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July 11, 2023

Emerging opportunities in global trade: goods, money and data


In our increasingly interconnected world, global trade plays a vital role.

No country can thrive in isolation, as every region relies on trade with others for more than 25 percent of at least one essential product. The global trade industry has experienced significant growth, reaching a record level of  $32 trillion in 2022, driven by various macroeconomic factors. However, disruptions in supply chains have compelled businesses to adapt and prioritize resilience. Small and medium-sized enterprises (SMEs) are seizing opportunities in global manufacturing and sales, while trade agreements foster supplier diversification and promote sustainability.

Looking ahead, geopolitical tensions and conflicts will impact the industry in 2023, but we believe global trade is here to stay. At QED, we see immense potential for technological advancements in global trade, making it an exciting domain for fintech growth and innovation.

Our investments in the space such as Nuvocargo, Vixtra, Cedar and many others that we will soon be able to disclose, as well as our unique global footprint across the U.S., LatAm, Europe, Asia and Africa, give us unique insights into how fintech will shape global trade in the next five years. We couldn't be more excited about the companies emerging in the space and the opportunities to tackle this $32 trillion market, as can be seen in the graphic below that highlights the scale of the worldwide opportunity.

Despite its vastness, global trade still lags in technological adoption, relying heavily on manual processes and offline channels. Fragmentation across the value chain leads to coordination, visibility, and data sharing challenges. Trust, a vital aspect of international trade, becomes more difficult to establish when dealing with different legal jurisdictions, currencies, and banking systems. Our belief stems from the understanding that financial services, catering to importers, exporters and carriers, hold the key to forging deep customer relationships and unlocking value creation.

International trade is often associated with the physical movement of goods across borders. However, beneath the surface, every trade transaction involves the simultaneous movement of three crucial elements: goods, money, and data. At its core, international trade is a complex interplay of these three components. Our conviction lies in the idea that successful businesses can be forged by strategically addressing one of these areas through an initial wedge and expanding into others, such as lending, payments and insurance. In this blog, we will explore how businesses can leverage this triad of goods, money, and data to unlock the true potential of international trade in the ever-evolving fintech landscape.

Moving Goods

  • The opportunity: International trade has become increasingly complex and challenging, requiring multiple parties to coordinate logistics, clearances, and transportation. To navigate this complexity, most buyers rely on freight forwarders to develop logistics strategies and coordinate various parties in the supply chain. A freight forwarder is a firm specializing in the arrangement of cargo on behalf of shippers. The traditional freight forwarding market is fragmented with a long tail, characterized by broken channels, with multiple parties performing various steps in the logistics process. The market is relatively commoditized, and traditional players yield low EBIT margins, ranging from 1-11%. Digital freight forwarders can disrupt the market by negotiating better rates, consolidating volumes, and reducing costs through new technologies, from AI and predictive analytics to IoT and system integrations.
  • Why now? The recent shift from a supply chain strained by unprecedented pandemic demand to an oversupplied freight market has significantly impacted the bottom lines of freight forwarders, shippers, and carriers. Their revenues, which are closely tied to shipment volumes, have been affected by the transition from high demand to a weaker environment. As the Freightos Baltics Index (FBX) reverts to pre-pandemic levels and rates stabilize, freight forwarders are more open than ever to adopting new technologies that will help them streamline operations and save money. Tech-enabled forwarders can be more efficient and offer competitive pricing while generating higher margins.
  • Market stat: The freight forwarding industry is both significant in size, estimated at $200 billion, and fragmented. To give a sense on the opportunity size for digital freight forwarders, Flexport, one of the largest and most well-known digital freight forwarders, achieved $3 billion in revenue during the peak of the 2021 market and was valued at $8 billion in 2022.
  • The challenges: Freight forwarding is complex business since the actual logistics process is not fully in the freight forwarder's control. Moving physical goods means operational challenges will never go to zero and, while there has been a push for digitization and automation, incumbents are still low in tech adoption. On top of that, established profitable incumbents have a lot of pricing power and scale benefits. Margins are low and volume is key. However, we firmly believe that technology has the potential to revolutionize the freight forwarding industry. By automating key processes and leveraging AI capabilities, freight forwarders can streamline operations, reduce costs, and unlock higher margins.
The fintech play: As the central hub connecting multiple parties within the intricate web of global supply chains, digital freight forwarders possess a unique advantage. Their extensive relationships and access to proprietary data enables them to offer tailored finance solutions, from supply chain financing to insurance, to the carriers, importers and exporters.

Moving Money

  • The opportunity: Today, the cross-border payments market is predominantly dominated by correspondent banks connected via SWIFT. However, these players often come with high costs, charging around 4% in fees, and sluggish settlement times of at least 2-5 days. The process itself is lengthy and bureaucratic, with most B2B foreign exchange (FX) negotiations taking place over the phone, lacking transparency and burdened by hidden fees. SMEs, in particular, face challenges in negotiating favorable rates.
  • Why now? The pandemic and recent geopolitical conflicts like Russia's invasion of Ukraine, and escalating tensions between major economies like China and the United States have underscored the need for resilience and redundancy in supply chain. As companies push to diversify their supply base to new countries, cross currency payments should grow both in volume as well as coverage in currencies. To address that, new alternatives have emerged, including fintech solutions that provide access to multiple local real-time payment, specialized money transfer operators (MTOs) networks and aggregators, distributed ledger technology (DLT) payment networks, central bank digital currencies (CBDCs) and stablecoins. However, navigating multiple rails can be daunting. On top of that, navigating fraud management, adhering to Know Your Business (KYB) compliance requirements, conducting reconciliations becomes even more challenging with a further diversified supplier base across multiple borders.
  • Market stat: $156T cross-border payment flow, out of which $40 trillion was done without the US dollar as one of the pair of currencies.
  • The challenge: Financing and foreign exchange (FX) services are commonly bundled together, with the dominant players in the financing market dictating the choice of FX partner, giving them significant influence over the selection process. With initial low take rate, businesses need to process high volume to build sizable revenues. On top of that, they need to be able to abstract the complexity of handling multiple payment rails in order to gain adoption across the multiple players in the supply chain. Our view is that a specialized payment solution for trading businesses that is offered through a B2B software with payment orchestration and AP/AR automation can be a compelling way to increase margin and stickiness.
The fintech play: There is opportunity for vertical B2B payments platforms designed for international trade to emerge. By leveraging multiple rails and global partners these platforms could offer smart payment orchestration across rails and automate the transaction (the decision, rate setting, transaction fee agreement etc). And by leveraging trade documents and global supply chain software data, they could automate and reconcile payments, avoiding errors and overspend.

Trade Finance

  • The opportunity: Goods shipped can take 30-90 days from port-to-port, which makes the long supply chain cycle turn into a significant working capital problem. For importers, it is hard to manage the gap between time of inventory purchase and time of final sale, and exporters struggle to manage the same gap between upfront purchase order payments and final balances paid-on-delivery. Although banks have appetite for this paper, the cost of managing risk and performing initial underwriting on individual shipments makes serving SMBs especially hard. Banks mostly offer letter of credit dedicated to large traders that do not require collateral for underwriting. As a result, small and mid-sized traders end up underserved, even though they account for 30-40% of cross border trade volume.
  • Market stat: $5.2 trillion global trade finance and $1.7 trillion global trade financing gap. Alternatively, these tech-enabled platforms can embed loans to exporters looking to provide extended payment terms or importers seeking to buy now and pay later. Access to financing is a critical pain point for SMBs involved in international trade, and addressing this need is just the beginning. Our thesis suggests that trade finance can serve as a launching pad to offer a range of adjacent financial and transactional services, along with supplier sourcing, ultimately evolving into a holistic marketplace platform for importing SMBs. The market is ripe for this evolution, as higher-value services have become fragmented and commoditized. By consolidating and streamlining these services into a comprehensive one-stop-shop solution, tech-enabled trade finance platforms can create significant value for SMBs.
  • The challenge: To effectively serve SMEs, trade finance providers must possess a deep understanding of the associated risks and implement measures to mitigate them both during the underwriting process and throughout the collection phase. Key risks include:
  1. Risk of fraud from suppliers and/or buyers: By leveraging alternative data, such as transaction histories, credit reports, and industry-specific information, trade finance providers can assess the likelihood of fraudulent activities.
  2. Risk of delivery from the supplier: Monitoring supply chain data and utilizing technology-enabled tracking systems can help mitigate the risk of delivery delays or non-compliance with contractual obligations.
  3. Risks of transport: Cargo insurance and collaboration with reliable freight forwarders can mitigate risks related to transportation, ensuring that goods are protected and reach their intended destinations.
  4. Risk of quality of goods dispute at delivery: Cargo inspection and insurance is critical, and liability needs to tied well by contracts to mitigate this risk.
  5. Risks of compliance: Adhering to anti-money laundering (AML) regulations and customs requirements is essential. Leveraging data and technology solutions can enhance compliance processes and minimize associated risks.
  6. Risk of payment: Assessing the buyer's financial health, creditworthiness, and ability to make timely payments is crucial to mitigate the risk of default. Alternative data sources can provide insights into the buyer's financial capacity.

In addition, distribution and capital requirements pose significant challenges for financing businesses. However, there are potential solutions on the horizon. The growing acceptance of electronic copies of Bill of Lading (eBLs) as legally valid documents and coordinated private/public partnerships for data sharing and fraud prevention can help mitigate risks. Additionally, partnerships between banks and fintechs offer a way to bridge the capital intensity requirement. These developments show promise in improving efficiency, reducing risks, and expanding access to financing for SMEs.

The fintech play: Tech-enabled trade finance players have a unique opportunity to revolutionize the industry by harnessing a combination of data from open finance, supply chain software, and trade-specific documents, as well as proprietary data. This data-driven approach allows for better underwriting and the provision of working capital to small and medium-sized enterprises (SMEs). These players can offer financing solutions through invoice factoring or by collateralizing the shipment, generating substantial gross profit margins of 20-30% for short-term loans.

Moving Data

  • The opportunity: In the complex realm of international trade, data is dispersed among multiple stakeholders within the supply chain, resulting in fragmented information flows. This fragmentation requires intricate workflows that often depend on manual processes and the exchange of physical documents. Consequently, vital data, including real-time shipment tracking, becomes challenging to obtain, leading to inefficiencies and delays.

    Additionally, navigating the diverse regulations and trade rules across different jurisdictions adds further complexity and opacity to the processes. Due to that complexity, a single cross-border transaction may require up to 50 sheets of paper that are exchanged with up to 30 different stakeholders and the digitalization of global trade remains relatively minuscule, with less than 1% currently conducted digitally.

    As a result, payments across the international supply chain are error prone with 12-20% of all ocean freight invoices due a refund because of errors created by the ocean freight invoicing process, according to experts. Despite their best efforts, logistics and A/P teams miss the mark in identifying ocean overspend and generic third-party post audit vendors are ill-equipped to deal with ocean freight. In addition to that, the International Chamber of Commerce highlights that paper-based processes impose a burden on SMEs in international trade. Digitalization can help close this trade finance gap.
  • Market stat: digitizing the bill of lading, a legal document that describes the shipment agreement, could save alone $6.5 billion in direct costs and enable between $30 billion and $40 billion in new global trade volume.
  • Why now? The industry is showing readiness for the digitalization of the bill of lading for several reasons. Firstly, digital standards for the bill of lading have been set and accepted by major container carriers through Digital Container Shipping Association (DCSA), a collaboration between several large container shipping companies, providing a foundation for data and process standardization. These carriers represent a significant portion of containerized trade. Furthermore, electronic bill of lading transactions have already been successfully implemented by providers like Bolero International and WAVE BL over the past 25 years, demonstrating the viability and functionality of electronic platforms for exchanging bills of lading.
  • The challenge: This is a highly competitive and fragmented space. Gaining scale beyond the first couple of millions in ARR is challenging as it becomes harder to differentiate and compete. Go to market is key so embedded solutions may be a compelling strategy.
The fintech play: We envision the creation of a data aggregator platform, similar to a "Plaid for Trade," that can effectively consolidate and streamline trade-related data. This platform would utilize optical character recognition (OCR) technology to process documents and leverage language models to provide summaries and highlight critical information. Additionally, the establishment of an open data environment would play a crucial role in enabling data sharing and collaboration among stakeholders.

Countries like Singapore and Abu Dhabi have already made significant strides by implementing regulatory frameworks that treat digital documents equally to their paper-based counterparts. Moreover, various tech players have developed closed systems tailored to address specific pain points within trade. However, the industry is still lacking an efficient and centralized marketplace, exchange, or infrastructure that can drive comprehensive trade innovation. By embracing open trading data, other platforms can leverage this valuable resource to enhance cost efficiency and expand access to capital.


The landscape of global trade is witnessing the emergence of numerous exciting businesses that are addressing the three key wedges we highlighted earlier: goods, money, and data. QED has taken great pride in supporting some of these innovative ventures.

In the upcoming months, we are thrilled to present a series of interviews with select companies from our portfolio. These discussions will delve deeper into the intersection of global trade and fintech, shedding light on the transformative potential within the industry. If you are actively building a business in this space or believe there is a noteworthy company we may have overlooked, we encourage you to share your insights and recommendations with us. If you are actively building a business in this space or believe there is a noteworthy company we may have overlooked, please hit me up on LinkedIn or at Together, let's explore the frontiers of global trade.