Why the Current Global Trading System is not Fit for Purpose

Henrique Celanto

General Manager (LATAM) – RedCloud

Henrique has extensive experience in technology and commerce, having previously worked in Senior roles at Paypal and Meta. At RedCloud, he oversees sales, business, development and strategic partnership initiatives across Brazil.

Why the current global trading system is not fit for purpose

The Coffee Quest Brasil is an example of perfect collaboration. Born out of a partnership with The Coffee Quest Europe, it has taken the format and technology of an established model and used it to become an independent organisation focused on the global export of specialty coffee.  It’s a strong business with outstanding products, but the question remains whether the business would have been able to advance so quickly without input from its European counterpart. Because while Coffee Quest continues to grow, other startups in the region have found themselves beginning to stagnate, not through want of trying, but through the lack of technology, and the inability to trade digitally. 

The gross domestic product (GDP) of emerging markets and developing economies (EMDEs) is forecast to increase by more than one third over the next five years from $45 trillion in 2023 to $62trn by 2028, according to Statista. Yet, compared to Western economies, it still lags behind significantly.

That’s largely due to the fact that the e-commerce retail giants such as Amazon have had a monopoly on access to the technology systems and software and finance needed to power these smaller economies over the last couple of decades. This severely restricts their ability to buy and sell goods, not to mention how they are distributed and paid for too.

Large retailers are playing by their own rules.

Such is the power that these large retailers have exerted on the market that they have been able to draw up their own set of punitive rules and policies governing others’ use of their platform. By imposing high fees and introducing competition in the form of their own private labels, as well as deploying deliberate algorithm bias and manipulation, they have made it virtually impossible for independent traders to use them effectively.

The end result is that many of these small businesses have gone to the wall, simply because they can’t compete due to the restrictions placed on them. As these large corporates’ profits continue to soar, so the sole trader or SME finds their already thin margins squeezed even further.

Added to that, due to the nature of the countries they reside in, many of these small operations are often based in remote areas without access to the traditional banking system. Because they are unbanked or locked out of the system, they have to rely on using cash to trade their stock and, thus, can’t always afford the inventory they need, therefore, losing out on potential sales.

Decentralised marketplaces are a viable solution.

Despite all the challenges that the current system presents, there is a solution. That is to form a decentralised marketplace which enables businesses to compete on a level footing, many of whom don’t necessarily have the marketing resources of their larger rivals, by giving them unfettered access to a larger potential global customer base and control over their transactions.

By allowing these small retailers to define their own terms and conditions, they can quickly build trust among their customers while delivering them the best possible service. These may include their policies on accepting returns and offering guarantees and warranties, which stand to benefit both parties.

Additionally, because the barriers to trade are removed, by cutting out the middleman, the buying and selling process is more streamlined and efficient. It’s also more transparent and secure, enabling everyone involved to see what is happening at all stages of the buying and sales process.

All of this means that small firms can focus on making a profit and investing the money back into their business so they can continue to grow, without having to contend with unnecessary restrictions imposed by the large e-commerce platforms that currently dominate the market.

Fintech has a leading role to play.

A vital piece of the jigsaw to enable the provision of this technology is fintech firms. Given the record levels of smartphone and internet penetration in emerging economies as the technology becomes more widely available to the people on the street, so it’s a prime opportunity for these startups to develop new products and services that meet the needs of traders and their end customer.

Nigeria, for example, is already reaping the benefits of digital payments, with 3.7 billion real-time transactions and the unlocking of $3.2bn in additional economic output in 2021, worth 0.67% of the country’s GDP, according to ACI Worldwide. With real-time transactions projected to rise to 8.8bn annually by 2026, adding a further $6bn in GDP, the future potential of such technology is huge.

Web3 as a key enabler.

Web3 is a new internet service that is built using decentralised blockchains – the shared ledger systems used by cryptocurrencies such as Bitcoin and Ether. Essentially, it does away with the intermediary in the sales process and gives the seller full control of the transaction.

By using blockchain, it will also make the process fully transparent and secure, with all transactions being able to be traced using a clear audit trail. In addition, it will make transactions far quicker and more efficient than at present.  

Tapping into EMDEs’ unfulfilled potential.

There will be more than five billion consumers in EMDEs by 2025. That represents a huge opportunity for the millions of independent retailers serving those markets and one that shouldn’t be spurned.

Digital trade is  the key to enabling SMEs to unlock this massive potential. But that can only be achieved by completely overhauling the current inefficient and ineffective trading system that only serves to benefit the few and putting in place a new one that will allow these small traders to grow and prosper.

Here at RedCloud our mission is to democratise borderless, global commerce, Our Open Commerce solution providers EDMEs with access to a decentralised B2B marketplace, where users have full control, offering digitised payments and real-time inventory visibility, insights into the performance of sales promotions and more. We’re already helping more than 300,000 retailers buy in excess of 250,000 products daily worth above $1 billion.