🌟 Editor's note

Editor’s Note | Week of 10 November 2025

By Carter Hoffman

We actually got to unpack our suitcases this week! Which was a pleasant change of pace after having been on the road for what has felt like six straight months.

This has also meant that we’ve had a chance to turn around some pretty exciting content from the past few months. The big piece this week, and also our Slow Read, is on how transaction banks are trying to drive profitability in a world where everyone is being asked to do more with the same balance sheet. It’s based on a roundtable we held with BAFT in Frankfurt.

On the multimedia side, we published a video recording from ICC Austria’s Trade Finance Week with Ramadurai Krishnan about trade finance registries (why they matter, what they fix, and what they don’t), and a video with Standard Chartered that we recorded at the ADB awards in Singapore. We also published the recording of a conversation at our Breakfast Club event in London about how to make trade finance assets more investable without rewriting the entire system.

As always, we published some news from the market, including a look into the results of ICISA’s latest business sentiment survey (spoiler: demand for trade credit insurance is holding strong), and an announcement from a second cohort of banks that have endorsed the ICC Principles for Sustainable Trade Finance.

Behind the scenes, we’ve recorded a few new conversations this week, one on trade digitalisation and another on sustainable finance. Keep your eyes and ears open for when those are released in a few weeks.

This month, our home turf, London, dominates the events scene. We’re delighted to be media partners for two initiatives that address the lack of liquidity —ahem, I mean, getting more liquidity —into trade finance through distribution, and that address the age-old trade finance gap. We’ll be challenging the crypto bros and talking RWA at the Trade Finance Investor Day on 10 November, and covering TF COP on 21 November.

We’ve also been busy gearing up for our awards in February (more on that soon), and working on a few other goodies that we hope you’ll enjoy when we are finally ready to share them!

Until next time — enjoy the stillness.

— The TTP Editorial Team

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Slow Read

How to drive profitability in transaction banking

By Joy Macknight

Transaction banks have had to adjust to a new normal in recent years, including adapting to higher for longer interest rates. Yet the overall 2025 economic picture is relatively positive: inflation has reacted little to tariffs, consumption and earnings are strong, credit spreads are tight, and equity markets remain buoyant despite global tensions. 

BAFT and TTP hosted a roundtable following the BAFT Global Councils Forum on September 27 in Frankfurt to discuss the state of play for transaction banks globally. 

The discussion started by examining whether the banks’ balance sheet strategy had changed in the new environment. Many highlighted an increased focus on managing and conserving risk-weighted assets (RWAs), as required under the Basel framework. 

“While banks [in my region] want to accelerate growth, the challenge we face is that a large amount of RWAs are stuck with longstanding guarantees that remain on our books,” said one contributor. “The policies are quite rigid because we are servicing government entities, which stops us from releasing liquidity.”

“Regulatory capital, in particular, is crucially important for banks to manage,” added another. “Banks are also keeping a close eye on return on capital employed (ROCE). The discussion isn’t just about managing RWAs, but reducing the denominator and increasing the numerator in the ROCE equation. But we are all living in an environment where spreads are tight, so there’s not much flexibility to improve profitability.”

While just charging more for transaction services isn’t a realistic option, some are looking at addressing the RWA challenge through credit enhancement structures, such as synthetic securitisation and collateralised loan obligations. Many agreed that trade as an asset is a structure that lends itself to RWA optimisation measures.

Profitability concerns

The severe margin compression facing transaction banks, which limits revenue growth, is a common concern, as is the disruption in payments driven by fintechs. Banks are grappling with ways to protect margins and drive profitability. 

Yet many regional players are reportedly moving into the transaction banking business, including trade finance. The growing competition has put pressure on the pricing side of trade finance, with a lot of money chasing fewer assets. “We’re losing deals in ways that doesn’t make sense,” said one participant. 

When thinking about growth, banks have to look at both sides of the balance sheet: assets and liabilities. “It’s almost a perfect storm – you've got pressure on the liability side and on the asset side,” said another contributor.

Despite the headwinds facing the transaction banking business, growth targets are rising year on year. This means that the revenue being lost on interest rates has to be found elsewhere, either by growing deposits or assets. 

One participant reported growing the trade asset side by cross-selling cash and foreign exchange. They are also moving up the value chain by looking at the value add, more structured trade where the returns are better.

“In terms of traditional trade, we are able to gain a slightly better return in more niche markets where not everyone can operate and the risk profile is different. That is where we are able to generate margin on the trade side,” they explained. 

On the payments side, they have been able to grow their volumes and underlying deposits. However, it’s now becoming a bigger challenge due to the uncertainty around rate movements.

Some banks are also looking at targeting customers outside their historic range. “We’re not going after just any customer, but those with more cross-border flows or who are expanding,” reported a participant.

There appears to be greater focus on driving primary banking relationships and growing wallet share. 

“Facilitating payments is fine, but you want to ensure the deposits come too – in particular operational deposits, such as salaries and supplier payments – because they’re stickier,” said a contributor.

Changing business model

Transaction banking is going through a technology transformation, which is driving a historic shift in the correspondent banking model, according to a participant. For example, stablecoins may facilitate a wholesale shift to tokenisation. 

“What used to be called global transaction banking is now being called GTX, where X is an unknown factor,” according to one participant. “While it used to take three or four days for money to change hands, now it will be instant with tokenisation. We’re looking at shorter turnarounds and higher turnover.” 

Many agreed that collaborating with fintechs has the potential to drive revenue. “We have to be the partner to do the FX, ensure that cross-border trade, cross-currency payments are happening on a regular basis. But fintechs can make one leg of the transaction faster, which will help increase our liquidity,” said a contributor. 

“To make a quantum leap to the liquidity services of the future, we’re making investments now with a different view from what transaction banks were investing in 10 years ago. How the big banks set up their liquidity business before is different from how banks are doing it today – we’re investing in partnerships,” agreed another.

Trade digest

Treasury, payment and global banking digest

Visa and Transcard partnered to launch embedded working capital solutions for freight and logistics | Trade Treasury Payments (TTP) posted on the topic

#TTPulse: Visa and Transcard partnered to launch embedded working capital solutions for freight and logistics
🔸Visa and Transcard have collaborated to launch an advanced embedded finance platform tailored for the freight and logistics industry, specifically supporting users of WebCargo by Freightos, a digital booking and payments platform

🔸As per the press release, the platform offers freight forwarders and airline carriers access to flexible credit terms, seamless onboarding, and automated reconciliation for air cargo transactions, built on Visa’s virtual card infrastructure.

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Did You Know? 

Advances in liquidity analytics and balance sheet optimisation are helping banks unlock hidden capital. By combining risk weighted asset (RWA) modelling with digital liquidity tools, transaction banks can reallocate up to 10% more capital into active use, strengthening profitability and improving return on capital employed (ROCE) across global operations.

Till next time,

Trade Treasury Payments (TTP)