{"id":3704,"date":"2019-10-17T05:33:25","date_gmt":"2019-10-17T05:33:25","guid":{"rendered":"https:\/\/www.antiersolutions.com\/?p=3704"},"modified":"2019-10-17T05:33:25","modified_gmt":"2019-10-17T05:33:25","slug":"strengthening-trade-finance-with-blockchain-technology","status":"publish","type":"post","link":"https:\/\/www.antiersolutions.com\/blogs\/strengthening-trade-finance-with-blockchain-technology\/","title":{"rendered":"Strengthening Trade Finance with Blockchain Technology","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n<p>Trade\nfinance through banks and financial institutions plays an\nindispensable role in the global market. It fuels international\ncommerce by providing delivery and payment assurance to buyers and\nsellers, helping them cover the trade funding gap. Currently, the\ntrade finance market stands between $4 trillion and $5 trillion.<\/p>\n\n\n\n<p>However,\ntrade participants are exposed to various business risks followed by\nuncertainties. Besides, many frauds and challenges are associated\nwith trade finance. The various vulnerabilities can be counted as\npayment and delivery delays, lack of insights in the movement of\ngoods and the efforts required for the counterparties\u2019 due\ndiligence. Due to these obstacles, both risk and cost factors\nincrease, especially for small businesses.<\/p>\n\n\n\n<p>Blockchain technology can eliminate all these problems, resulting in a better financial ecosystem. <strong><a href=\"https:\/\/www.antiersolutions.com\/blockchain-solutions-for-enterprise\/\">Enterprise blockchain solutions<\/a><\/strong> have the potential to:  <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>\nMinimize\n\tfrauds and disputes in delivery and payment mechanism\n\t<\/li><li>\nEnhance\n\tthe transparency of asset movement\n\t<\/li><li>\nEnable\n\teasy flow of trade receivables\n<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Potential\nof Blockchain Solutions<\/strong><\/h4>\n\n\n\n<p>The\nrealm of blockchain technology has the potential to navigate the\nshift to a new advanced digital world. The technology reduces\noperational complexities and transaction costs and redefines the\nvalue chain interactions.<\/p>\n\n\n\n<p>The\nthree salient features of blockchain that\nwill contribute to treating the major pain points of trade finance\nare:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>\n<strong>The\n\tcryptographic security \u2013<\/strong>\n\tthe security is maintained as it is based on the blockchain\n\ttechnology, making the information immutable and credible. It is\n\tbased on permission access for trade participants, thus ensuring\n\tprivacy and confidentiality of data.\n<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li>\n<strong>Distributed\n\tledger architecture \u2013 <\/strong>ensures\n\ttransparency and traceability of the transactions. It increases the\n\tvisibility of the status of asset tracking, enables execution of\n\tcontracts through smart contracts and can handle the downtime and\n\trisks.\n<\/li><li>\n<strong>The\n\tnetwork consensus mechanism \u2013 <\/strong>it\n\tis based on the consensus network which enables a single source\n\tthrough which the truth flows enabling it to be a base for issuance\n\tof financial obligations. It eliminates the problem of\n\tdouble-spending, fraud and a requirement of continuous\n\treconciliation.\n\n<\/li><\/ul>\n\n\n\n<p>All\nthese features together form a strong foundation for the\ncollaborative trade finance ecosystem and it effectively increases\nthe efficiency of processes, improves the liquidity and provides a\nbetter vision into the trade finance chain.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Blockchain\u2019s\nimpact on trade finance<\/strong><\/h4>\n\n\n\n<p>The benefits of blockchain can be leveraged by the finance industry while addressing the pain points of trade finance. <\/p>\n\n\n\n<p><strong>Automated payment methods<\/strong> <\/p>\n\n\n\n<p>An\neffective way to minimize business risks is the use of the letter of\ncredit (LC). It facilitates the trade flow and settlement process\nthough the mediator of banks. These are affected by high costs of\ntransactions, complexities in the process and contractual delays.\nThere are many flaws in the system as LC is based on the system of\nevaluation of documents instead of the actual delivery of assets\nwhich made the goods unclaimed at the delivery location.<\/p>\n\n\n\n<p>To alleviate the various risks associated with the LC, it can be re-modeled on the concept base of blockchain. This would enable the mitigation of ambiguities in the payment contracts by automating the compliance verification process in terms of the contract and ensuring faster payments to sellers. The integration of enterprise blockchain solutions into the system also discovers the early detection of any inconstancy or inefficiency in the process.  <\/p>\n\n\n\n<p><strong>Assurance of delivery to buyers through asset tokenization<\/strong> <\/p>\n\n\n\n<p>In\nthe shipment transit, buyers need to foresee timely indications. It\nenables them to minimize the business risks and future damages that\nmay happen when assets may not reach the delivery location at the\nexpected time. Buyers lack the insight into the damages or delays\nthat happened along the journey may be due to bad weather, custom\nhold-ups, congestion in ports or any other reason.<\/p>\n\n\n\n<p>The\nmain factor affecting this situation is that the actual trade\ndocuments move separately from the flow of the goods. In this\nsituation, a buyer cannot claim the goods until he receives the\nphysical documents. The documents may get forged, leading the buyer\ninto a complete mess.<\/p>\n\n\n\n<p>However, integrating blockchain technology into the system enables the digital transformation of assets into crypto assets. It will further denote the custody and ownership of the bearer. Thus the trade documents can be issued and verified directly on the blockchain by the concerned parties. It will also enable delivery issuance and better management of risk.  <\/p>\n\n\n\n<p><strong>Increasing the financial revenues for banks through digitized payment instruments and mitigation of risks <\/strong><\/p>\n\n\n\n<p>Banks\nact as a medium for the trade receivables and other financial\ninstruments such as promissory notes, drafts or bills of exchange.\nThese are the negotiable instruments which are transferred to the\nthird parties. This enables the suppliers to maintain their working\ncapital daily by choosing methods such as discounting and factoring.\n<\/p>\n\n\n\n<p>In\na traditional process, banks face some obstacles in the compliance\nprocedures due to the inefficiencies of limited availability of\ninformation, reliability on trade documents and huge incurring of\ncost. This results in business risks, further leafing to financial\nfraud, duplication of transactions, damage to reputation and costly\nlaw-suits.<\/p>\n\n\n\n<p>To\novercome this, the payment instruments can be issued on a blockchain\nnetwork. These can be digitally created as the financial contracts\nbetween the issuer and the redeeming party. It will thus prevent\nfraudulent activities, improving SMEs financing options, maintenance\nof liquidity and efficient management of receivables.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>End\nNotes<\/strong><\/h4>\n\n\n\n<p>Enterprise blockchain solutions can help remove the inefficiencies from the trade finance process, subsequently improving the interest of all the stakeholders. This association will further result in the seamless management of major operational complexities.<\/p>\n\n\n\n<p>Antier Solutions helps businesses and entrepreneurs adopt the next wave of a digital business through <strong><a href=\"https:\/\/www.antiersolutions.com\/\">enterprise blockchain solutions development<\/a><\/strong>. We create a harmonious trifecta of technology, design thinking-driven approach and intelligent strategies to help in blockchain integration.  <\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"<p>Trade finance through banks and financial institutions plays an indispensable role in<span class=\"excerpt-hellip\"> [\u2026]<\/span><\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":3709,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[1577,1576],"class_list":["post-3704","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain","tag-enterprise-blockchain-solutions","tag-enterprise-blockchain-solutions-development"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Strengthening Trade Finance with Blockchain Technology - 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