The world of technology is always changing rapidly. This change is always experimental and the results of which could either be beyond expectation good or horribly miscalculated bad. Whatever might be the case this experimentation is a required aspect of any market if it wants to grow further and make things that were once only feasible in imagination possible to exist in reality.
The current Fin-Tech market has been impacted quite a lot by the introduction and implementation of blockchain technology. Blockchain has been the word that is on everyone’s tongue and with good reasons of course. The technology offers security, transparency, and quick and direct data processing. There are other aspects of blockchain as well, but discussing each and every aspect is beyond the scope of this article.
Trade Finance is one of the largest financial industries in the world. With a whopping 9 trillion in revenues globally this industry accounts for a huge chunk of the global economy. The process involving trade finance is very manual. The biggest tool use to execute trade finance is paper. Not a single good moves around without a bunch of papers being signed, those papers being sent to postal addresses, and those papers being processed for a stamp of approval. Paper is what makes the existence, ownership, and other utilities known throughout the network of that particular trade finance activity.
In a recent report by the Asian development bank, the trade finance gap is around 1.5 trillion. When we talk about the trade finance gap we mean the requested amount of trade finance which is rejected due to many reasons but the biggest one is the lack of digitalization and manual data entry.
The reason why blockchain can be a good tool for trade finance is that blockchain is transparent and can be completely automated. Blockchain will never lie to you, meaning once an activity is validated and recorded on its ledger (think of it as a database) it will remain there for the rest of eternity. Every party that is involved within that processing can view this activity. The other way blockchain can be of great assistance is through its means to automate things via smart contracts.
Smart contacts are contracts that run automatically when their required context is triggered. Think of them as self-executing programs that run when a certain condition regarding which they were built for occurs in the system. These contracts are what basically help execute processes on the blockchain. In the trade finance domain, these contracts could be vital for process execution, and because nothing will execute unless it fulfills the required condition no foul play could occur.
