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Can the pandemic be a catalyst for global trade digitisation?

The paper-driven nature of trade processes has long been a frustration to corporates that have been successfully automating various other areas of the treasury and finance functions. Paper-based processes are time consuming, inefficient, and costly.

Writing in South Africa's FAnews, Vinod Madhavan, head of Trade for Standard Bank Group, says that in the current environment of Covid-19 related lockdowns, many of these processes that work to facilitate cross-border and international trade have been impacted and may temporarily have been rendered obsolete to a certain degree. 

"Existing technological solutions are available for logistics and trade," Madhavan says. "Rapidly implementing them out of necessity from the current environment will be an excellent step in the right direction for trade digitisation. This however, requires collaborative approach between governments and industries to remove barriers by amending and aligning regulatory frameworks."

This is a point well made, as the acceptance of digital trade documents can vary considerably from country to country, particularly if you look at an instrument like the electronic Bill of Lading.  

Looking specifically at trade in Africa, Madhavan writes that those who were previously hesitant to accept an electronic bill of lading, for example, are now ready to embrace and adopt the technology for its benefits. "The impetus that the virus has brought to trade digitisation should therefore not be underestimated," Madhavan says.

In many countries, temporary concessions have been made to digital trade processes in order to prevent shipments grinding to halt. 

"Standard Bank is currently in conversations with multiple regulators, exploring how we could go about amending regulations, even though it may be a temporary dispensation for the duration of Covid-19, to facilitate digital trade," Madhavan writes. "These engagements are happening in multiple markets across our network. With the challenges brought about by the virus outbreak, there is now an exciting dialogue in markets that will help to influence some of the necessary changes."

Temporary changes in regulation to permit additional digital solutions are great if they do help support the global trade network during this time of extraordinary stress. Hopefully the practical demonstration of the benefits a digitised trade network can bring will see such temporary changes become permanent. 

Digitisation pushing forward

One thing that is for sure is that on the innovation happening on the digital side of trade has been carrying on at a pace. Most recently on CTMfile we covered the successful transaction between Baosteel and Rio Tinto on the Contour open trade finance network, and there have been plenty of other examples this year of pilot transactions and industry partnerships, all designed to make the process of trade easier for corporates.

This week it has also been confirmed that IBM has enhanced its partnership with the we.trade digital trade finance network. The collaboration is designed to enable network enhancements and accelerate the global commercialisation of the platform. IBM has also become a new shareholder along with the 12 existing bank shareholders.

Already one of the largest blockchain-enabled trade networks in production, we.trade is designed to improve the trade finance lending process, supporting companies as they grow their business and expand into new markets. Over the last few months, we.trade has seen momentum continue to build as companies move to replace paper based trade finance processes with a digitised solution.

From July 2020, we.trade says it will extend services to additional banks and clients across Europe before expanding the network globally, starting with Asia. At the same time, work will continue to help enable the platform to interoperate with other distributed ledger-based trade finance networks, such as the work already completed with Hong Kong-based eTradeConnect, a blockchain-based trade finance platform formed by 12 Asian banks.

The press release that announced the news makes the point that, with disruption in many services that support traditional trade finance methods, there's now an added incentive for international trade to go digital, including embracing platforms which offer digitised versions of once manual business processes to ensure signatures, contracts, and trade financing agreements can be virtually linked.

Built on the latest version of the IBM Blockchain Platform, we.trade is backed by banks including CaixaBank, Deutsche Bank, Erste Group, HSBC, KBC, Nordea, Rabobank, Santander, Société Générale, UBS and UniCredit. It is designed to connect buyers, sellers, banks, insurers and logistics organisations in a network that simplifies cross-border trading.

The we.trade network helps automate many of the processes around trade finance, as well as provide traders with access to insurance, credit rating and logistics services. Once on the network, traders can initiate orders, manage the order-to-payment process and attain financing. They can also search the network to discover new trading partners.

A recent IBM Institute for Business Value survey of more than 1,000 organisations globally found respondents said that accessing new markets is among the top motivating factors to join an existing blockchain network such as we.trade. Meanwhile 64% of respondents indicated that reducing friction in current processes and services was a top reason for using blockchain technology to augment existing trade digitisation investments.

"The strategic direction for we.trade and IBM is focused on driving growth and transparency across the entire trade ecosystem, collaborating to enhance the network effect of blockchain, and expanding access to trade finance and other services to the market place," said Jason Kelley, GM Blockchain Services, IBM. "Innovative technology and new pricing structures will help more banks align to internal production controls using their choice of cloud services. Meanwhile we.trade aims to help banks create new trusted trade corridors and expand markets by interconnecting with other regional trade services platforms."

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