As the digitisation of trade finance grows, more organisations are turning to the increasingly popular marvel – the new kid on the block, if you will – of blockchain, distributed-ledger technology (DLT) which promises new opportunities for efficiency and creating value across the industry.
Indeed this kind of partnership between banks, technology companies, non-banks – often ecosystems given the number and scale of institutions involved – based around DLT solutions is popping up regularly, a point articulated well, although just in part, here by CBInsights.
ANZ is directly involved in two such efforts in Singapore & Hong Kong - countries also working together on a single cross-border infrastructre with strong support from the respective regulators.
In addition to ANZ - the only Australian bank involved – other stakeholders in the Hong Kong DLT Trade Finance platform include the Bank of China, the Bank of East Asia, DBS Bank, Hang Seng Bank, HSBC and Standard Chartered.
In Singapore, the Networked Trade Platform (NTP) has had input from a number of banks and others alongside the Monetary Authority of Singapore – and will reportedly result in a collective $S600 million in productivity savings a year for those involved.
Additionally, ANZ has joined Banco Santander, BNP Paribas, Citi, Deutsche Bank, HSBC and Standard Chartered in building a digital Trade Information Network by the end of 2018.
Big players HSBC and ING are part of a consortium involved in the fantastically named ‘Voltron’ DLT platform. In May HSBC concluded a soybean trade transaction on the platform which – thanks to the DLT – took 24 hours to compete, rather than the traditional three months.
It’s these kind of efficiencies which are attracting the big players. Research from the Asian Development Bank puts the amount of unmet demand for trade finance around the world at $US1.5 trillion. Developing Asia’s cut of that figure is 40 per cent.
A single company which processes around 1,000 export documents a year can save close to $A250,000 by moving to a digital trade solution.
But hang on, I can hear you ask: doesn’t the existence of dozens of blockchain ecosystems create the same problems a single one would solve?
The question is a fair one but in practice each effort ultimately works to the benefit of each other.
To take the plane analogy again; our planes of people (data) travelling between countries are divided by airlines (blockchains) but everyone lands, takes off and benefits from the shared services of the airport – or in this case, the broader digital trade finance ecosystem.
The data is coming in from different jurisdictions – Singapore, Hong Kong etc- but once it gets into the airport is able to make transit to different flights and airlines, moving amongst the ecosystem to the benefit of everyone – participants and customers alike. It’s a process being worked on by many, many initiatives right now.
So yes, there will be some disparate chains – but the point is not to fight it, to let it happen, develop innovations which will benefit everyone and eventually come to a common standard. As deputy chief executive of the HKMA Howard Lee said, a major aim of the Hong Kong platform is to “link up with other trade platforms in other jurisdictions to further facilitate cross-border trades.”