Global trade has been using old technology for decades which has been holding it back due to deep structural and technology issues. The move to new technologies, particularly block chain based platforms, and being more open and collaborative working is clearly the way forward. However, this move to new technologies is not going to be quick.
In our post on “Battle of trade finance blockchain platforms hots up BUT…” CTMfile reported that there are four trade finance blockchain groups bidding for your business which are not necessarily interoperable because their blockchain systems cannot necessarily communicate with each other directly.
Corporates need to be careful
Corporates need to be careful when choosing the new platforms because of these incompatibility issues. They need to recognise that each consortium has its own niche. Corporates need first to consider what are they trying to do, e.g. Do I need: open account based trade? Do I need supply chain finance? Do I need better physical visibility in the supply chain? Need to digitise my LC business?
And then ask - because of the incompatibility problems - of each platform:
- What block chain technology platform used?
- What platform do my corporate trading partners use?
- What platform(s) and in which consortia are my bank(s) on/in?
Overcoming incompatibility issues
The main block chain consortia are well aware of the inter-operability issues. So a major new initiative is underway in which all the trade finance consortia, the major infrastructure providers and some 25 leading FI have formed an independent industry initiative (similar to the WorldWideWeb Consortium) which will develop open standards and protocols for interoperability between tradefinance business networks. Apparently there will be a big announcement at SIBOS in October about this new initiative.
But this new initiative will not get rid of the incompatibility issues overnight, it will take many months/a few years to develop the new standards and protocols needed. Corporate treasury departments will still need to be careful in choosing their trade finance partners.
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