an interview with Alisa DiCaprio , Chief Economist at R3, a financial services technology company. Alisa is also one of 20+ course authors for our new Certificate in Digital Trade Strategy. Please note the views shared in this interview do not necessarily reflect those of ICC Academy.
Why should an organisation make digitising their trade and supply chains a priority?
Alisa DiCaprio (AD): The industry movement towards digitisation started following the global financial crisis. At that time, the steep increase in the regulatory burden required information collection to be more automated. Today, the regulatory compliance motivation is joined by the need to set up operational flows to take advantage of future innovations, all of which will be founded on digital technologies.
What are the biggest potential benefits of digitisation in your opinion?
AD: The biggest benefit of digitisation is that digital infrastructure sets up companies to both use today’s newest tools, and also to be prepared to deploy future technologies.
What are the costs, both financially and operationally, of not doing so?
AD: The cost of upgrading to a digital infrastructure is not zero. But it will only get more expensive the longer a legacy system remains out-of-sync with today’s baseline technologies.
Operationally, it will be difficult to attract younger staff who have to shift gears from their digital baseline to learn how to use paper.
What do you see as the key challenges and obstacles to digitisation in the trade finance industry? What are some of the common pitfalls to avoid?
AD: Some challenges are common across trade. Finding the funding to digitise is a challenge when profit margins are thin and the macroeconomy is unsettled. This makes it more difficult to justify a large infrastructure outlay.
Another challenge is ensuring the right team is in place that can both identify and implement a new architecture.
Finally, where trade flows cross jurisdictions, any digital infrastructure must be accessible to all parts of the transaction chain. Stamps or signatures may still be needed in some parts of the chain. This does not preclude digitisation, it only requires it to be more deliberate.
What impact would you like the new Certificate in Digital Trade Strategy (CDTS) to have? Why are you excited to be involved with this new course?
AD: The new certificate breaks down the process of digitisation into its component parts.
Digitisation sounds like a dramatic overhaul of every internal system, but this is not how it has to happen. It’s about more than just IT systems change, it’s also about how you engage your partners and your ecosystem to share the benefits of these changes.
How has the need for and focus of technology in trade finance changed over the last 5-10 years? What problems did it initially solve and what is being used for now?
AD: Trade finance initially digitised because of the global financial crisis. Many of today’s innovation departments had their start back then, as a way to comply with new regulations.
This crisis pushed the industry forward quickly. But instead of fully reorganising the trade finance process, digitisation often simply translated existing paper-based flows. This meant that users still bumped into firewalls where information had to be converted to paper or re-keyed in order to be used by the next node in the transaction.
The good news is that this moved the baseline for many actors from paper to digital. Today, these institutions are better set up to accept new technologies like blockchain and machine learning.
In your opinion, what are 1-2 of the most exciting opportunities you think blockchain and other technologies will create in the trade finance sector in the next 3-5 years?
AD: In trade finance, blockchain has been used to address two problems – repetitive activities and data conversion.
Document checking is a necessary part of contractual fulfilment in trade finance. But when it can be more effectively done by machines rather than humans. Data sharing is also a key flow in trade finance which is more credibly executed using blockchain.
In the next 3-5 years we’ll see those financial institutions that are familiar with blockchain flows branching into new types of finance.
This will happen most quickly with them because they have already been operating in a blockchain environment for several years. Once a flow is familiar within an institution (with compliance, with legal, with the business line) it is easier to use it as a stepping stone.
Certificate in Digital Trade Strategy (CDTS)
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