While the world speeds ahead towards a world of futuristic automation, the trade finance world remains firmly stuck in the 20th century, with some fundamental processes still resembling those of medieval times. “It is widely acknowledged that trade finance is reliant on archaic, paper-based processes that have no place in the 21st century,” says Christoph Gugelmann, CEO of trade technology platform Tradeteq. Compared to the near instantaneous trades on the New York Stock Exchange, trade financing transactions could take weeks to clear. 

According to The Economist, processing trade credit needs the exchange of 36 original documents and 240 copies, on average, with each of the 27 parties involved spending hours fact-finding and form-filling. Shockingly, less than a quarter of banks make use of digitised documentation. Aside from being extremely painful for the highly-paid peons tasked with filing this information, such a byzantine process is a waste of time and money as well as prone to human error that could incur further losses in time and money. 

Blockchain’s provision of an automated and reliable method of record-keeping, however, promises to bring a much-needed shake-up to the process. Hailed as the most crucial accounting innovation since the invention of double-entry bookkeeping, the openness and immutability of the blockchain could potentially do away with some of the tedious compliance mechanisms and record-keeping involved in trade financing, while automation promises to greatly reduce the amount of time needed to process a transaction. 

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