Trade Finance's Window of Opportunity

Welcome to the 41st edition of The LogTech Letter, a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I wrote about how shippers prioritize logistics technology differently than the service providers that cater to them. This week, I’m looking at an area that seems primed for an explosion - trade finance and the technology that underpins it.

As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.

For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and I can be reached at or on Twitter at @LogTechEric.

Over the past few weeks, I’ve spoken on background to a number of importers while writing at And one question I ask is, at what point does the soaring cost of moving an ocean container start to make the economics of the goods inside that container unviable? Is there a threshold over which the cost of transport affects the margins on the goods too much to ignore?

The answer is different for different shippers, of course. A low-cost footwear importer has a different cost equation than a high-value technology component shipper. But the root question is almost more important than the answer - containers move between markets not because it’s fun to load ships and sail around the world. They move because of the goods inside of them, and in the world of logistics, we can often forget it’s the goods that matter, not the receptacles that contain them and the conveyances that carry them. Those goods have value and someone pays for them to be produced and the title over them is hugely important.

Which is a labored way of me addressing what I see as an area where technology is inserting itself into the logistics discussion: in the form of trade finance. I’ve written about this topic a bunch in recent years, primarily through the lens of incumbent and startup technology providers using some solution or data lever to enable more efficient deployment of capital.

Let’s maybe first talk basics. What do we mean when we say “trade finance.” I look at that concept as the financing of the goods in a shipment from order to delivery. And that leads to a load of questions. Which entity finances those goods? What are the terms of the financing? Which party enters into the financing arrangement with the financier? When does ownership of the goods transfer? Is a letter of credit necessary?

Then there are the technology-related questions to ask. What can digital platforms do to make that process faster, more efficient, more accurate? How does software reduce risk to financiers? Can it make financing possible to new sets of financiers? What data elements are needed, and from whom and when?

Broadly speaking, the bigger question is, how can technology enable new mechanisms that change the nature of how goods are financed? Sometimes this is couched in terms of working capital solutions, something the Swiss visibility provider Arviem has built a business use case around. Sometimes it’s more basic, around merely giving a small importer access to capital (or getting it better terms on capital than it ordinarily would have garnered from a bank).

The foundational idea around new trade finance models is leveraging the customer relationship that a shipping line, forwarder, or software provider has with an importer or exporter into better access to financing. In essence, that logistics entity is occupying some or all of the role a bank would have in a financing transaction, based on a simple premise: I know this customer and therefore I am able to understand the risk more fully than a bank with an arm’s length relationship would be able to.

Data is, of course, the key element here. Arviem, to go back to that example, uses its primary product (a visibility solution) to reduce the risk related to a shipment and thereby create situations where ownership of goods can be timed optimally for various parties in that shipment. A forwarder can look at a historic volume of data for its customers, create a risk matrix, and decide which ones are best suited to get access to trade finance. Ocean carriers likewise can look across a huge catalog of data around shipments from its customers and make similar determinations.

There have been a raft of niche approaches to this, often driven by startups. Mundi is targeting exporters in Mexico, as well as eyeing a white-labeled trade finance product for forwarders in that market. Cross-border freight broker Nuovocargo believes there is a big opportunity to use its digital platform to enable financing of goods it is moving. Digital forwarder Beacon raised $15 million in mid-2020 with a model based around turning execution of its customers’ shipments into trade financing opportunities. Flexport long ago realized using customer data to offer capital solutions helped feed its own flywheel. It helped those shippers and their suppliers, and gave Flexport an alternative revenue stream. More holistically, helping shippers grow their volume theoretically gives Flexport access to more potential business (freight, customs, insurance, and yes, capital services) down the line.

Incumbents are in the game too. Jaguar Freight Services in April partnered with order finance company King Capital to give its shipper customers trade finance options, for instance. I could tie up the rest of this newsletter just linking to such examples from established forwarders and software providers.

There are lessons to be learned though. In one sense, trade finance feels like one of those “if this hasn’t been done before, there must be a reason” opportunities. I always default to the idea that if money is directly involved, solutions will be developed. So why have scalable trade finance products been so elusive? Why doesn’t every shipper have the option of geting a low-friction, one-click trade finance option?

Well, there are situations like the Greensill Capital meltdown. I won’t go into too much detail here, as the Financial Times has covered it in excruciating detail the past few months. Those situations always have a way of poisoning the well, even for well-intentioned capital solutions providers. There always seems to be a veneer of sketchy engineering in the world of finance that keeps people skeptical - we are, after all, still barely a decade out from the credit default swap fiasco.

But all this is to say that there appear to be exciting opportunities, for financiers, for suppliers, for importers, and for forwarders and software companies looking to build diversified revenue streams. And it’s all based on the idea that logistics data is potentially more valuable in adjacent use cases than it is in the more direct ones to which it is usually applied.

Here’s a roundup of pieces on the past week from my colleagues and myself (note: there is a paywall):

  • In a week of big news, the biggest was clearly E2open buying BluJay Solutions for a whopping $1.7 billion. That’s far less than Panasonic paid for Blue Yonder in April but it contributes to a sense that supply chain management software suites are in demand, valued by public markets (since E2open just went public in February), and that consolidation is needed. Consolidation tends to lead to reverberation, though. As established vendors get bigger, there’s space for all the startups flooding the space to fill gaps left by competitors merging.

  • Speaking of which, project44 continued its part in the rollup of the freight visibility space with the acquisition of competitor ClearMetal. That’s its second deal for an ocean visibility provider in three months (after buying Ocean Insights in March). As Jason Duboe, project44’s chief growth officer, told me, “our customers are thinking from an import and export perspective.”

  • No one better at dissecting the pitfalls of the TMS space than Ryan Schreiber at CarrierDirect.

  • Another interesting wrinkle from Freightos: the company has brought on co-loader Vanguard Logistics to provide instant quoting and booking to forwarder customers through its WebCargo platform. This is distinct from co-loaders that look to sell LCL capacity and services direct to shippers on Freightos’ marketplace.

  • My colleague Peter Tirschwell tackles the always thorny issue of automation at US West Coast ports in his latest column.

  • DAT Solutions is integrating FourKites visibility data into its load board, meaning shippers using the board can get predictive ETAs and other services for third party carriers they ordinarily would have little access to and control over.

And here are some recent discussions, reports, and analysis I found interesting:

  • Interesting forwarding technology market map here from Transport Intelligence. I’d quibble with some of the categorization, and there are definitely some names missing that I’d include, but solid overall.

  • I’m writing more and more about low-code and no-code and here’s a solid piece from Vizion about what that means from an ocean freight visibility perspective.

  • This is a cool visualization from FourKites.

  • Nice outlook from S&P Global on the container shipping market.

  • If you want a deep dive into early-stage VC, and what separates a supply chain-focused fund from a more general one, highly recommend giving this podcast, between Julian Counihan at Schematic Ventures and Ty Findley at Ironspring Ventures, a listen.

  • Interesting interview here with Vaishnav Shetty at ECU Worldwide about the consolidator’s new digital platform ECU360.

  • And finally, something to watch out for, from a VC perspective, on the rather silly antitrust bills making the rounds in Congress these days. For the record, I think all the permutations of these are rather untenable, as Erin Griffith at the NYT notes here.

Some upcoming events I’ll be involved in:

  • The IAPH World Ports Conference June 21-25 is right around the corner. I’ll be involved in various technology-related elements of the program, including sessions on how ports should prepare for automation, demystifying data collaboration, a session on how ports of all sizes can embrace the technology on offer, and a chat with MSC’s André Simha about how electronic bills of lading might impact ports. Register here.

  • Joining an impressive list of experts (of which I’m the least qualified, by far!) to discuss container shipping regulatory considerations that financial institutions need to be aware of. Register here for the free webcast June 8 at 10 am EST. 

  • Also on June 8, I’ll be talking to the inimitable Audrey Ross of Orchard Custom Beauty about how she prioritizes technology investment during the JOC’s Canada Trade and Shipping Outlook webcast at 1 pm EST. The event is free - register here.

  • Moderating a session on where TMS is headed at 10 am CET June 22 as part of SupplyStack’s TMS Insight Series.

  • Moderating two sessions at the SMC³ Connections conference June 28-30. 

Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.