Charles Darwin once said, “It’s not the strongest or the most intelligent who will survive, but those who can best manage change.” Rapid change has come to trade finance, but what is needed now is process modernization. TradeTech, the use of technology, innovation, and software to support and digitally transform the trade finance industry, can facilitate this evolution. One major roadblock standing in the way of this global transformation though, is the lack of international policy coordination.
The true promise of TradeTech lies in reduced transaction and compliance costs, stronger supply chain security and ultimately efficient, accessible, and sustainable global trade. Given the volume and ubiquity of international trade, coupled with the technologically advanced world in which we live, it is not unrealistic to expect a documentation process that is fast, comprehensive and secure. But that is not always the case.
According to Maersk, the international shipping company, the price of processing trade documents is around 20% of the physical transportation cost of that shipment. In fact, a single transaction can involve up to 20 documents and 5,000 data field interactions, wasting time, money and resources.
With the majority of global trade occurring on paper, goods often arrive at a port well before documentation, leading to costly delivery delays. As noted by the World Economic Forum, cargo vessels spend 60-70% of their port time at berth, incurring the industry an additional expense of $4 billion a year.
The volume of documents required for international trade make it more difficult for MSMEs to trade yet reducing supply chain barriers through digitization can increase GDP up to six times. Document digitization is an “essential step towards trade digitization, but it’s not sufficient,” according to the WEF. Electronic documents, such as those that are e-signed, need to be recognized on par with paper documents.
TradeTech increases efficiency, saves time and money by preserving security. Paper documents can be forged. The benefit to blockchain is its immutability; the ledger is designed to be a permanent, indelible, and unalterable history of transactions.
The importance of this technology to the sustainability of the global supply chain cannot be overstated. But it can only live up to its potential through global adoption and scalability. With standard international procedures and regulations, all shippers and corporations could conduct business and transactions in a seamless manner and help deliver on the promise of TradeTech vis-a-vis efforts such as:
- * Preventing a fragmented technological environment where different companies use their own systems
- * Avoiding discriminatory measures that favor regional traders and providers
- * Improving market access for global trade participants
The past few years have shown the risk of supply chain reliance on physical documents. There is no doubt the delays that persist today could have been significantly reduced and potentially avoided altogether, if a globally adopted digital document recognition and processing system had been in place. Not to mention that fraud mitigation costs would have been greatly reduced.
The technology for end-to-end visibility, trade facilitation, transparency, supply chain resilience and security, and risk mitigation exists. The next step must be the creation and adoption of international policies and structures designed to increase the speed with which global trade can occur seamlessly and securely.
Triterras strives for end-to-end visibility, trade facilitation, supply chain resilience and security.
For more information on our solutions, see Trade Finance Transformed.
