Trade finance has often been called banking’s “last bastion of paper”. This is because it is a difficult area to digitalize, due to disparate jurisdictions, incompatible systems, legal requirements for physical possession of documents and other challenges. However, digitalization has been ongoing and is now being fast-tracked by the global pandemic.
At Euro Exim Bank, we have played a pioneering role in the digital transformation of trade finance. Since 2020, we have offered our customers digital banking solutions for trade finance, including our fully-featured, proprietary online trade settlement platform, Exim Wave, which provides instant access to over 150 currencies.
Embracing the Future, Early
Taking digitalization even further, we are one of the first trade finance providers to have adopted blockchain for international trade settlements and in our own workflows. Since 2019, through our partnership with RippleNet, we have provided an alternative to SWIFT for international trade settlements. This is a huge advantage for SMEs in emerging and frontier markets.
How Does Blockchain Work for Settlements
Instead of using the US dollar for international trade transactions, RippleNet allows us to use Ripple, a cryptocurrency, for cross border payments. This is not merely an instruction but a virtually instantaneous mechanism with on-demand liquidity, allowing for the secure flow of funds and reduced restrictions on cash flow. RippleNet, which is probably the most widely distributed blockchain network among banks, also enables end-to-end tracking and secure real-time messaging.
Blockchain for Trade Finance
It is now possible to issue digital trade finance instruments, such as letters of credit and bank guarantees using smart contracts, another marvel of blockchain technology. A smart contract is a self-governing mechanism that once initiated will automatically manage, track, trace and settle international trade transactions with minimal human interference. At Euro Exim Bank, we provide both blockchain driven and traditional digital trade finance instruments, along with paper-based solutions where needed
Untapped Potential
The ability of blockchain to create, maintain and transmit non-fungible tokens or NFTs is a major area of untapped potential. An NFT is a unique digital token that cannot be corrupted or interchanged; an ideal way to manage tracking, transmission, transfer of possession and verification of international trade documents, such as bills of lading; a major hurdle for trade finance digitalization.
Furthermore, blockchain makes it possible, for the first time ever, to create a truly global, interoperable, immutable, absolutely secure, reliable and decentralized system for international trade. A system where all participants can submit and retrieve information related to international trade, trade finance, shipping, customs and supply chains. This has the potential to create a single unified, transparent, incorruptible system for global trade that can make the whole process safer, cheaper, easier and faster.
At Euro Exim Bank, we are excited about the digital future of trade finance, supported by blockchain. We are constantly innovating to ensure that our customers, particularly SMEs in emerging and frontier markets, can enjoy the most modern, convenient and secure trade finance and settlement solutions.
