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Advancements in financial technology combined with economic and political pressures have compelled global trade organizations to seek innovative strategies for managing trade credit risk and short-term commercial liquidity needs across borders.

From the proliferation of distributed ledger platforms and supply chain financing networks to reforms in trade policy, this period of disruption has also brought new opportunities for businesses engaged in cross-border commerce.

In this post, we will examine several modern trade finance mechanisms that have emerged as popular solutions for facilitating global trade transactions with improved access, transparency and risk management capabilities compared to traditional methods.

Origins and Evolution of Trade Finance

If you ever wondered what is trade finance, simply put trade finance refers to the financial instruments and services that are used to facilitate international trade between businesses, especially in cases where there is a lack of trust or familiarity between trading parties. The concept of trade finance has evolved significantly over time, reflecting the changes in global commerce and advancements in technology.

The origins of trade finance can be traced back to ancient civilizations such as Mesopotamia and Egypt, where traders relied on primitive forms of settlement mechanisms, bartering goods for other goods or commodities. As trade routes expanded and merchants began conducting business with distant partners, letters of credit were introduced as a way to mitigate risk and guarantee payment for goods being shipped.

In recent decades, globalization has led to an even greater demand for efficient means of conducting international business transactions. With increased competition in global markets and challenges posed by currency fluctuations, new forms of trade finance have gained prominence.

Moreover, advancements in technology have further transformed how we conduct trade finance today. Electronic platforms now offer convenient ways for businesses to apply for loans or issue credit guarantees without having to go through traditional cumbersome processes.

In conclusion, it is evident that what we know today as "trade finance" has come a long way from its humble beginnings. From primitive forms of bartering to modern banking systems and now digital platforms, trade finance has adapted and evolved with the changing landscape of international trade.

Key Models and Mechanisms

Letters of credit (LCs) are one of the oldest and most popular trade finance instruments. They provide a guarantee to sellers that they will receive payment as long as they fulfil the agreed-upon terms of the transaction. LCs work by involving two banks: an issuing or opening bank, which acts on behalf of the buyer to issue the LC; and an advising or beneficiary bank, which provides notification to the seller once it receives the LC.

Factoring is another widely-used form of financing in international trade. It involves selling accounts receivable (invoices) at a discount to a third-party called a factor. Factoring allows businesses to obtain immediate cash flow by converting their sales on credit into cash before actual payment is received from buyers.

Lastly, forfaiting is often compared with factoring due to its similar nature; however, there are some significant differences between them. Forfaiting differs from factoring in many ways but primarily because it deals with open account transactions rather than documentary credits like LCs or bills of exchange commonly used in factoring arrangements. Essentially, forfaiting involves purchasing medium- or long-term receivables arising from export contracts without recourse against exporters' default risk.

Risk Assessment and Mitigation

Risk assessment and mitigation are vital components of trade finance, as they help banks and other financial institutions manage potential risks and ensure the successful completion of international transactions.

Credit risk refers to the potential loss that a bank may face if a borrower fails to fulfil their financial obligations. When engaging in international trade, banks must carefully evaluate their clients' creditworthiness before issuing any form of financing.

Country risk involves assessing the potential for loss due to economic instability or political unrest in a particular country. In today's globalized world, it is not uncommon for businesses to engage in cross-border trade with countries facing instability or conflicts.

Strategies for Mitigating Risk:

Insurance: Banks may opt for insurance coverage against losses arising from non-payment or default by borrowers.

Guarantees: Banks can issue guarantees on behalf of their clients guaranteeing payments from buyers.

Securitization: This method involves pooling together various trade finance transactions and then issuing securities backed by these pools, thus spreading the risk.

Future Outlook

One key aspect that will shape the future of trade finance is regulatory changes. With an increased focus on transparency and risk management, governments are implementing stricter regulations to mitigate financial risks and safeguard against fraudulent activities. This will ultimately lead to a more secure and efficient trade environment.

Furthermore, integrated platforms are set to revolutionize the way trade finance operates in the coming years. With the use of blockchain technology, all parties involved in a transaction can securely share information and documents in real-time. This not only increases efficiency but also reduces costs associated with traditional paper-based processes.

In conclusion, it can be predicted that over the next few years, we will witness significant transformations within the realms of globalized trade due to advancements in technology coupled with regulatory changes aimed at creating a more secure trading environment.

The forex market is all about exchanging one currency for another quickly and easily to profit from the trade. There are plenty of benefits to using this marketplace for international trade. Here’s everything you need to know about it.

Manage your risk and currency exposure

One of the biggest issues with larger international trades is that the exchange rate is going to affect your investments. Fluctuating exchange rates are going to take a chunk out of your investments if you aren’t careful, and these constantly changing prices are going to cause depreciation challenges. However, you can protect against currency exposure and other risks with careful planning.

There are three types of risks. The first is transaction exposure, where exchange rate fluctuations can affect a company’s obligations to process payments in a foreign country. Translation exposure is the risk that a company’s equities, assets, liabilities or income will change because of exchange rate fluctuations. Economic exposure is caused by the effect of unexpected exchange rate fluctuations on cash flows.

To mitigate these risks, many businesses complete forward contracts to lock in the exchange rate or use currency options to buy or sell a currency at a specific rate on or before a specific date. Using these tips can help prevent currency exposure from ruining your trades.

Keep yourself informed with forex news

Forex news can be your lifeline and your guide into the world of using forex for international trading. Keeping yourself informed of the news around your currency is going to be extremely helpful – especially if you are trading in the US dollar, which is a partner of a lot of currency pairs. Any changes in the US are going to impact a lot of financial markets. 

Being aware of the news and knowing when the news for your currency is released can help you make a plan to ensure that your international trades are bearing you a lot of fruit and some good payments! 

Adapt pricing changes for forex trading

Price action trading is all about highs and lows. You buy low, you sell high, and you try to make a profit in the middle of all this. However, if you are internationally trading, you’ve got two massive sets of data to work with. So, you need to make sure that you have a pricing strategy for the international market to find some success. 

Ensure that you are analyzing the currencies you are internationally trading, and focus on getting the best profits that you can. Having strategies and knowing how to price change is going to do infinitely more for you than simply going in blind. 

Learn and benefit

Finally, don’t be afraid to make a few small international trades and find out about the process. The forex market is going to help you make some international trades – once you learn how to use it, of course!

According to Yoshiko Nagano of Cambridge University Press, the ancient civilisations took advantage of their country's natural resources, such as gold, quartz, jade, and wood, by trading these items for food, water, and other essentials with other countries. This method is what they call the Barter System, and this was carried out for years on end before the standardisation of coinage and paper bills.

The Bretton Woods Agreement established the Gold Exchange Standard at the end of World War II. As a result, countries fixed their national currency exchange rates to the US dollars convertible to gold at a fixed rate. Not only that, but it did now allow convertibility to be available to individuals and companies, only to central banks. However, when the US dollar convertibility to gold was terminated, the Bretton Woods System ended in 1971.

How does a paper hold any value if it has no support from anything? Well, that is where concepts like Legal Tender come in. The Fiat System, which we still use today, has an assigned value to a currency declared at a Legal Tender. It means the government decides if a medium of payment should be recognised for a financial transaction, trade settlement, or commerce in a country or jurisdiction. Some Fiat currencies, like the US dollars and the Euro, are internationally accepted. People use them for international trade because the world's most credible governments and largest economies support them. A Fiat currency has value because it is enforced by the government and because exchanging parties agree on its value.

Let's talk about digital currency, on the other hand. Based on the statistics of CoinMarketCap, Bitcoin is still the number one cryptocurrency in the world, with a market cap of $930,151,472,692 as of August 2021. Bitcoin is a digitally created asset held electronically, similar to a digital photograph or document, and does not deteriorate over time. The traders attentively guard the value of bitcoin on how it fluctuates from time to time. Cryptocurrencies vary in features and objectives, as subsets aim to solve some of the perceived challenges of Fiat currency and aspire to become a form of money to make payments or store value. 

Inspired by the revolution started by Bitcoin, many organisations formed their digital currency. Most of these currencies circulate intrusted crypto trading platforms, such as the Pattern Trader website. People worldwide have already been exchanging bitcoin for goods and services, speculating that bitcoin will have a determined value. Citizens, however, understand that Bitcoins can not replace government-issued currencies like the US dollar as they need to pay for their taxes and other government fees using the official currency. It is the upgraded way of buying and paying for things that we would like to have. Bitcoin has way more buying power compared to before. In 2010, Laszlo Hanyecz, a Florida resident, spent 10,000 BTC on two pizzas at Papa John's Pizza. The transaction was the first time someone used BTC for a business transaction with a real company. Nowadays, a bitcoin is worth 49,597.10 US dollars, so technically, it was the most expensive pizza ever sold. Another essential of this digital coin is that it is divisible and portable. You can send any quantity of bitcoin a lot quicker than shipping or sending cows or bars of gold to purchase something.

Most beginners opt to start investing with cryptocurrencies, learning methodologies and practising trading on crypto platforms; although, technical traders always remind the public that crypto trading is risky. Despite that, others take the challenge and see market volatility as an advantage. Nowadays, crypto enthusiasts are more courageous in investing since many mentors or coaches hold their hands along the way. 

The value of the pound sank precipitously on Friday, falling by more than 1% against the euro and the dollar after UK prime minister Boris Johnson’s warning on Thursday that a no-deal Brexit remained a “strong possibility”.

Sterling fell 1.3% against the euro to €1.089 and against the dollar to $1.3204 in early London trading.

The pound has been under continuous pressure since Wednesday, when Johnson and European Commission president Ursula von der Leyen confirmed that “significant differences” were yet to be bridged after trade negotiations in Brussels.

The UK and EU are currently deadlocked over questions of their post-Brexit relationship, with main sticking points including competition rules and fishing rights in UK waters. The two sides have set a deadline of Sunday to reach an agreement and prevent a “no-deal” scenario that would likely cause economic chaos.

"We need to be very, very clear there's now a strong possibility that we will have a solution that's much more like an Australian relationship with the EU, than a Canadian relationship with the EU," Johnson said. Unlike Canada, Australia does not have a comprehensive trade deal with the EU, and most of its trade is subject to tariffs.

However, the UK as a nation conducts far more trade with the EU – around 47% of its overall trade compared with Australia’s 15%.

“With the UK now looking like it’s hurtling towards a no-deal Brexit, investors should adopt the brace position for swings in sterling and shares in domestic focused companies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.


Whether or not a deal is achieved, the UK’s temporary trade arrangements with the EU will expire on 31 December.

A surge of freight volumes has caused gridlock in UK ports, and the government has been warned by port operators that further disruption could be on the way once new Brexit checks come into force.

Felixstowe, the UK’s biggest deep-sea port that handles 40% of the country’s container trade, has been handling around 30% more goods than usual as businesses have rushed to replenish stock after the end of the recent England-wide lockdown and ahead of the final days of the Brexit transition period. The disruption has also been felt in other major ports including Southampton and London Gateway, impacting several industries.

Shortages of essential products like washing machines and fridges have been reported by several high street retail chains. Builders are also running short on tools and supplies, with Builders Merchants Federation CEO John Newcomb describing the ports as a “major issue” for members.

“There appears to be an increasing issue getting products through ports,” Newcomb said. “Rather than taking a maximum of one week to unload, it is taking up to four.”

Elsewhere, Honda was forced to close its 370-acre factory in Swindon – its largest plant in Europe – which operates a “just in time” manufacturing supply chain. As the punctual arrival of goods is essential to the continuity of its production line, congestion at ports left the factory unable to function.

From 1 January, UK exporters and lorries will be subject to new checks on agricultural and animal products at EU ports, which logistics industry heads fear will disrupt mainland imports. Equally concerning are the health and safety checks that the UK plans to impose on EU imports, including food, potentially causing shortages.


In a letter to cabinet office minister Michael Gove in November, British Ports Association CEO Richard Ballantyne warned of a “severe impact” on trade and essential supplies.

“Some ports are being told by customers that these volumes of interventions could ‘kill off’ particular trades,” Ballantyne wrote, raising fresh-cut flowers and salad and meat supplies for supermarkets as some of the most at-risk areas.

With the dust finally settling on the US presidential election, reactions from world leaders have been largely predictable. Heads of state have rushed to congratulate President-elect Joe Biden almost as soon as the vote swung his way in key states, with Canadian Prime Minister Justin Trudeau and French President Emmanuel Macron being among the first to call the former US Vice President on 7 November. More followed soon afterwards, seeking to reaffirm alliances and build early ties with the next head of the nation.

This has not been the case for all world leaders. China’s President Xi Jinping conspicuously refrained from congratulating President-elect Joe Biden on his election victory, apparently waiting until the confirmation of his winning Arizona on 13 November – and therefore depriving Trump of any conceivable comeback – to finally extend a hand. Xi’s reticence speaks to the Chinese government’s deep distrust of the US, and perhaps of the incoming administration more than the one outgoing.

Though the CCP has remained largely silent on Biden in official statements, it has made its opinions known elsewhere. "China should not harbour any illusions that Biden's election will ease or bring a reversal to China-US relations, nor should it weaken its belief in improving bilateral ties,” read an editorial published in the state-run tabloid Global Times on Sunday. “US competition with China and its guard against China will only intensify.”

To an observer, this hardly makes sense at first glance. In many respects, a Biden presidency is likely to prove beneficial to the Chinese government and economy. One of the main planks of the Trump administration’s foreign policy has been the imposition of tariffs on hundreds of billions of dollars’ worth of Chinese goods, sparking a trade war that Biden has slammed as “the wrong way” of confronting China and is likely to be rolled back during his term. The Trump administration’s severe restrictions on Chinese student visas are all but certain to be lifted as well, as are more minor swipes made by the outgoing government. Most of all, a Biden administration will not be prone to the same unpredictable outbursts as its predecessor, sometimes hailing Xi Jinping for his “hard work” and “transparency” and sometimes condemning him as “totalitarian”.

“US competition with China and its guard against China will only intensify.”

However, Biden’s administration will differ from Trump’s in one crucial respect: its willingness to embrace cooperation on the world stage – and, consequently, leave fewer openings for China’s ambitions. Though the Trump administration was characterised by an unpredictable foreign policy, this did not always manifest in the form of sanctions and tariffs; several abrupt policy shifts have had the effect of ceding leadership to China in key political and economic areas.

We have seen shades of this occurring recently in the White House’s refusal to join the 170-nation-strong COVAX alliance on the grounds that it was “influenced by the corrupt World Health Organisation and China”, leaving a leadership vacuum that China gladly filled. The administration’s earlier move to withdraw the US from the WHO and the United Nations Human Rights Council, both also pitched as repudiations of Chinese influence, gave the CCP further room to increase that same influence.

These are the splits that have had an obvious net positive effect for China and its image, but there have been other divergences from the international norm that have driven a wedge between the US and the international partners it ordinarily relies on in trade and diplomacy. A prominent example of this was the fracturing of the Iran nuclear deal, a high-profile break from diplomatic consensus that left allies scrambling to save trade agreements built up in the deal’s aftermath. Another was the Trump administration’s systematic blocking of nominees to the WTO Appellate Body, which renders it unable to form the quorum required to hear and resolve international trade disputes. While both of these departures were less concerned with rebuking China, they confounded America’s allies and eroded efforts to present a unified international front against threats like China’s growing economic dominance.

The chances of this erosion continuing under the Biden administration, which has posited the explicit aims of “working with our allies to stand up to China” and restoring the United States to a “position of global leadership”. Foreign leaders’ rush to build ties with Biden, even as Trump contends that the election is not over, illustrates even further that the old alliances are looking for a return to form. China is right to be wary; despite outside appearances, its economy is not an unstoppable machine. Even prior to the outbreak of the COVID-19 pandemic, its GDP growth in 2019 fell back to the lowest levels seen since the early 1990s, and the continual exodus of its young professionals is an albatross on its development.


As it moves to expand trade with other nations through agreements like the Regional Comprehensive Economic Partnership – a free trade pact spanning a third of the global economy, formed in the aftermath of the US withdrawal from the rival Trans-Pacific Partnership a year after Trump took office –  and pledges to open its economy even further, China will thrive in the void of competition left by America. It remains to be seen how long this void will be maintained.

The value of the pound fell against the dollar and euro over the weekend, as news emerged that UK ministers were planning new legislation to undercut key provisions of the EU withdrawal agreement, giving rise to fears that the UK will face an end-of-year “no deal” Brexit.

The Financial Times first reported that the “Internal Market Bill” would undermine the legal force of areas of the agreement in areas including customs in Northern Ireland and state aid for businesses, risking a potential collapse of trade talks with the EU. Downing Street later described the measures as a standby plan in case talks fall through.

Political backlash followed as Michelle O’Neill, Northern Ireland’s Deputy First Minister, described any threat of backtracking on the Northern Ireland Protocol as a "treacherous betrayal which would inflict irreversible harm on the all-Ireland economy and the Good Friday Agreement". Scottish First Minister Nicola Sturgeon also stated that the legislation would “significantly increase” odds of a no-deal Brexit.

The pound was down 0.6% against the dollar by 10am on Monday for a total slide of 1% against the dollar in the past 5 days. The pound also slid 0.5% against the euro for a total of 0.7% in the same period.

The value of the pound is now equivalent to $1.319, or €1.1145.


The eighth round of Brexit talks is set to begin on Tuesday, aimed at forming a deal that will allow companies in the UK and EU to trade without being hindered by customs checks or taxes.

The news follows Prime Minister Boris Johnson’s imposition of a 15 October deadline for securing a Brexit deal, recommending that both sides “move on” if no such agreement is reached by that date. The proposed deadline would come far ahead of the slated end of the transition period on 31 December 2020.

In several sectors of the economy, negative prices have existed for years, meaning that it is not the seller but the buyer of a product who is paid. Examples can be found in power generation and banking. Triggers are imbalances between supply and demand and marginal costs of zero or below.

In the traditional world of physical products, marginal costs are significant and so prices of zero are rare, and those below zero practically never occur. The Internet and other technologies are changing this situation fundamentally. For many digital businesses the marginal cost of an additional product unit is often zero or close to zero – for example adding a new subscriber to a streaming service such as Netflix.

We’ll now cover three interesting scenarios where these effects can be observed.

Negative prices from oversupply

At the European Power Exchange the number of hours with negative electricity prices has increased from 15 hours in 2008 to 211 hours in 2019. Last year, the power producer paid the buyer a (negative) price per megawatt hour for almost ten days. The buyer received the electricity plus money. How can this be explained?

In this case, even when demand for electricity is low, stopping production is not possible.  In order to be able to produce on days with positive prices and make a profit, the producers must subsidize the electricity on days with negative prices.

With the negative oil prices we are currently observing, we encounter the same conditions. It is more advantageous for the oil producer to pay the buyer something in addition than to interrupt production or rent expensive storage capacities.


Negative interest

Interest is nothing other than the price of money. Negative interest rates were first observed in Denmark in 2012. Today they have become a widespread and much discussed topic. In some cases we have seen negative interest rates on loans… so a financial institution is paying someone to take a loan!

For European banks it can be more profitable to lend the surplus money at an interest rate of -0.2% instead of depositing it at the central bank and having to pay negative interest of -0.5%. And if depositors are willing to provide the bank with money at a negative interest rate, the bank can lend this money at a negative interest rate and still achieve a positive contribution margin.

Pricing when marginal costs are negligible

In traditional transactions, from the seller's point of view, the theoretical short-term lower price limit is the marginal cost, which means that he or she only sells a product at a positive contribution margin.

That said, a price of zero is common in promotions. Free samples (for pharmaceuticals or consumer products, for instance), are widespread for new product launches. This tactic makes sense if the price of zero stimulates sales in subsequent periods.

These tactics become even more powerful for subscription services such as online news subscriptions or streaming music/video services. That is why so many offer a 30-day free trial, because once the subscription is started then future sales are almost 'automatic'.

However, the question arises why zero should be the lower price limit in this situation. With marginal costs of zero this option becomes much more attractive than with the significant marginal costs in the traditional economy.

For many digital businesses the marginal cost of an additional product unit is often zero or close to zero.

In fact, such negative prices can be observed. Commerzbank has been crediting new customers with 50 euros for a long time, which means it pays a negative price. The same applies to the voucher of the same amount that METRO Cash & Carry gave to new customers.

In its initial phase, PayPal also used negative prices. Each new customer received 20 US dollars. In China, providers of bicycle sharing services such as Mobike paid their customers to use the bikes to return them from the suburbs back to the centre of the city, where they are needed more.

Ultimately, the question is how marketing and promotional measures work compared to negative prices. Product launches are regularly supported with substantial budgets. The funds flow into instruments such as advertising, displays, promotions and discounts. A negative price can be more effective than advertising or similar measures without having to provide larger budgets.

More negative pricing as a deliberate tactic?

It is likely that we see more negative prices in the future. As we write this, the COVID-19 crisis is causing markets to experience supply and demand spikes like never before. This not only upsets the traditional short-term equilibrium but will also have some lasting effects to customer buying behaviour and their appetite for risk.

Will negative prices be used by new entrants as a way to disrupt established markets? To arrive at an optimal outcome, the effects of promotional measures and negative prices must be quantified. In the Internet age, it can be expected that investments in negative prices will increasingly pay off in the future.

Professor Hermann Simon is founder and honorary chairman of Simon-Kucher & Partners, the world’s leading price consultancy. Mark Billige is Chief Executive Officer of Simon-Kucher & Partners.

Factory data released by Beijing has shown signs that the Chinese government’s push to restart the economy has seen some early results. The National Bureau of Statistics found that China’s industrial production increased by 3.9% in April, its first rise since the beginning of the year. The increase beat even analysts’ projected rise of 1.5%.

Following the figures’ release, early Friday trading saw European stocks buoyed. France’s CAC 40 rose by 1%, Germany’s DAX by 1.3%, and London’s FTSE 100 by 1.3%. The pan-European STOXX 600 index saw an increase of 1.2%.

US futures also showed signs of improving, with the S&P 500 and Dow Jones Industrial Average futures rising by more than 0.3% each, and Nasdaq by 0.5%.

These positive signs were later reversed, however, as it emerged that the US government intends to block microchip shipments to Chinese telecommunications giant Huawei, a move likely to escalate tensions between the two countries. As a consequence, the S&P 500 and the DOW slipped by 1.1%, with Nasdaq ending 1.4% in the red.

China’s own stock indexes saw little change, with the Shanghai composite finishing 0.07% down. Elsewhere in Asia, South Korea’s Kospi rose by 0.12% and Japan’s Nikkei by 0.62%, apparently undisturbed by China’s industrial growth or trade tensions.

Early trading on Thursday morning saw global share prices go into free-fall as the continued spread of coronavirus threatens to greatly impact international trade. The crash also followed a Wednesday-night speech by President Donald Trump announcing that “all travel from Europe to the United States” would be suspended for 30 days.

Though the Trump administration quickly clarified that only “human travel” from Europe would be restricted, and not trade, Thursday morning’s share price downturn indicated a lack of investor confidence in the new measures’ effectiveness.

The Dow Jones Industrial Average fell by around 8.2 %, driving US indexes further into bear market territory, while Nasdaq fell by 6.5% and the S&P 500 by 7%.

The widespread losses triggered the market’s “circuit breaker”, automatically halting trade for 15 minutes to interrupt the steep decline in prices. Once trading resumed, however, stocks continued to plummet.

Every share in the FTSE 100 was trading lower before markets closed, with the UK’s main share index having suffered a fall of more than 9% in value.

Indexes in Frankfurt and Paris also fell, as did Asian markets, as Japan’s Nikkei 225 index closed 4.4% lower than previously.

While companies have suffered worldwide, travel companies saw some of the worst blows to share prices, with airline conglomerate IAG facing a 10% drop.

This news comes after a string of regulatory changes in the consumer finance industry introduced by the Financial Conduct Authority, who took over from the Office of Fair Trading in 2014.

Peer-to-peer lending involves lenders acting as ‘middlemen’ between people looking for short term loans and investors looking to earn a return on an investment – often with returns as high as 12% or 15% depending on the amount of risk that they take on.

The peer-to-peer lending industry is estimated to be worth £2 billion in the UK, but has seen the casualty of some big names go into administration in recent years too.

The existing peer to peer lenders will form a separate industry body, replacing the existing regulator that was in force since 2011. The new group will be part of a wider fintech group that will represent companies in their industry.

Why is the existing trade body being replaced?

Following the news that the existing P2P trade body is to be replaced, Innovate Finance said that this was because the P2PFA had ‘achieved its objective of providing adequate protections for consumers.’

It also follows the recent news of additional peer-to-peer lending criteria being implemented in December 2019.

The new group of lenders are the leading members of the 36H Group, as well as a part of Innovate Finance. They have approximately 250 members in total, and also represent other fintech firms such as Dozens, Moneyfarm and Atom Bank.

What are the new FCA regulations?

The regulations for the peer to peer section created by the Financial Conduct Authority (FCA) mean that casual investors are now banned from being able to put any more than 10 percent of their assets into the sector.

The new FCA regulations also require peer-to-peer lending platforms to thoroughly assess the level of knowledge and expertise of investors before they make a P2P investment.

Some argue that this could potentially pose problems for lending platforms, who may decide to close completely if they will be losing huge investment.


How do peer-to-peer lending platforms work?

Peer to peer lenders receive money from investors and then distribute the cash to borrowers in exchange for a return on their investment.

The lender acts as broker or middleman between a high street borrower and an investor and returns range from 5% to 15% per annum, depending on the level of risk. For those looking to invest in good credit customers, the return is often lower because the chance of repayment is high. If you invest with bad credit customers, the risks of default are potentially higher, but the rewards may deliver a return of up to 15% per annum.

In terms of regulation, the peer-to-peer lending platforms are monitored by the Financial Conduct Authority, but they are not a part of the Financial Services Compensation Scheme.

This means that if a borrower defaults on payment (and this is expected of at least 20% of customers), investors are not necessarily compensated.

Most lending platforms will have their own compensation scheme in place including procedures, separate funds and a customer services team to collect on bad debt.

With its strong influence on the multilateral trading system, the US is undoubtedly amongst the most powerful countries in the world when it comes to trade. Over the course of his presidency, Trump’s “America First” policy, however, has increasingly been undermining international trade laws. Over the past few years, the US president has been fighting numerous battles with some of America’s trading partners, using tariffs for leverage in negotiations. And although it may look like he’s done a lot, has this led to any progress? Let’s take a look at the main measures that Mr Trump has taken to protect American trade over the past four years.

The US vs. China trade war

The trade war with China which President Trump announced in 2018 is the most prominent trade conflict we’ve witnessed in recent years. The US President has been accusing China of unfair trading practices and intellectual property theft for years, whilst China has long believed that the US is attempting to curb its rise as an economic powerhouse.

The dispute has seen the two countries impose tariffs on hundreds of billions of dollars worth of one another's goods and although they recently signed a preliminary deal[1], some of the most complex issues remain unresolved and most of the tariffs are still in place. The US will maintain levies of up to 25% of approximately $360bn worth of Chinese products, whilst China is anticipated to keep tariffs on over $100bn of US goods.

United States-Mexico-Canada Agreement (USMCA)

Back in 2018, the US, Canada and Mexico signed a successor to The North American Free Trade Agreement (Nafta) which was renamed as the United States-Mexico-Canada Agreement or USMCA. The agreement governs over $1.1 trillion worth of trade between the three North American countries.

Renegotiating Nafta was one of Trump’s key goals for his presidency. "The terrible NAFTA will soon be gone. The USMCA will be fantastic for all!", he tweeted shortly after signing the new deal with America’s neighbouring countries.

However, despite the name change and the claims that the updated agreement would "change the trade landscape forever", a lot of the terms have remained the same[2]. Stronger labour provisions and tougher rules on the sourcing of auto parts were some of the most notable changes, however, analysts believe that their significance remains to be seen.

What’s more, a number of the other updates were discussed during negotiations which took place before Trump took office.

Tariffs on European cheese, wine & aircraft

There hasn’t been a trade deal agreed with the Europan Union as of yet. In 2018, after the US introduced tariffs of 25% on steel and 10% on aluminium imported into the country, the two sides went through a round of tit-for-tat tariffs with the EU announcing retaliatory tariffs on US goods such as bourbon whiskey, motorcycles and orange juice. A few months later, in October, the US imposed a new round of tariffs[3] on $7.5bn of EU goods, including French wine, Italian cheese and Scotch whisky. The US also imposed a 10% levy on EU-made airplanes which could hurt US airlines that have ordered billions of dollars of Airbus aircraft.

President Donald Trump has also repeatedly threatened to impose additional tariffs on European cars and although that hasn’t materialised yet, he has confirmed that he’s serious about it when he recently mentioned his plans again[4] during the World Economic Forum in Davos.

Trade deals with South Korea & Japan

One of Trump’s first moves as President of the US was to withdraw the country from the Trans-Pacific Partnership (TPP) – a proposed trade agreement between 12 countries, which eventually went ahead without America. Since then, Mr Trump has claimed two bilateral agreements with South Korea[5] and Japan[6]. However, the changes were so limited that Congressional researchers concluded that they barely qualified as trade deals.

With Japan, the US agreed on either levy cuts or full elimination on $7bn worth of agricultural goods, which is what it would have received under the Trans-Pacific Partnership too.

The most notable win that came from the agreement with South Korea is the extension of the 25% US tariffs against South Korean light-duty trucks to 2041. Previously, it was scheduled to expire in 2021.

Tariffs on steel and aluminium from Brazil and Argentina

In December last year, Mr Trump surprisingly announced on Twitter that he’s ‘restoring’ tariffs on steel and aluminium imports from Brazil and Argentina.

The two South American nations have been exempted from higher duty on both metals, but according to President Trump, both countries had been devaluating their currencies which he believes is ‘not good’ for American farmers.

There hasn’t been much progress since the initial announcement, but Brazil’s President Jair Bolsonaro said he had been assured by Trump that the tariffs won’t materialise.








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Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
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