5 Ways How Blockchain Eases Trade Finance Processes

5 Ways How Blockchain Eases Trade Finance Processes

Trade finance is an age-old practice of trading that involves domestic as well as international transactions. Trade finance includes various processes such as lending, factoring, providing letter of credit, export credit, and insurance. Thus, approximately 80 to 90 percent of the world trade depends on trade finance. With the rising transaction rate, the volume of paper documents also increases and makes the transaction process clumsy and cumbersome. To address this issue, the banks and financial institutes are inclining towards technology to cut down the expenditures and to boost its efficiency. Hence, blockchain technology ventures into trade finance as it not only reduces cost but, paves the way for newer revenue opportunities such as new credit models and funding guarantees supporting the trade.

Let us see how leveraging blockchain could streamline the processes of trade financing.

Improving Transparency

The paperwork related to cargo, factoring and receivables can be accessed without the tension of password tampering or information manipulation. Also, the digital data stored on a blockchain can only be distributed but never duplicated. Thus, blockchain ensures safe and transparent transactions.

Real-time Monitoring

Blockchain technology enables real-time tracking of the processes such as financing paperwork, credit score approval, procuring goods, supply and trade of monetary spends, and more. Thus, makes the trade cycle real-time for all the stakeholders that include collectors, exporters and importers.  

Minimizing Cost

Adopting blockchain in trade finance drastically reduces the unnecessary cost. The smart contracts in blockchain eliminate the need for correspondent banks which in turn would avert the extra transactional charges. Additionally, blockchain enables convenient tracking of bills, thereby addressing the problem of data duplication. 

Increasing Speed and Efficiency

Blockchain's decentralized data storage model helps in enhancing the efficiency of the entire trade cycle. It reduces tracking time, automates transparent bills, and the overall transaction could be carried out without any human assistance, and thus, increases the speed of the transaction. 

Enhancing Regulatory Compliance

Blockchain enables regulators to access the transactions that are real-time monitored. These access permission aids in retaining transparency and adds to obtain quick approvals. Also, the digital cross verification of the transaction is simplified making blockchain a go-to option for the trade finance organizations.  

With the growing competency, proficiency, accuracy and speed are what every organization is looking for. Adopting and implementing technology is the ideal way to be competitive in this fast-paced world.