August 29, 2023

The Overlooked Benefits of Supporting International Traders

In our previous article, we discussed the major funding gap faced by UK businesses engaged in international trade and called on financial institutions to view this as an opportunity. There are compelling reasons why focusing on international traders can benefit banks.

Research by major banks has revealed that businesses trading internationally generate significantly higher income compared to domestic clients of similar size and turnover. One bank found income from international clients was over 300% more on average.

There are several factors driving this differential:

  • International traders utilize more services like foreign exchange, international payments and trade finance products. This naturally translates into more commission and fee income.
  • Supply chains for international trade are longer and more complex. Working capital needs are higher, resulting in larger financing requirements.
  • International staff need corporate credit cards and expense management tools that work globally.
  • Services like import/export letters of credit, guarantees and insurance are required.
  • International clients have more touchpoints with a bank, driving loyalty when served well.

Some may argue the risks of international trade outweigh the benefits. But these risks can be managed, just as with domestic clients exposed to global market variables like commodity prices. With proper due diligence and risk management, international traders offer an attractive upside.

In summary, international trade clients may require more services and present cross-selling opportunities. Their loyalty also grows when banks understand their needs and provide tailored solutions.

Financial institutions would benefit by focusing more on international traders and providing services like trade finance to support them. The funding gap presents not just a challenge, but a chance to innovate.

We at Finativ have long experience helping banks develop trade finance capabilities. Please reach out if you want to discuss capturing this opportunity. Supporting international traders can significantly boost income while also fueling wider economic growth.

For more information, contact:

Richard Carter, Consulting Director, Finativ

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