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FINEON Exchange: Trade Finance as an Asset Class

AI is powering the trade finance industry in new and innovative ways, paving the way for FINEON Exchange’s marketplace for exporters to match with bank and non-bank funders. The trade finance industry’s pressing search for liquidity is garnering institutional investor interest that will transform trade finance into a new asset class. Zoya Malik, managing editor TFT spoke to Michel Kilzi, MD FINEON Exchange about the platform’s value proposition that will offer solutions for emerging market exporters and investors to find new markets to increase their bottom line.

Trade finance as an asset class is growing in interest for both institutional investors and the banking and finance sector, as they look to increase yield, diversify and fill unmet funding gaps. Global risks in trade finance for short and long term products are particularly low compared to other segments with lower default rates on performance guarantees. This presents an enticing prospect for all concerned but begs the question that, in the digital age, what shape can trade finance take as an asset class?

FINEON Exchange, based in Luxembourg, has developed a revolutionary platform of a multipurpose marketplace, catering for European exporters seeking to get finance for sales into developing and emerging markets. With an emerging markets global trade finance gap estimated at USD 1.5 trillion (Global Trade Report, Euler Hermes 2019), the potential for FINEON Exchange is bright. Set to be launched by the end of Q2 2019, the platform seeks to improve cash-flow and optimise working capital through the utilisation of innovative structured trade-finance for exporters and financiers. Matchmaking is the name of the game, firstly for exporters to access the best deal possible in finding a bank or a non-banking institution to fulfil its financing needs and, secondly, in providing financial institutions with a marketplace offering deep market intelligence on clients’ risk profiles and finance requirements.

Michel Kilzi, Managing Partner, FINEON Exchange anticipates the marketplace will create a win-win value ecosystem that supports receivable finance, receivables securitisation programmes and a scoring/rating system. He says this will allow “industry stakeholders to collaborate, appealing to exporters, funders, scoring agencies and insurers. We also have strategies in place to partner with countries’ Chambers of Commerce as well as export and credit agencies.” FINEON Exchange’s customer on-boarding registers a financiers’ lending criteria on rating and scoring, on types of business and their ceiling with the needs of potential partners.  Kilzi states, “We are providing the same standards of KYC and AML data as stipulated by regulators and a market intelligence register for quality deals for funders in required geographies and specific jurisdictions, with best receivables. Exporters receive top notch information on export financing and increase sales by issuing their exposures.”

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Artificial Intelligence’s supremacy for trade finance growth is in its power to drive consolidation and scale in a market place, to speed up access and exchange of critical and hitherto disparate information across a centuries old marketplace and modus operandi. FINEON Exchange’s marketplace platform will provide exporters with necessary security and information protection relevant on their transactions and give banks more visibility in the market by product and geography, rendering them with a strengthened overview on supply-chain trends to discover leads, according to their credit appetites.  Kilzi explains, “With our multisided platform we will be solving a real problem in export finance requirements and doing that at speed.”

An example of FINEON Exchange’s marketplace business intelligence in action is when a well-known European exporter approached FINEON Exchange to source potential funders for its exports to an emerging market;  FINEON Exchange approached a Swiss bank, who was already familiar with the exporter but had not expected that such exporter was increasing its exposure into that specific emerging market; when both were matched, the Swiss bank  showed great interest in the deal and ended up financing the exporter in record time.

FINEON Exchange’s emphasis on AI investment bolsters the platforms proposition with robo-advisory that can guide exporters from the onset of their journey. This is to position the exporter to benefit from the highly-automated and well-standardised information that creates desired financing structures to fit the exporter’s strategy and appetite and formulates relevant credentials on all stakeholders, to speed up home to market processes. Funders (banks and non-banks) and insurers too, will benefit from real time trade finance market intelligence by sector, commodity and also provide a granular visibility into the different supply chains across geographies, products and services.

FINEON Exchange’s real-time marketplace will drive compelling stakeholder collaboration, raising Trade Finance’s profile as an attractive asset class for investors.

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