Bankers Tout Trade Finance as the Sweet Spot for Blockchain

At least, that was the impression given at the Blockchain Summit in London this week, where a range of bankers talked enthusiastically about the digital trade finance platforms they are building and the cost reductions they believe will result.

One refreshing aspect of a largely paper-based system like trade finance is that there's less in the way of creaking architecture.

Still, underscoring the energy around this use case, Varma described, in general terms, a new, fully automated trade platform Citi is building, which he said would combine blockchain with artificial intelligence and the internet of things.

Others talked about the possibilities for tokenization - one aspect of blockchain that enterprises have only recently begun to embrace - in trade finance.

Taking the tokenization of trade finance to its logical conclusion, Lee Pruitt, the CEO of ethereum-based startup InstaSupply, said the whole process can be opened up so that banks are no longer required to loan money against invoices.

Stepping back, trade finance is big business, worth some $9 trillion worldwide, according to a recent report by the International Chamber of Commerce.

Bankers see room for improvement, which helps explain their search for efficiencies through digitization via blockchain.

Sean Edwards, the head of legal at Sumitomo Mitsui Banking Corporation, posited that there is an additional $1.5 trillion of potential trade finance business that isn't being done, in places like Africa and parts of Asia.

Edwards, who is also chairman of the International Trade Finance Association, said one the things that's needed to get those places on board is an efficient know-your-customer system to onboard what he called "Long tail suppliers," those most in need of finance.

"Trade finance is event-driven, punctuated with invoices, purchase orders etc. What you find is the pre-shipment stages are very poorly served; banks are bad at providing finance to early-stage small suppliers," he said.