The trade players’ expectations are high from blockchain technologies. We expect from the adoption of blockchain the advent of a greener, smarter, more connected, and overall better world for global trade and commerce. To exporters and importers, this technology presents an immediate benefit of across-the-board transparency, and as transactions added to the blockchain are and cannot easily be tampered with, blockchain technology allows products and transactions to be traced easily. Why is this technology still not largely adopted? Why so much resilience from the industry?
Before we analyze the reasons for this sluggish implementation, let us see how exactly can blockchain transform or basically simplify the life of trade players. The role of blockchain in general is secure methods of exchange of sensitive information. The immediate uses of blockchain are:
- – Smart contracts – digital sales and other legal contracts
- – Track and trace – location of goods to be monitored and facilitate payments in close to real time
- – Platforms – business transactions can be executed directly on the platform itself through the use of “smart contracts” embedded in the platform
- – Intermediaries avoidance – the platform could be further connected to payment systems and distribution networks for smoother flow of payments, goods and services.
- The exporters and importers are the primary beneficiary of the adoption. Inside of a company this technology will bring cost reduction, speed, agility, confidence and predictability. Countries and policy makers will benefit as well from improving the conditions of trade for their companies from promoting the development and implementation of more and more blockchain technologies. Firstly because these technologies will encourage their economies agility and performance and secondly the policy makers should ensure these new technologies are developed in their countries to safeguard competitiveness.
We have looked at some startups who succeeded so far to integrate the international trade networks with their blockchain technology solutions:
- – Skuchain (USA) aims is to eradicate the use of letters of credit (LC) and help firms that don’t qualify for open account systems. Through its role at the Banker’s Association for Finance and Trade, Skuchain has enabled blockchain-based trade instruments for various banks. The World Economic Forum has named Skuchain in July 2019 the most promising Technology Pioneers of 2019.
- – Wave BL (Israel) is a startup which wants to eradicate bills of lading. Wave BL connects all members of the supply chain to a decentralized network and allows them a direct exchange of documents. Wave’s application manages ownership of documents on the blockchain eliminating disputes, forgeries and unnecessary risks. According to the CEO of Wave, they are currently successfully used by forwarders in the US, EU, Asia and the Middle East.
- – DLTLedgers (Singapore) is a platform that combines both supply chain traceability and the trade finance aspect. The company wants to “uberize” the trade finance model. By using smart contracts, traders on the platform can automate the creation of trade flows and build a digitally signed consensus framework among multiple parties. Latest success in Australia, where they have managed to onboard the agribusiness company Agrocorp ($3 billion revenues and 4500 farmers) is a sign of confidence in the blockchain technologies.
- Gaining industry adoption is the most critical challenge and this will determine the success of blockchain technology in global trade. The organizations involved in global trade still struggle to find successful and scalable use cases for blockchain. Nonetheless, the success of the startups mentioned above is a sign that the industry is getting from projects and trials to execution and implementation phase.
- To understand the reasons of the slow implementation of this technology, we have looked at the Gartner’s survey in 2019 of CIOs. In this survey only 5% of CIOs rated blockchain as a game changer for their organizations and 11% have deployed or will deploy blockchain in the next twelve months. Simultaneously, Deloitte has looked during 2018 at the country level opinions of senior executives and in terms of production plans for blockchain projects the leaders are China, Germany and Mexico, followed closely by United Kingdom, Canada and France. Surprisingly, a very low percent of U.S. companies stated that their organization already deployed blockchain technology in production. There is still margin for education and convincing the main players of relevance of the technology.
The blockchain’s benefits spread across all industries. As can be seen above, it has a lot of innovative benefits in global trade industry that includes effective time management, trade tracking, cut costs, and it also eliminates middlemen. It is quite evident that global trade actors would be challenged by decentralization. The blockchain is here to stay and the blockchain could solve some trade finance problems and relieve stress for buyers, sellers, financial and transportation companies. The extensive acceptance of blockchain in international trade will contribute to increase opportunities. It is expected to benefit specifically the importers and exporters as it will grant them access to more financial support.