Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Digital Export Trends and Global Trade Fintech Opportunities
Digital Trade | Dec 10, 2024
Image: Global Trade Outlook and Statistics (WTO, Apr 2024)
WTO Global Digital Trade Growth Insights and Fintech Opportunities
The World Trade Organization published a comprehensive report on 'Global Trade Outlook and Statistics' (48 page PDF, April 2024) highlighting the growth of digitally delivered services in 2023 which accounted for 13.8% of total global exports (9% increase year over year) for a total value of $4.25 trillion.
See: IMF Working on Global CBDC Platform to Revolutionize Global Remittances and Trade
This includes categories such as IT/software development and support, financial services, media streaming, research, and e-learning. Canada ranked 16th with the United States, United Kingdom, and Ireland capturing the top 3 spots among digital exporters (see table below). There are significant opportunities for fintech in the expanding digital global trade sector.
Top 20 Digital Exporters
Visual capitalist created a great infographic that helps you visualize and compare the top 20 digital exporters table data below, view here.
| Rank | Country | Export Value (USD) | Global Share (%) |
|---|---|---|---|
| 1 | United States | $649 billion | 15.3% |
| 2 | United Kingdom | $438 billion | 10.3% |
| 3 | Ireland | $328 billion | 7.7% |
| 4 | Germany | $279 billion | 6.6% |
| 5 | India | $257 billion | 6.1% |
| 6 | France | $225 billion | 5.3% |
| 7 | Netherlands | $207 billion | 4.9% |
| 8 | China | $207 billion | 4.9% |
| 9 | Japan | $162 billion | 3.8% |
| 10 | Switzerland | $155 billion | 3.7% |
| 11 | Singapore | $153 billion | 3.6% |
| 12 | Belgium | $143 billion | 3.4% |
| 13 | Sweden | $132 billion | 3.1% |
| 14 | Spain | $128 billion | 3.0% |
| 15 | Italy | $125 billion | 2.9% |
| 16 | Canada | $118 billion | 2.8% |
| 17 | Luxembourg | $112 billion | 2.6% |
| 18 | Denmark | $110 billion | 2.6% |
| 19 | Hong Kong | $105 billion | 2.5% |
| 20 | Australia | $100 billion | 2.4% |
Select Data Insights from the Report
1. Growth by Regions
- North America: The U.S. leads with $649 billion in digital exports due to its strong technology, great infrastructure, and large consumer market.
- Europe: Countries like the U.K., Ireland, and Germany are top exporters and rank high on the list thanks to strong technology sectors and supportive government policies.
See: 2024 Global Payments Growth, Trends, and Fintech’s Edge
- Asia: India and China are rising stars and growing fast. India’s IT services grew 17% last year, and China’s digital exports doubled since 2019.
- Emerging Markets: Singapore and Hong Kong are key players in Southeast Asia, driving growth in fintech and IT services.
2. Key Trends
- Digital trade grew 9% yoy and reached $4.25 trillion in 2023. Digital services like IT and financial services enjoyed double-digit growth as more and more businesses and consumers transact more online.
- Unlike physical goods, digital services were less affected by conflicts and supply chain issues. They bounced back quickly after the pandemic with trade now 50% higher than pre-pandemic levels.
- Sustainability and ESG compliance is becoming an important part of digital trade. For example in 2023, demand for insurance services that addressed climate and geopolitical risks grew by 17%.
- Regions with smart policies and trade agreements like the EU experienced strong growth in digital services (i.e., business services alone grew by 13% in 2023).
3. Breakdown by Service Type
- Business, professional, and technical services: 41.2%.
- Computer services: 20.5%.
- Financial services: 16.0%.
- Intellectual property-related services: 10.9%.
See: Reversing Canada’s Digital Economy Productivity Decline
- Insurance services: 5.2%.
- Telecommunications services: 2.6%.
- Other personal, cultural, and recreational services: 2.1%.
- Information services: 1.5%
Fintech Opportunities in Digital Trade
1. Faster, Cheaper International Payments
Fintech companies like Wise and Ripple have democratized international payments. In Canada, Buckzy Payments is leading the charge with real-time cross-border payment solutions. Their platform allows businesses to transfer money across borders instantly which helps exporters avoid exchange rate risks and save on fees.
2. Smarter Trade Financing Options
For many exporters, managing cash flow is a challenge, especially when dealing with international buyers, however it an be easier with tools like invoice factoring and export insurance.
See: Breaking Down the Steps to Achieving Full Business Ownership in a Foreign Market
Canadian fintech FundThrough specializes in invoice factoring which is a fintech tool where businesses get paid upfront for their invoices. Their service is made for small and medium-sized exporters, helping the manage cash flow and expand internationally.
3. AI Insights to Drive Better Trade Decisions
Artificial intelligence is transforming trade decisions. Fintech companies can create platforms that analyze global markets, predict and pinpoint demand, improve trade route planning, and identify growth opportunities. Canadian AI startup, Coveo, provides businesses with advanced analytics to optimize operations and market strategies.
4. Automating Taxes and Compliance
Dealing with complex regulations and taxes is simplified by fintech solutions. Canadian company Wave Financial provides tools for automating invoicing, tax calculations, and financial compliance. While Wave focuses more on small businesses, its software can be adapted for exporters (opportunity). Imagine software that calculates tariffs, files tax reports, and ensures compliance with local laws and all in real time. This reduces errors, saves time, and helps businesses avoid costly penalties.
5. Financial Products that Promote Sustainability
Sustainability is becoming a global trade requirement. Fintech companies are creating tools that track carbon emissions, monitor ESG compliance, and provide financing for green initiatives.
See: Export resources for Canadian firms
Canadian fintech CoPower (now part of Vancity) offers green investment products such as loans for renewable energy and energy-efficient projects. These tools help companies align with sustainability goals while accessing financing for eco-friendly initiatives.
Challenges in Digital Trade
While digital trade opens up huge opportunities, it also comes with a lot of challenges that businesses must overcome to reap the rewards.
- Different tax rules in each country make it tough for exporters to stay compliant, adding extra headaches for businesses trying to expand globally.
- Increasing tariffs and trade restrictions are making it harder or more expensive for goods and services to move freely across borders.
- Political conflicts can disrupt trade routes, trigger sanctions, and create uncertainty, all adding risk for businesses looking to expand to new markets.
What Canada Needs to Do Next
To boost its ranking position as a leader in digital exports, Canada needs to invest in fintech innovation to solve practical world trade challenges. They need to build robust and reliable solutions that make global trade cheaper, more streamlined, and more predictable.
See: A Guide on Global Entity Management: Strategies & Services
Industry and government need to build more global connections and partner with global fintech hubs and trade organizations that can help Canadian fintechs tap into global expertise and markets. Canada needs simpler, trade-friendly policies to make it easier for businesses to expand their digital exports and improve Canada's competitiveness in global markets.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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