Many of our personal and professional interactions are now digital, and this has become ever more true due to the COVID-19 pandemic. From online shopping to business agreements, we are paying, signing documents or sharing information electronically. 

There is, however, an area of business that is still on the long journey towards digital transformation: B2B cross-border trade, specifically for SMEs. 

The trust factor

International trade is complex, requiring large amounts of documentation and adherence to globally established terms and conditions. For large organizations with many resources, these things are relatively easy to manage, with people and processes in place to handle buying and selling arrangements. For smaller businesses, however, a successful transaction often relies on one key but somewhat intangible factor: Trust. 

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When a buyer and seller want to arrange large trades- often of commoditized products such as apparel or electronics- they need to come to an arrangement. Will the buyer pay before the goods arrive, or after? How can the buyer be sure the goods will arrive if they pay first, and how can the seller be sure payment will arrive if they ship the goods first?

When we think about this from a consumer perspective- for example, buying from an online retailer- we are accustomed to paying upfront and rarely have concerns about whether our purchases will arrive. If they don’t, we’re assured that there are channels and mechanisms in place to sort things out. 

This problem has not been solved in the realm of B2B, particularly for smaller businesses for which it doesn’t make sense to engage expensive banks and lawyers for their transactions. 

Tech-powered trade

Pre-COVID, a key part of establishing trust with a business partner was to visit, taking a look at the operations and building rapport with the people in charge. Without the ability to travel, if either party is unsure about a deal, it’s likely to fall through. With some of these deals in the upper tens of thousands of dollars, losing them not only harms the small businesses themselves, but also damages local and regional economies over time. 

The global addressable B2B trade market is valued at approximately $8 trillion, $500 billion of that in Southeast Asia alone. So how to solve this trillion-dollar problem? The solution lies with technology, providing an infrastructure solution to small merchants across APAC to allow them to transact safely and securely. In practice, this is a digital escrow system which holds funds until goods have arrived, providing peace of mind to both parties in a deal. Tazapay is one such solution, dedicated to providing small businesses the tools they need to boost their businesses.

Striving for digitization

International trade is inherently complex. There are many established rules to follow and it will always require large amounts of documentation. These complexities and the challenges associated with tackling them mean that things have largely remained the same for a long time, with a lot of activity remaining paper-based and relatively slow. While this makes the industry primed for change, the digital transformation journey will take time, and success will come from enabling business transformation in focused areas. 

Data from Forbes in 2020 demonstrated that years of anticipated transformation was compressed into months as businesses shifted quickly to digital-first operations. In fact, where many industries have suffered, in financial services, digital and contactless payments have been a shining light for the industry. Moving both personal and business banking further online has allowed business to continue to flow without the bottlenecks of in-person meetings. It makes sense to help further the drive towards digitization in cross-border trade by starting with payments, but there are other areas where we can expect to see change. 

One of these is document verification, a core part of trade finance. Where it might take a human an hour to verify a standard set of documents associated with a cross-border deal, new intelligent technology can do it in minutes with up to 95% accuracy. This process also turns all documents digital, ready for further inspection including compliance. This speeds up the time to complete deals and helps to identify errors or discrepancies, boosting overall efficiency, further reducing risk and generating a wealth of trading data that can be used for better decision making in the future. 

We can also expect to see an acceleration towards electronic bills of lading, documents issued by carriers that confirm receipt of cargo for shipment. COVID-19 has meant that moving from paper bills of lading has become increasingly necessary, and in the future will lead to advantages in greater efficiency and security. 

Finally, we are likely to see more online marketplaces emerge specifically for B2B players that are dedicated to helping buyers and sellers find one another and connect virtually. When these parties identify a way to work together, they will then be able to turn to a business verification and digital escrow tool to help them safely do business together. 

This article was contributed by Rahul Shinghal, CEO, Tazapay

About the author

Rahul Shinghal is the CEO and co-founder of Tazapay, a Singapore headquartered company which enables trust in cross border B2B transactions via a digital escrow service specifically designed for trade. Tazapay is backed by leading investors like Sequoia and Saison Capital. Rahul has spent more than 20 years in Fintech and Payments. Prior to Tazapay, Rahul was the Asia-Pacific head of revenue and growth for Stripe and before that, Rahul spent 10 years at PayPal in various leadership roles, including the head of SMB across international markets, and as managing director of Southeast Asia. Rahul is based in Singapore and is passionate about using the power to tech to solve real world problems and truly democratise commerce and trade.