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Industry-wide connectivity is critical for trade finance blockchain applications


Alisa Di Caprio, Vertical Lead, Trade and Supply Chain, R3

In the short history of blockchain technology, some of the most promising solutions have already failed to make it off the whiteboard because of their inability to offer a solution to the industry’s most persistent challenge: integration. And nowhere else is this challenge more apparent than in the complex and diverse ecosystem of trade finance.

Blockchain’s promise for the trade finance industry cannot be overstated. If applied effectively, the technology has the potential to address the $1.5 trillion trade finance gap that has been identified by the Asian Development Bank. Companies of all sizes will benefit from better visibility into trading relationships and easier access to financing options, beyond point-to-point relationships, to a global network of trading parties. 

But how can the barriers to entry be lowered so that firms without unlimited resources and large technology budgets can access the new digital trade finance ecosystem? And how can large institutions with complex IT infrastructures achieve seamless interaction between existing systems and new, blockchain-enabled services? The future of enterprise blockchain technology for trade finance hinges on the industry’s ability to find an answer to these critical questions.

Every business needs finance

Every growing global business needs finance. In 2017 alone, USD 15.5 trillion of merchandise exports were transported around the world across sea, air, rail and road, and as much as 80% of these commercial transactions required financing. 

Traditional technology required corporates to log into multiple portals and juggle relationships and documentation for each shipment. In addition, businesses today must navigate the growing threat of cyber-attacks, need for regulatory compliance, increasingly sophisticated fraudsters and ever-changing sanctions lists. Contributing to this complexity, cumbersome and time-consuming paper-based processes are still commonplace.

Take, for example, invoice financing. While a common process in the facilitation of global trade, managing invoice payments and terms can be slow and inefficient for companies and their trading partners. They must navigate different currencies and jurisdictions, each with unique requirements in terms of contract terms and payments. 

Because of this, companies often establish multiple, local, trade finance programmes, which can involve duplication and minimal standardisation across the organisation. This makes it harder to optimise working capital and have effective visibility of compliance and counterparty risk across the company.

Against this backdrop, the scope for the scale of improvements blockchain can deliver is huge, but the ability to integrate this new technology into legacy systems is a key requirement for success. Only by bringing the best of both the new and the old together to offer optimal results can the technology serve its ultimate purpose.

Innovation in integration

When it comes to blockchain trade finance networks, much like payment networks, size and connectivity matter. For a platform such as TradeIX’s Marco Polo, for example, partnering with an established player such as Mastercard has enabled it to plug into a vast global ecosystem of hundreds of millions of registered entities worldwide. For companies already connected to Mastercard’s infrastructure, this partnership dramatically reduces the time and complexity of integrating the Marco Polo platform.

APIs are also a critical consideration when it comes to integrating blockchain technology. Any blockchain application a firm runs talks to its legacy system using the same technology that it uses today – RESTful APIs, for example – to connect to its existing system of record. APIs allow clients to push and pull data onto the blockchain. In other words, they allow users to select the data that truly add value for them and fits their individual use case. The blockchain then adds the security of a distributed system and the immutability of data, among its other benefits.  

For corporates, integration with their Enterprise Resource Planning (ERP) back-office system must also be achieved before a trade finance blockchain application can be deployed. A large corporate might have multiple different banking relationships that each require a bespoke connection from their ERP system to the bank’s platform, and then onto the bank’s own back-office system. 

Blockchain can be deployed in such a way as to work around this, for example, by incorporating functionality that enables data to be pulled directly from a cloud ERP system. For the corporate, that means that they continue to use their ERP as before, instead of building another bespoke bridge. 

Inclusivity will drive mass adoption

In order to move towards a truly digitised and connected ecosystem for trade finance, mass adoption on a global scale is essential. This elusive network effect can only be achieved if technology players prioritise forward-thinking, inclusive integration solutions that lower the barriers to entry for all types of companies involved in the trading process. 

If only a handful of firms adopt a blockchain solution for invoice financing, for example, the solution is useless if one company needs to trade with another that is outside this circle of early adopters. All the other benefits of blockchain such as speed, efficiency and lower costs mean nothing if you cannot use the platform to connect with the necessary counterparties.

Any realistic attempt at digitising and connecting global trade needs to embrace the importance of such a network effect and build technology that drives it by enabling seamless and straightforward integration.

Like any piece of enterprise technology, blockchain will be most useful when used in conjunction with existing systems. The reality is that most businesses are not yet ‘digitally native’ and so will continue to rely on legacy systems – all to different extents – in the near future. 


The key to unlocking blockchain’s true potential, therefore, is not to try to replace these systems, but rather to make sure the technology fits into the right places, with minimal cost and disruption to a firm’s day-to-day business. Put simply, integration holds the single most important key to rewiring the $8 trillion global trade finance market.


This item appears in the following sections:
Financial Supply Chain Platforms
Trade Finance
Dealing & Trading Platforms

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