Vietnam’s Prospects in Cross-Border Trade Cooperation and the Online Trade Finance Model

The rapid development of digital transformation supporting the digitalization of trade, accompanied by the conclusion of a number of free trade agreements, has been pushing Vietnam to grasp the opportunities of digital trade to be ready for cross-border trade cooperation with other countries.

1. New opportunities for businesses brought about by cross-border trade cooperation

Cross-border cooperation brings about significant benefits, some of which can be mentioned as follows:

• Allows domestic businesses, especially small and medium-sized enterprises (SMEs), to reach international partners/customers easily and at a lower cost than traditional offline methods.
• Improves participation parties’ trade competitiveness and supports them in entering the global digital economy. Businesses can easily access global markets, connecting with customers to conduct business and optimize transactions through e-commerce platforms.

An important factor supporting cross-border e-commerce transactions is international trade finance, with typical finance instruments and services such as: Letters of Credit (L/C), export financing, and bank guarantees. According to the 2023 Trade Finance Gaps, Growth, and Jobs Survey published by the Asian Development Bank (ADB) in September 2023, the global trade finance gap (the difference between requests and approvals for financing to support imports and exports) had increased to a record high of 2,500 billion USD in 2022 (from 1,700 billion USD in 2020), and SMEs are the most affected with 40% of trade finance requests being rejected. Online trade finance platforms help solve these challenges by optimizing the process of receiving requests from businesses with the application of technologies, such as OCR, AI, digital signatures, and eContract, and providing an effective source of capital financing for businesses. Both businesses and banks participating in the trade finance process receive benefits, including reduced operating costs and minimized fraud risks thanks to KYC and information updated and authenticated from relevant sources.

In addition, a number of organizations around the world are developing and deploying platforms that combine trade platforms and online trade finance platforms, moving towards one-stop platforms for comprehensive online trade process, such as China’s Easipass (E&P International Inc.) and CAIH (China Asean Information Harbor), and Europe’s EU Digital Finance Platform.

2. FPT IS’s solution supports Vietnamese businesses in cross-border cooperation

Being in the top 30 countries with the largest net export values, Vietnam has an economy greatly dependent on trade. Therefore, e-commerce activities in Vietnam play a critical role in expanding exports and helping businesses leverage digital technology to increase productivity, guiding the country towards a productivity-led growth path.

Aiming at expanding new business cooperation models and promoting cooperation projects connecting and processing cross-border commercial transactions, FPT IS, as the leading tech firm in Vietnam and the region, hopes to contribute experiences and the Made by FPT IS solution – TradeFlat digital financial ecosystem – to help remove barriers to import and export between Vietnamese businesses and overseas businesses, creating advantages in shifting global supply chains and international trade.

TradeFlat, Vietnam’s pioneering L/C Blockchain platform, streamlines L/C operations seamlessly with an end-to-end platform. In addition to efficiently managing L/C transaction processes, TradeFlat also tackles global financing challenges for businesses engaged in trade transactions in Vietnam, including: Supply Chain Finance (SCF), Electronic Guarantee (eGuarantee), and Business Financial Health Monitor.

In 2023, TradeFlat partnered with Japan’s leading trade platform, TradeWaltz, becoming the first solution duo to promote Vietnam – Japan trade effectively. Within just 3 months of beginning cooperation, the two platforms successfully conducted a PoC integrating with international L/C transactions, marking a significant milestone in cross-border trade on an online trade platform for businesses in Vietnam and Japan.

In 2024, in cooperation with TradeWindow – the technology company that owns the No. 1 online trade platform in New Zealand, TradeFlat and TradeWindow will integrate two platforms based on: API Linkage – connecting trade and trade finance related services to handle transaction flows and cross-border financing, Research and strategic planning for markets, and Collaboration with trade platforms in Australasia and other regions. The immediate goal is to conduct a successful Proof of Concept – PoC, facilitating stakeholders in trade activities in New Zealand and Vietnam to experience and apply comprehensive digitalization processes, aiming to drive rapid growth in two-way trade turnover in the coming years.

The cooperation with Tradewaltz and TradeWindow is the key to actualizing FPT IS’s vision aimed at becoming a leading online trade and trade finance platform in Vietnam that connects strategic partners in international trade activities. Moreover, this cooperation signals a step forward in fostering the cross-border trade model between Vietnam and the Japanese and New Zealand markets, as well as the broader international arena, in order to create a comprehensive digitalization model for international trade activities, accompany the Governments, Businesses, and Banks of Vietnam and neighboring countries in expanding opportunities and connect cross-border trade effectively and reliably on digital platforms.

Exclusive article by FPT IS ExpertAuthor Nguyen Hong Oanh – TradeFlat Product Manager, FPT IS