(Banking Technology, London, 19 October 2017) Amid the hype around distributed ledger technology and blockchain it can seem they are technologies looking for solutions. Trade finance is a complex, paper-based activity. It encompasses lending, issuing letters of credit, factoring, export credit and insurance. Companies involved with a trade finance transaction include importers and exporters, banks and financiers, insurers and export credit agencies, and other service providers, such as customs organisations. Documentation is an important aspect of trade finance, but it isn’t standardised and invoices, letters of credit and bills of lading can differ greatly from country to country. Japanese bank Mizuho recently completed a trade finance transaction between Australia and Japan, digitising all necessary documentation and sharing the data with multiple participants across a distributed ledger. A consortium of seven European banks have formed the Digital Trade Chain (DTC) initiative, a blockchain-based digital platform for managing and tracking domestic and cross-border open account trade transactions. The members of the consortium are KBC, Unicredit, HSBC, Rabobank, Societe Generale, Deutsche Bank and Natixis. The distributed nature of the data could significantly reduce cycle times – for example, by making data simultaneously available to all parties in a transaction, each could perform their respective checks in parallel, reaping immediate benefits over today’s slower, linear approach. [There should be concerns however that this is a brand-new technology that is not defined by regulators, raising concerns about transparency if access to trade data is limited only to corporate interests, which may wish to protect the economic, social and environmental impacts of their trade activities from public scrutiny.]
