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How Technology Can Help Global Trade Become More Efficient, Inclusive and Equitable

Sep 04, 2023 - 07:33 AMAuthor - Emerio Banque

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Global trade finance is a key factor in the growth and development of the economy, contributing to the improvement of wealth, the creation of jobs, and the reduction of poverty. But the current system of international commerce faces formidable challenges, such as inefficiencies, exclusions, and inequalities that can stunt development and damage the world economy. To overcome these challenges and reach the full potential of global trade finance service, creative solutions are needed. Technology has the power to change business practices and promote an efficient, diverse, and egalitarian economy. The following article will examine how technology could provide a more favorable environment for international trade.

As supply chains have gotten more intertwined, managing them has grown more challenging. Furthermore, external factors like market volatility, changes brought on by pandemics, and increased awareness of the environmental impact of supply chains have driven regionalization and the need for optimization. This has interestingly led to the creation of Trade Finance Service to support small and medium-sized businesses and other stakeholders in focusing on supply chain resilience, making international trade finance more effective, inclusive, and equitable.

Blockchain

A supply chain powered by blockchain can help with the organized recording of shipment/transaction data pertaining to the cost, time, place, quality, and certification of items. As a result, a company's reputation is strengthened through increased supply chain transparency, enhanced traceability and compliance, and decreased administrative costs. Additionally, it guarantees that everyone involved in the supply chain can securely and digitally access the same information, potentially minimizing misunderstandings or human errors that may occur during difficult paperwork and data transfer.

SMBs may connect to external players in the ecosystem for seamless communication, enabling industry innovation and fostering international trade. This is made possible by blockchain and AI technologies that do away with the need for physical documents like receipts, invoices, tax forms, contracts, financial reports, etc.

Intelligent Supply Chains

Supply chain management has advanced thanks to the growing adoption of artificial intelligence (AI) based solutions by small businesses. Models for predicting demand, complete transparency, dynamic planning optimization for managing inventories, and automation to cut waste are a few of these.

Additionally, data-driven technology and correlation/predictive analytics help companies predict customer behavior and enhance supply chains as data becomes more pervasive. Predictive analytics has been available for a while, but it has only lately become accessible for SMBs, creating a new generation of tech-savvy, more creative business owners.

Following the supply chain crisis, more small and medium-sized businesses (SMBs) are dedicated to utilizing contemporary technologies to provide scalable, user-friendly digital experiences for employees and clients that will aid in resolving supply chain restrictions. Companies are coming up with creative ways to manage their supply chain, such as building information systems that offer real-time insights on port call estimations or designing cloud-based applications for staff to use for mundane chores.

IoT

For the purpose of enabling business decisions and averting shortages, an Internet of Things inventory system makes sure that the supply levels of a number of essential components are continuously tracked. Additionally, IoT sensors can be utilized to assess multiple performance parameters because modern supply chains depend on the proper operation of numerous units. Businesses can, for instance, extend the lifespan of their equipment by employing predictive maintenance in the supply chain to take the required precautions to prevent breakdowns in advance.

Electronic payments

The reconciliation and verification of information is laborious due to the numerous related actors in traditional commerce and supply chain movements. Even though these payment cycles can change, human interaction is frequently needed to confirm data, which can slow down payments. Distributed ledgers, which function as safe, open databases where each user has a copy of the data stored, can be useful in this situation. When money is transferred or shipment information is logged, it is promptly verified, made visible to all supply chain participants, and nearly immediately updated.

Additionally, only authorized parties are permitted to use digital signatures to begin transactions. The design of this system supports a fund transfer that is frequently more rapid, affordable, and secure than manual approaches.

Electronic-Based Logistics

For example, smart packaging solutions enable product tracking and send warehouse information to shippers and delivery partners, meeting the demand for security and safety throughout transportation. Additionally, by enhancing crucial logistics procedures, lowering theft, and managing waste, such initiatives typically assist businesses in increasing sales and decreasing costs.

Utilizing the Cloud

To facilitate communication between entities in the ecosystem and guarantee globally uniform processes, optimized supply chain cloud platforms can be utilized to construct tools and mechanisms for linking stakeholders like importers, exporters, insurance providers, transport carriers, etc.

Letters of credit are trade finance instruments that have been used for a long time to reduce the risks involved in international trade by bridging the gaps between exporters' and importers' differing needs and enabling them to conduct business with confidence. Typically, a beneficiary wants a guarantee to ensure recompense in the event that the bank's client fails to comply with a contractual obligation.

When an exporter's and an importer's financial needs conflict, trade financing might help to reduce ambiguity. To avoid dealing with an export shipment that hasn't been paid for, an exporter would prefer an upfront payment from the importer. However, the exporter won't release the products unless the importer has already made a payment.

Upon receipt of adequate documentation of shipping and compliance with all other International Letter of Credit agreement requirements, the issuing bank will ensure payment to the exporter.

By thereby reducing the risks associated with contract failure, a supplier's inability to perform as agreed, or a buyer's failure to pay for goods, bank guarantees play an important role in fostering international trade.

Technology has the potential to revolutionize global trade with export financing and import financing, making it more effective, inclusive, and fair. By embracing digital solutions and making use of the potential of developing technology, stakeholders in the global trade ecosystem can solve issues, create new opportunities, and promote sustainable and equitable growth. By making monetary investments in innovation, collaboration, and capacity building, we can create a more robust and equitable global trading system that benefits companies, governments, and people alike.

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