Or at least the gap is not one of finance, but of easily accessible and verifiable information on businesses around the world.
The Asian Development Bank (ADB) estimates that the size of the Trade Finance Gap in 2020 - the gap between the market demand and supply - has skyrocketed to $3.45 trillion1 from $1.5 trillion in 2019 due to the COVID-19 pandemic.
The constriction of credit is felt most acutely by SMEs in developing markets as the costs of the compliance obligations imposed on the banks to identify, verify, and perform due diligence in many cases exceeds the expected revenue generated from the transaction.
In this way, many banks are pulling out of more high-risk jurisdictions or cutting their correspondent banking relationships which has a knock-on effect for local SMEs and their growth. In fact, ‘76% [of banks surveyed by ADB] reported that anti-money laundering (AML) and know-your-customer (KYC) regulations are major obstacles to expanding their trade financing operations’.2
If we are to build back better and close this gap, international exporters such as those using Open Borders Direct, need to harness the very latest technological advances to de-risk their international trading operations and help banks and other funders turn compliance from a cost to a competitive advantage. When Regulatory Technology (Regtech) is implemented well it enables a superior customer experience as well as automating compliance with regulation.
For example, for UK exporters the identification and verification of the other side of the transaction using data from the primary source (in this case national business registers), which is timestamped and has a data integrity guarantee is the first line of defence in the global fight against money-laundering and can be achieved while seamlessly complying with the very latest audit and regulatory standards.
Sounds complicated. Aren’t there bigger problems in the world right now?
The virus has once again underlined the interconnectivity of the global economy.
The severing of correspondent banking relationships around the world means companies in less-developed markets lack the finance to grow. Without this growth, companies cannot employ people, national economies do not develop, taxes are not paid, public services are not improved and progress stalls.
More and more businesses are going API (Application Programming Interface) first. This means that the days of slow-moving monolithic services providers which do everything averagely, are quickly being replaced with nimble integration platforms that connect with the best-in-class specialist provider for each individual niche concerning international trade.
Examples of these include Shieldpay for digital escrow accounts, Equiniti for virtual FX business bank accounts or kompany for Business KYC (KYB).
This approach allows companies to continually iterate their internal processes, benefitting from the end service provider’s weekly release cycles and product roadmap developments, all while ensuring compliance with the latest and ever stricter anti-money laundering requirements.
That is where kompany can help. With more direct connections to official national business registers than any other supplier on the market, the kompany platform provides real-time access to authoritative Business KYC data and documents for more than 110 million companies in over 200 countries and jurisdictions around the world.
Think ‘Companies House for the world’. By going straight to the source, international exporters can verify and identify the business and the people behind it within seconds using a fully automated and seamless process. In this way, they can export with confidence, knowing the risk of non-payment or default is lowered to a manageable level within their risk appetite.
There are many headwinds facing SMEs and international exporters right now and business uncertainty is at an all-time high.
However, looking at the companies founded in the global recession (for example Airbnb, Groupon, and WhatsApp) and the success of schemes like Entrepreneur First, the future belongs to those who embrace risk mitigated by digital innovation, using the latest technology to close the information gap, knowing that they are playing a key part in building back better.
James Penn is the Regulatory Affairs and Business Development Manager for kompany. He is interested in the intersection between global regulation, national politics, and technology.
Connect with James to learn how kompany’s business KYC API can transform your business onboarding journey using audit and regulatory-proof data straight from the primary source.
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