This article in the Economist last month – The digitisation of trade’s paper trail may be at hand – highlights the complexities and absurdities of today's trade finance business. It's a global jungle that means a single freight shipment of fruit from Africa to Europe could entail more than 200 communications involving 30 parties, while “a Venetian merchant” would recognise some modern trade finance documentation. Digitisation is key to removing these bureaucratic blockages and blockchain-based technology, together with smart contracts, are now being tested in the field. Two of the trade finance platforms currently being developed are blockchain-based and aim to eliminate the physical version of the multiple documentation checks, stamps and communications that are necessary for shipping goods internationally. The platforms aim to replace the paper documentation with a digital ledger, so participants in a transaction can see data updated in real time as goods go through each stage of transport and consignment.

As reported in Global Trade Review, this month nine European banks (Deutsche Bank, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, Société Générale and Unicredit), all part of the we.trade consortium managed by the banks and IBM, announced that their blockchain-based platform, run on the Hyperledger Fabric blockchain framework, will be available to corporate clients from this summer. The platform manages, tracks and protects trade transactions between SMEs and managed the transactions and data in one place.

And in a similar vein, Finxtra reports today that ICICI Bank has already added 250 corporate customers to its custom-developed blockchain platform for domestic and international trade finance. The platform allows all parties in the trade to have a real-time view of data at domestic and overseas branches of ICICI. Finextra's report adds: “It also allows them to track documentation and authenticate ownership of assets digitally and execute a trade finance transaction through a series of encrypted and secure digital contracts. Further, it allows each participant to check online the status of the application and transmission of original trade documents through the secure network.”

While the Economist doesn't think that the paper trail will disappear from trade finance completely – and is in fact likely to endure, at for now – initiatives such as those by we.trade and ICICI could achieve huge cost savings for banks. The Economist states: “Part of the gain from digitisation lies in cutting costs. Banks employ armies of people in back offices, looking for discrepancies that may betoken fraud or honest error. Digitisation should also free the flow of finance to firms starved of it, partly by helping banks’ compliance with anti-money-laundering rules. The Asian Development Bank has put the gap between available trade finance and demand at $1.5trn.”