As global trade rebounds in a post-pandemic world, the underlying infrastructure of trade finance is showing signs of strain. Despite significant digital innovation and record trade volumes—$33 trillion in 2024 according to UNCTAD—an estimated $2.5 trillion trade finance gap continues to stifle growth, disproportionately impacting emerging markets and SMEs.
This paradox is not due to a lack of interest or need. It’s a result of fragmented systems, inconsistent data standards, and risk models that haven’t evolved in step with the global economy.
“Trade finance has reached a tipping point where we need more than innovation—we need infrastructure,” says Sameer Sehgal, CEO of Traydstream. “Until we rethink how data, regulation, and technology interact, the gap will persist.”
Understanding the Persistent Trade Finance Gap
The Asian Development Bank (ADB) reports the global trade finance gap rose to $2.5 trillion in 2022, up from $1.5 trillion in 2018. The gap is felt most acutely by SMEs, particularly in developing markets where banking relationships, compliance burdens, and limited digital access intersect.
In Africa, the regional trade finance gap is estimated at $81 billion.
In Asia, over 45% of SME trade finance requests are rejected by traditional banks.
Globally, 74% of rejected trade finance applications are due to perceived credit risk or lack of information.
What’s Holding Us Back: Three Structural Fault Lines
- Outdated Risk Models and Manual Processes
Despite decades of growth in global trade, many institutions still rely on legacy documentation systems and risk frameworks rooted in paper trails. The lack of digitised documentation makes due diligence, fraud detection, and compliance increasingly expensive—and often inaccurate.
“The irony is that in a data-rich world, trade finance decisions are still data-poor,” says Stephan Hufnagl, CTO of Traydstream. “We need to shift from static compliance to dynamic, real-time risk models built on machine-readable data.”
- Legal Misalignment and Regulatory Fragmentation
Although countries like the UK, Singapore, and UAE have made strides with legislation such as the Electronic Trade Documents Act (UK, 2023), most jurisdictions still do not legally recognise digital trade instruments like e-bills of lading or e-guarantees. This legal grey zone deters banks from digitising at scale.
MLETR (Model Law on Electronic Transferable Records) has been adopted in just 7 countries to date.
Paper-based instruments continue to dominate in 80% of cross-border transactions, despite the technology to digitise them.
- Siloed Digital Platforms and Poor Interoperability
Many digital trade platforms operate in isolation, each with proprietary formats, onboarding protocols, and compliance checks. As a result, corporates and banks must onboard multiple systems—creating digital friction instead of streamlining.
The emergence of Digital Trade Corridors (e.g. Singapore–UK) and the WTO’s Trade Facilitation Agreement show promise, but without cross-platform data harmonisation, the benefits remain limited.
Innovation That’s Moving the Needle
AI for Document Intelligence and Compliance
AI is now used to read, interpret, and validate trade documents against standards like UCP600, ISBP, and dual-use goods regulations—in seconds rather than hours. This improves compliance accuracy and creates structured data that can be used for also be used for advanced analytics.
Traydstream’s platform using AI for document checking report 70% reduction in processing times and up to 30% fewer compliance breaches.
This also unlocks predictive analytics, helping banks identify anomalies across large volumes of trade data.
Embedded Trade Finance and Alternative Credit Scoring
New fintechs are embedding trade finance solutions directly into procurement and logistics systems, making financing decisions based on transaction-level behaviour rather than traditional credit scores. This is particularly useful for SMEs and informal traders.
Emerging platforms in Asia and Africa are using payment history, shipping reliability, and fulfilment data to unlock millions in credit previously inaccessible to smaller exporters.
Global Collaboration: The Missing Link
Several initiatives point toward a more unified future:
The Digital Standards Initiative (DSI) by the ICC is working with global stakeholders to promote common data standards.
The WTO’s Trade Facilitation Agreement (TFA) aims to reduce trade costs by up to 14% through digitisation and regulatory simplification.
In late 2024, HSBC and the IFC launched a $1 billion trade finance facility to support exporters in 20 emerging markets.
What Comes Next? Infrastructure Over Hype
As Traydstream’s CTO aptly puts it, “Trade finance doesn’t need more platforms. It needs smarter pipes.”
The real transformation will come from interoperable infrastructure—data that flows securely across borders, banks, and platforms. Legal frameworks must align with technical standards. And risk models must evolve to reflect not just who a client is, but how they trade.
Final Thought: Bridging the Gap Means Building Bridges
Trade finance remains one of the most critical enablers of global growth, responsible for supporting up to 90% of cross-border trade flows. Solving the $2.5 trillion finance gap is not just a financial imperative—it’s a developmental one.
By combining regulatory reform, smarter technology, and a shared industry vision, the bottlenecks that have defined this sector for decades can finally give way to breakthroughs.
Key Stats at a Glance
Metric, Figure, Source
Global trade value (2024), $33 trillion, UNCTAD
Trade finance gap, $2.5 trillion, ADB
SME trade finance rejection rate (Asia), 45%, ADB
Rejected applications due to poor data, 74%, LexisNexis
Time saved via AI document processing, 60%, McKinsey
Trade cost savings via WTO TFA, 14%, WTO
