One of the most propitious industries for blockchain technology is trade finance. Many of the world’s largest banks are putting time into its research and development.
Thanks to a consortium of 71 global financial leaders, R3CEV, much has been uncovered about potential uses of blockchain technology.
Since 2016, R3 has executed several pilot runs in the marketplace to complement their research. They will continue to improve these strategies until ready to fully enter the market.
So, what are some of their findings of potential use? Here’s the future of trade finance with blockchain technology companies.
Monitor Real-Time Status and Condition
One of R3’s members, CBA, is a leading contributor to the research of blockchain technology. Currently, they are undergoing 3 different projects to analyze blockchain use.
They are conducting a trial run with exporters who ship cotton. A humidity monitor is placed inside the canister, which is linked to IoT and GPS.
This monitor allows consumers to track their shipments with real-time status. Also, they are able to evaluate the condition of their product as it travels through.
Other national blockchain technology companies are running pilots, similar to this study. In Singapore, Hellosent is conducting similar tests. However, they’re studying the import of French wine.
Eliminate Unpaid Settlements
A growing issue for grain farmers is a financial loss due to trade insolvencies. An estimated $50 million was lost in 2014 because of this activity.
It takes roughly 4-6 weeks for a farmer to receive payment for their shipments. At that, often times conflict arises between farmers and buyers over payment complications (failing to pay the appropriate amount, late payment, etc.).
Australian start-up, Full Profile, has taken matters into their own hands.
Their blockchain platform allows farmers to now receive automatic payment upon delivery of grains. This will significantly reduce the risk of dispute between farmers and buyers.
Once Full Profile’s application is fully functional in a domestic setting, they will expand on external trade.
The use of blockchain technology can also be beneficial to reducing financial loss and risk. Upon further development, it will be able to digitize sales and legal arrangements.
Trade finance is an unwieldy industry, that relies heavily on settlements and contracts. Currently, most of these agreements are handled the old-fashioned way: paper copies.
Blockchain technology will remove the need for this paper-based system. This ultimately reduces the risk of…