Trade finance, where financial institutions provide credit facilities in order to guarantee exchange of goods, is a centuries old industry that is hampered by challenges such poor customer experience, increasing cost pressure and substantial regulatory burden.
With its manual, cumbersome and often expensive processes, trade finance is ripe for disruption.
One technology in particular that’s been praised for its potential to drive efficiencies, reduce cost and open up new revenue opportunities in trade finance is blockchain and distributed ledger technology (DTL).
Among the key advantages, financial documents linked and accessible through blockchain can be reviewed and approved in real time, reducing the time it takes to initiate shipment. Regulators can be provided with a real-time view of essential documents to assist in enforcement and AML activities. Banks facilitating trade finance through a blockchain platform would no longer require a trusted intermediary to assume risk, eliminating the need for correspondent banks.
Here are how blockchain is disrupting trade finance institutions: