Blockchain Technology For Trade Finance: Future of Digital Trade
The digitization of the trade finance industry is long overdue, especially in the post-pandemic era where international trade had experienced a solid economical shock. No doubt that trade partners across the world are looking for a fast, safe, and reliable way of processing trade data under an association with banks and financial institutions.
According to the financial experts, it can only be achieved by digitizing trade finance and getting rid of age-old paper-based processes which are operating till now. Secondly, supply chain finance must be brought back to a stabilized level after the pandemic disruption.
Blockchain Is Genuinely Turning The Table“When will the trade finance services start working on Blockchain?” This is probably the most asked question among trade parties on various trade-related conference programs about how close the industry is to experiencing blockchain in trade transactions.
But it's not as easy as it seems. Reasons? Till today, cross-border trade involves several paper-based transactions while communicating different information such as country of origin, product details, or value of transactions under an LC, SBLC, BG, etc. It generates a higher volume of documentation. This is why distributed ledger technologies (DLT) such as blockchain that uses a decentralized network to enable participants to initiate transactions even in the absence of a trusted, legal central authority can be seen as a game-changer.
Blockchain has a huge potential to change the whole game for the trade finance industry which is still an extremely manual & paper-based industry. It is simply providing a technological platform, allowing parties-to-the-trade to handle trade data quickly, efficiently, and safely by bringing them together through a decentralized network.
For example, recently Contour launched digitized letters of credit services under which each member of trade can get a copy of the same data in the digital form but aren’t allowed to make any changes without the consent of all other involved parties.
It simply accelerates the trade process as the instruments can be easily accessed by any of the parties with complete transparency and safety. Unlike traditional paper-based trade transactions which take weeks to open and exchange between the parties.
Blockchain technology allows global traders to collaborate and initiate a transaction within banks easily & with utmost security. Through the DLT, we can achieve a greater level of transparency throughout the supply chain, eliminate the possibility of any fraud as well as cut back costs & time limitation.
Do you want to know how blockchain technology can provide more benefits to the trade sector, read our blog: Blockchain Transformed Technology