The Latest Global Trade Finance Industry Statistics Explained
The global trade finance gap is estimated at $1.5 trillion as of 2020.
The statistic that the global trade finance gap is estimated at $1.5 trillion as of 2020 represents the difference between the demand for trade finance by businesses and the available funds provided by financial institutions to support international trade transactions. This gap indicates a significant challenge for businesses looking to engage in cross-border trade activities, as it reflects limitations in access to financing that could potentially hinder the growth and expansion of global trade. The figure underscores the importance of addressing barriers to trade finance, such as lack of collateral, credit worthiness, and regulatory challenges, in order to promote economic development and foster international trade relationships.
In the last fifteen years, global cross-border trade has almost doubled.
The statistic “In the last fifteen years, global cross-border trade has almost doubled” indicates that the volume of trade between countries has significantly increased over the past decade and a half. This suggests a rapid growth in international trade activities, reflecting the interconnectedness and interdependence of economies worldwide. Factors such as globalization, technological advancements, and trade agreements have likely contributed to this substantial expansion in cross-border trade. The doubling of trade volume signifies a shift towards a more integrated global economy, where goods and services are exchanged between countries at an unprecedented rate, impacting various industries and economies across the world.
By 2025, the global trade finance industry is expected to reach USD 24.50 trillion.
The statistic indicates that by the year 2025, the global trade finance industry is anticipated to grow significantly and reach a total value of $24.50 trillion. Trade finance refers to the financial instruments and products used in international trade transactions, including services such as letters of credit, export credit, and insurance. This projected growth highlights the increasing importance and scale of global trade, as well as the growing complexities and financial needs associated with conducting business on a global scale. Such a substantial figure underscores the significant role that trade finance plays in facilitating international commerce and economic development.
Global trade volume of goods and services is expected to decrease by 5.3% in 2020.
The statistic indicates that the total value of international trade in goods and services is projected to decline by 5.3% in 2020 compared to the previous year. This decrease is likely a reflection of the significant disruptions to global supply chains and economic activity caused by the COVID-19 pandemic. Factors such as travel restrictions, lockdown measures, and reduced consumer demand have all contributed to this downturn in global trade volume. The contraction in trade can have widespread implications for economies around the world, impacting industries, businesses, and employment. Policymakers and businesses will need to carefully navigate these challenging circumstances to support a recovery in international trade and the broader economy.
Asia constitutes nearly 60% of the global trade finance market.
The statistic that Asia constitutes nearly 60% of the global trade finance market highlights the region’s significant role in facilitating international trade through financial instruments and services. Given Asia’s position as a major hub for manufacturing and exports, it attracts substantial trade finance activity to support the flow of goods across borders. The statistic suggests that a majority of trade finance transactions, such as letters of credit, trade loans, and export credit insurance, are facilitated in Asia, emphasizing the region’s prominence in global trade dynamics. This high level of participation underscores Asia’s importance in driving economic growth through trade and underscores the region’s influence on the overall global trade finance landscape.
The perceived risk in trade finance transactions is 0.37%.
The statistic “The perceived risk in trade finance transactions is 0.37%” indicates that, based on the perspective of relevant stakeholders or experts in the field of trade finance, there is a perceived likelihood of encountering risk in trade finance transactions of 0.37%. This suggests that these stakeholders believe there is a relatively low level of risk associated with engaging in trade finance activities, with only a small probability of experiencing negative outcomes or losses. Perceived risk in trade finance transactions can encompass a variety of factors such as credit risk, compliance risk, operational risk, and market risk, among others, and a lower percentage value like 0.37% indicates a favorable risk perception among those involved in trade finance.
An estimated 80-90% of global trade relies on trade finance.
The statistic indicates that a significant majority of global trade transactions are facilitated through trade finance mechanisms. Trade finance involves various financial instruments and products that help businesses engage in international trade by managing the risks associated with cross-border transactions. This high reliance on trade finance underscores its crucial role in supporting the flow of goods and services across borders, enabling businesses to access working capital, manage payment risks, and navigate complex regulatory and logistical challenges in global trade. The statistic highlights the vital importance of trade finance in fostering economic growth and facilitating international commerce.
45% of banks’ trade finance applications were rejected in 2019.
The statistic ‘45% of banks’ trade finance applications were rejected in 2019′ reflects the rejection rate of trade finance applications across a sample of banks in the year 2019. This statistic suggests that nearly half of the trade finance applications submitted to these banks during that year did not meet the necessary criteria or requirements for approval. The high rejection rate could indicate various factors at play, such as strict lending standards, economic conditions, or the creditworthiness of applicants. Understanding the reasons behind the rejections and potential trends in trade finance can help banks make informed decisions to improve their approval rates and support businesses in accessing trade financing opportunities.
The digital trade finance market would record 6.1% CAGR during the period 2020-2026.
This statistic indicates that the digital trade finance market is projected to experience a Compound Annual Growth Rate (CAGR) of 6.1% over the period from 2020 to 2026. CAGR is a measure of the annual growth rate of an investment over a specified period, assuming that the growth happens at a steady rate. In this context, it suggests that the digital trade finance market is expected to steadily grow by an average of 6.1% per year during the stated period. This forecast indicates a positive outlook for digital trade finance, potentially driven by advancements in technology, increasing digitization of financial processes, and a growing focus on efficiency and transparency in trade transactions.
Only 9% of banks use Artificial Intelligence for trade finance.
The statistic stating that only 9% of banks use Artificial Intelligence for trade finance implies that the majority of banks have not fully adopted AI technologies in this particular area. This may suggest a slower uptake of AI within the banking industry for trade finance applications, potentially due to factors such as regulatory concerns, cybersecurity risks, or the need for further investment in AI infrastructure. Banks that have implemented AI in trade finance may be benefiting from improved efficiency, risk management, and decision-making capabilities compared to their competitors who have not yet embraced this technology. Overall, this statistic highlights a significant opportunity for banks to explore the benefits of AI in trade finance to stay competitive and enhance their operations.
The letter of Credit is the most commonly used trade finance instrument, constituting about 75% of trade finance products.
The statistic indicates that the letter of credit is the predominant trade finance instrument, representing approximately 75% of all trade finance products used in international trade transactions. A letter of credit serves as a payment guarantee from a financial institution to the seller, ensuring that the buyer will fulfill its payment obligations upon the completion of the transaction. Due to the assurance it provides to both parties and its versatility in managing risks associated with cross-border trade, the letter of credit has become the preferred choice for facilitating global trade. Its widespread usage highlights the importance of this financial tool in enabling businesses to engage in secure and efficient international transactions while mitigating various financial risks.
As of 2020, 12% of the global trade finance gap is from low-income countries.
The statistic indicates that in the year 2020, 12% of the global trade finance gap, which refers to the difference between the demand for trade finance and the supply of it, can be attributed to low-income countries. This suggests that a significant portion of the unmet trade finance needs worldwide is concentrated in countries with lower income levels. The lack of access to trade finance can hinder the ability of businesses in these countries to engage in international trade activities, potentially limiting their economic growth and development opportunities. Addressing this gap by increasing access to trade finance for low-income countries could help facilitate their participation in global trade and contribute to their economic advancement.
82% of trade finance professionals think ‘green trade finance’ will increase post-COVID-19.
The statistic reveals that a significant majority of trade finance professionals, specifically 82%, believe that ‘green trade finance’ will witness an increase in popularity and adoption following the COVID-19 pandemic. This indicates a growing awareness and interest within the industry towards sustainable and environmentally friendly trade practices. The optimism expressed by the majority of professionals suggests a shift towards more sustainable and ethical practices in trade finance, possibly driven by the global recovery efforts post-pandemic and an increasing emphasis on environmental responsibility in business operations. This statistic reflects a positive outlook towards the future of trade finance in aligning with environmentally conscious practices.
Around 29 percent of companies worldwide reported the availability of trade finance as a significant obstacle to their export activities in 2020.
This statistic indicates that approximately 29% of companies across the globe faced challenges due to the limited availability of trade finance which hindered their export operations in the year 2020. Trade finance plays a crucial role in facilitating international trade by providing companies with the necessary funding and support to engage in import and export activities. The fact that nearly a third of companies cited this as a significant obstacle highlights the impact of financial constraints on the ability of businesses to expand their global reach and participate in international trade. This statistic underscores the importance of addressing issues related to trade finance to promote economic growth and enhance global trade relationships.
Global value chains account for nearly 50% of trade worldwide.
Global value chains refer to the international production process where goods or services are created through a series of interconnected stages across different countries. The statistic that global value chains account for nearly 50% of trade worldwide indicates the significant role these chains play in the global economy. This means that half of the total trade volume involves goods and services that have crossed multiple borders during their production process, highlighting the complex and interconnected nature of modern international trade. Global value chains allow for specialization, efficiency, and cost reduction in production processes, driving economic growth and facilitating cross-border partnerships. Understanding and harnessing the potential of global value chains is crucial for businesses and policymakers to navigate the ever-evolving landscape of global trade.
The global trade finance software market size was expected to grow by USD 1.45 billion during 2021-2025.
The statistic indicates that the global trade finance software market was anticipated to experience significant growth with an expected increase of USD 1.45 billion between the years 2021 and 2025. This growth projection suggests a positive trend in the adoption and utilization of trade finance software solutions across various industries worldwide. Factors such as increasing digitization, automation of financial processes, and the need for more efficient and secure trade finance operations likely contribute to this anticipated market growth. As companies seek ways to streamline their trade finance operations, the demand for advanced software solutions in this sector is expected to rise, leading to the projected market expansion during the specified timeframe.
By 2025, it is expected that 100% of trade transactions will be conducted electronically owing to rapid digitalization.
The statistic that by 2025, it is expected that 100% of trade transactions will be conducted electronically due to rapid digitalization indicates a significant shift towards fully electronic and digitized trade processes. This projection suggests that traditional paper-based trade transactions will be almost entirely replaced by digital systems by 2025. The increasing adoption of digital technologies such as e-commerce platforms, electronic payment systems, and blockchain solutions are driving this transformation in the way trade is conducted globally. This statistic highlights the growing importance of digitalization in streamlining trade processes, reducing operational costs, enhancing efficiency, and improving transparency in trade transactions. It underlines the necessity for businesses to adapt and leverage digital technologies to remain competitive in the evolving landscape of global trade.
Demand for trade finance outstripped supply by $1.5 trillion in 2019, and this is expected to increase to $2.5 trillion by 2025.
The statistic indicates a substantial gap between the demand and supply of trade finance, with demand exceeding supply by $1.5 trillion in 2019, a figure that is projected to increase to $2.5 trillion by 2025. This suggests a growing mismatch between the needs of businesses for trade finance to support their international trading activities and the available supply of such financial products and services. As global trade continues to expand, it becomes increasingly crucial for financial institutions and policymakers to address the widening trade finance gap to ensure businesses have the necessary access to funding and risk mitigation tools to support their cross-border trade operations effectively.
Conclusion
The global trade finance industry statistics showcase the dynamic and interconnected nature of international trade transactions. As demonstrated by the data presented, trade finance plays a crucial role in facilitating global commerce and ensuring smooth transactions between businesses across borders. With the right insights and understanding of these statistics, businesses can make informed decisions and leverage opportunities in the ever-evolving landscape of trade finance.
References
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