Traditional Trade Finance for U.S. and Canadian Middle-Market Companies
Report Summary
Traditional Trade Finance for U.S. and Canadian Middle-Market Companies
Despite the increasing importance of open-account transactions, nearly 80% of U.S. and Canadian middle-market companies continue to use traditional trade finance.
Boston, MA, October 8, 2008 – A new report from Aite Group, LLC explores the parallels and discrepancies between the view of middle-market companies and that of top global trade banks in the application of traditional trade finance. The report also examines the use of bank-provided traditional trade finance mechanisms among Canadian and U.S. middle-market companies.
The report is based on Aite Group's Q2 2008 survey of 40 U.S. and 25 Canadian middle-market companies and its Q3 2008 survey of 19 of the top 100 global trade banks. According to the report, opportunities exist for banks to continue to profit with traditional trade finance while migrating to support open-account transactions as well. Although U.S. and Canadian middle-market companies currently use open-account transactions, many of them also desire traditional trade finance, especially documentary credits and standby letters of credit (L/Cs). In fact, a total of 79% of survey participants use traditional trade finance, of which 74% use both open-account transactions and traditional trade finance, and 5% use traditional trade finance alone.
"Banks can leverage their trade finance expertise when it comes to document review and knowledge of legal requirements by country to assist their clients with purchase order and invoice management for open-account transactions," says Nancy Atkinson, senior analyst with Aite Group and co-author of this report. "By entering into non-financed transactions, banks can provide broad-based support for middle-market clients and assist in the transition toward open-account transactions."
This 17-page Impact Note contains 13 figures. Clients of Aite Group's Wholesale Banking service can download the report.