Blockchain technology in the recent days, has gained prominence with the widespread improvement of the Bitcoin prices. When the bitcoin prices started skyrocketing earlier this year, the transaction force of bitcoin, that is the blockchain technology also started to gain importance among the people who wanted to invest in it. Because, if there is money, there needs to be a way to move it around, and the process to move it around is the, blockchain technology.
Now, quite evidently, industries which deal with transactions are the biggest industry for blockchain technology. One such industry is trade finance. Now, what is generally is trade finance? Trade finance is the financial transactions, both happening internationally and domestically, which relates to trade and receivable finance. Now, every time an item is sold or bought across borders, there is some amount of trade finance involved. One of the major difficulties that stands at the way of trade finance, is the huge amount of paperwork that needs to be done, in order to maintain the accountability. Hence, some of the world’s largest bank are putting in investment over blockchain, so that it can be developed for them to use, and trade finance turn digital.
A research consortium consisting of global leaders, has been doing market research for a year now, to integrate blockchain in to the market fully. They have come up with some of the findings, which can help the banks and the companies dealing in trade finance, integrate blockchain in their module in the coming years. In this article, we will discuss about the promises of blockchain technology for trade finance, so that, the blockchain technology companies can work with the companies dealing in trade finance, to make way for a better streamlined process.
Monitor Real-Time Status and Condition
CBA, a member of the research consortium has been doing studies, to analyze the use of blockchain. What they are doing is, they have partnered with companies who export cotton. Now, with the use of IOT or Internet of Things devices, and by using a GPS device with that, they are now monitoring real time status of the cotton shipment. The IOT device is also capable of measuring the humidity of the shipment cannister, and hence, you being the exporter, can actually see the humidity inside the cannister and at the same time, see, where your products are at this point of time.
It is important that export of such materials is streamlined, since, there is a story of trade finance, every time a product crosses a border. Hence, it is very important that the exporters can track their shipment in every step.
Eliminate Unpaid Settlements
Another problem that blockchain technology tends to solve is uniform payment for everyone. For the last few decades, it has been seen that, grain farmers experienced or faced losses due to trade insolvencies when the grain crossed borders. Often it so happens that, when they get the payment, they don’t get the full payment, due to several reasons. Hence, disputes arise between the farmers and the buyers.
Now, various blockchain technology companies are now in the game, making life easy for farmers. What they are doing is, they are streamlining the whole process by blockchain technology to a point, where farmers are paid their money, as soon as the grain reaches the buyer, thereby reducing the risk of conflict between the farmer and the buyer.
In the modern world, everything is getting digitalized, and when something gets digitalized, it means clarity and globalization of the system. Today, trade finance is predominantly handle by paper documents, and sometimes it becomes very tough to manage all these paper documents. These documents sometimes get manhandled and gets lost or tarnished. Digital documents can be found out more effectively, and there is no chance that it will be lost or be tarnished.
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