Trade Finance Automation Looks to Recode Supply Chain Payments

For untold decades, global trade has run on an unlikely fuel: paperwork. And for an equal amount of decades, trade finance, which hinges on mitigating the risks inherent in international transactions, has also run on paper.

But in an era where cargo ships are tracked by satellite and invoices processed by AI, digital-native solutions like trade finance automation are coming to pressure old systems by rewriting supply chain code.

Legacy instruments, like letters of credit and documentary collections, have long served as critical tools for reducing counterparty risk and ensuring that sellers receive payment upon fulfilling contractual obligations.

These mechanisms, deeply embedded in global commerce, have historically been perceived as conservative and procedural. Yet today’s trade environment demands agility, precision and enhanced risk management.

As evidenced by the Tuesday (May 20) news that Ontik has raised $3.7 million in a seed round to expand its digital trade credit platform, the modernization of traditional trade finance elements is being catalyzed by technology.

Financial institutions, in turn, are revisiting the mechanics and applications of time-tested instruments to meet new challenges, like the impact of tariffs on their customers’ global supply chains. A new question is gaining urgency: Can algorithms replace letters of credit?

Read also: CFOs Reimagine Flow of Funds as Volatility Becomes the Norm

As tariffs rise and trade routes shift, businesses are seeking ways to manage risk, preserve liquidity, and ensure contractual integrity.

Traditional trade finance processes are a legacy cost center, mostly due to transaction-related paperwork and labor. And yet, the system persists. The reason? It’s largely because the trillions of dollars in global trade demand mechanisms that safeguard against the many uncertainties of cross-border transactions.

In volatile, high-risk or legally ambiguous scenarios, letters of credit remain indispensable. Their utility is not just about payment, but about enforceability, reputation and institutional backing.

But for routine, low-risk trade between trusted parties in digitally advanced jurisdictions, automated trade finance is not only viable. It’s already happening.

Some countries are moving decisively in this direction. Singapore, for example, in 2021 launched the TradeTrust framework to facilitate legal recognition of electronic trade documents, while the UAE has implemented a nationwide blockchain-based trade finance registry. These initiatives hint at what a globally interconnected, algorithm-driven trade finance ecosystem might look like.

Data from the March 2025 “Global Money Movement: Singapore Edition,” a PYMNTS Intelligence and TerraPay collaboration, reveals that with the total value of Singapore’s international trade in services reaching nearly $750 billion in 2024, the city-state’s businesses are recognizing the advantages of modern payment solutions.

Beyond digital documentation, trade finance is now entering an era of automation, leveraging advanced technologies like artificial intelligence (AI), robotic process automation (RPA), and machine learning to streamline operations, reduce human error, and cut processing costs.

Read also: Currency Matching Innovations Critical as Tariffs Shake Up Cross-Border B2B Trade

The trade finance world is at an inflection point. Just as algorithms are transforming equity trading, lending and insurance, they are beginning to reshape the ecosystem of global trade finance. But the shift won’t happen in a single leap. It will be incremental, adaptive, and, most of all, hybrid.

The future isn’t one where letters of credit vanish. It’s one where they evolve — becoming smarter, faster and more accessible. In that world, algorithms don’t replace trust. They help build it.

“When you have volatility in the values of currencies it adds to what is ‘necessary’ to carry out successful cross-border payments and an overall payment strategy,” Rob Seidman, head of U.S. Bank’s Avvance, told PYMNTS. “The holy grail is a frictionless experience.”

Visa, in collaboration with PYMNTS Intelligence, found across eight industries and 23 countries, as documented in the “2024-2025 Growth Corporates Working Capital Index,” that 7 in 10 users of financing report improved buyer-supplier dynamics. 

At the same time, automation is also aiding regulatory compliance. AI-driven tools can monitor transactions against anti-money laundering (AML) and know-your-customer (KYC) frameworks, generating alerts for suspicious activities and enabling proactive intervention.

Instruments like standby letters of credit are gaining traction as hybrid instruments that combine the security of a guarantee with the procedural flexibility of a credit facility. This is particularly attractive to multinational firms navigating multiple jurisdictions.

Ultimately, trade finance is not just about payment anymore. It’s about strategy, foresight and resilience.

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