Trade finance is the process by which importers and exporters mitigate trade risk through the use of trusted intermediaries. These trusted intermediaries are financial institutions who provide assurance to sellers in the event that the buyer does not pay and contractual certainty to buyers (in the event that goods are not received.
In return for assuming these risks and providing a financial “safety net” for the buyer or seller the intermediaries are paid a fee. Essentially, almost any time goods or services are bought or sold across any border, there is some form of trade finance involved.
Stezy.io platform can help redefine, digitize and improve how trade finance instruments are executed today.
Current challenges in Trade Finance:
- Time-intensive creation and management of financial agreements
- Manual Anti-Money Laundering (AML) compliance checks
- Duplicative efforts managing Bills of Lading (BoL)
- Multiple versions of the truth increase costs and impact efficiency
- Delayed settlement results inconsistent business cash flow
Potential Benefits
- Enhanced transparency as all parties share in a single source of truth
- Increased business agility by decrease time to payment
- Decreased need for trusted intermediaries
- Reduced compliance issues from accessible historical audit record
Short-Term Reality
- Use Blockchain as a single source of truth and allowing access to all authorized parties
- Focus on utilizing smart contracts to manage Letters of Credit or BoL status
- Early actions based on smart contract status notification.
BUSINESS DRIVERS
- Information flow is reliant on large volume of paper documents.
- Entities across the process are forced to perform manual and time-intensive reviews of financial agreements.
- Operational cost of oversight is significant and leads to delayed shipment.
- No single version of the truth available, as multiple entities hold several copies of the same document, making authenticity unverifiable and, in the case of delivery, bills of lading end up being financed multiple times.
- Settlement is often delayed in order to verify delivery.
DIGITAL CAPABILITIES
- Digital distributed for transactions and trade finance activities
- Cryptographic peer-to-peer (P2P) network
- Smart contracts: Real-time and self-executing contracts triggered by the efficient exchange of digital data
- Process automation to automate manual and repetitive operational tasks
BUSINESS OUTCOMES
- Enhanced Transparency: Near real-time review and approval of documentation, reducing the time it takes to initiate shipment.
- Reduced Counterparty Risk: Bills of lading are tracked through blockchain, eliminating the potential for double spending.
- Increased Business Agility: Time to payment shrinks from weeks to days due to automated settlement.
- Disintermediation of Trusted Intermediaries: Leverage cloud-based assets to verify identity.
- Auditable Historical Record: Reduce compliance burden and costs as regulators are provided with a near real-time view of key documents.
Building and Integrating the with Trade finance operations is seamless with stezy.io (A do it yourself Platform). Stezy Helps to create and integrate with ease and can invite and create a consortium and build smart contracts in a matter of minutes. Try out now contact us for your requirement.
Published at Mon, 29 Apr 2019 22:37:13 +0000
