International Trade Financing (“Trade Finance”) represents one of the earliest forms of transactional finance, originating from systems of barter and the exchange of money, and is an essential financial backbone of global commerce to mitigate cross-border risks such as payment defaults, political instability, freight and logistical backlogs, and other force majeures to ensure seamless international trade. Nowadays Trade Finance is a vital enabler of global commerce, providing the financial instruments and structures that allow exporters and importers to bridge liquidity and risk gaps between shipment from supplier and payment from customer, especially in times of tariffs, geopolitical decoupling and supplier diversification efforts. 

Global trade hit a record $33 trillion in 2024, expanding 3.7%, or $1.2 trillion, according to the latest Global Trade Update by UN Trade and Development (UNCTAD). Over the past several decades, Trade Finance has drawn a diverse range of investors, including banks, non-bank lenders such as factoring companies and private credit funds, as well as fintech firms. Investors in this space can earn spreads of up to 10% above the base rate, offering attractive returns along with valuable portfolio diversification.

Yet, despite its fundamental role in supporting trillions of dollars in annual trade flows, its financing remains fragmented and often expensive due to high risks that could be categorized in 3 different buckets: credit risk, fraud risk, and operational risk. Understanding these risks - and how artificial intelligence (AI) can help mitigate them - is essential for financial institutions, businesses, and regulators seeking to maintain the integrity and efficiency of international trade, which ultimately benefits the end customer - the consumer.