Trade finance is shaping up as one of the most promising early use cases for blockchain technology.
The arrival of blockchain is prompting banks to search for analogue processes across the global economy which could be digitised to reduce financing risk. As a cumbersome process using multiple paper-based contracts with settlement typically taking weeks, the $US4 trillion ($5.3 trillion) trade-financing industry is set to be revolutionised by distributed ledger technology in the coming years.
Many of the world’s largest banks and various start-ups have been pumping funds into blockchain research and development. They are now branching out of their laboratories to explain the opportunity to customers.
In the trade finance space, this means importers, exporters, government agencies, shipping companies, logistics and transport operators and insurers – whose buy-in will be required for a new system to get off the ground. Blockchain could be used to digitise sales and other legal contracts, allow the location of goods to be monitored and facilitate payments in close to real time.