TradeFIRevolution

#TradeFiRevolution MultiversX is a high-capacity public blockchain that aims to provide security, efficiency, scalability, and interoperability by using two key elements: adaptive state partitioning and a new consensus mechanism, Secure Proof of Stake (SPoS).

MultiversX can process over 30,000 transactions per second with low block times (6s), negligible transaction fees, and fast finality for cross-partition transactions within seconds.

#TradeFiRevolution Digital Revolution in Trade Finance International trade has tripled as a share of global GDP since 1945, and banks have done well from it. Revenues from trade finance now total approximately $50 billion a year. But signs suggest that the good times may be ending, not only because the growth of trade is now slowing but also because new entrants could capture attractive parts of the value chain.

Documentary trade, traditionally facilitated by letters of credit (LCs) issued by banks, is steadily being replaced by open-account trade. Increased legal certainty, the ease of international communication, and a new abundance of information on counterparties mean that importers and exporters are more confident about trading without the financial reassurance a bank provides. Competition for slices of a shrinking pie is pushing down prices. Simultaneously, regulation is making trade finance more costly to supply.

Adapting to shifts in demand is not straightforward, however. The global economy is precariously positioned, with causes for concern in China, the EU, and commodity- based economies. If confidence falls, demand for credit guarantees may take off again. Banks must be prepared to respond to rapid changes in the quantity and location of demand. The most lucrative transactions are those in which a bank serves both sides. But no cost-efficient bank can have a leading presence in every market.

To succeed in this challenging and uncertain environment, banks’ trade finance offerings must be agile, low cost, and valued by customers despite the growing availability and safety of alternatives to documentary trade.

Part of the answer lies in the digital revolution unfolding in trade finance. Digital innovations in the customer interface can create “stickier,” more valuable relationships. And by automating many laborious paper-based processes, digital technology can reduce costs and expand a bank’s operational footprint without requiring more people on the ground. The next generation of trade technologies—electronic bills of lading (eB/Ls), MT798, bank payment obligation (BPO), and blockchain—may push trade finance toward the paperless business long envisaged.

If banks do not embrace these digital advances, their challenges will only grow. They are likely to find that tech-savvy upstarts have shunted them out of the lucrative role they have played for centuries, costing them not only the revenue from trade finance but the customers that came with it.
Trade finance customers seek the same things that other corporate banking customers want: process transparency, risk reduction, credit when needed, and the rapid, low-cost facilitation of transactions. 
In recent years, banks have used digital technology to make it easier and cheaper for customers to access such services. Deutsche Bank’s Autobahn platform offers clients an ever-growing variety of apps for cash flow management, supply chain management, trade finance, and more. But for trade finance, best-in-class innovation has come predominantly from fintechs. PrimeRevenue and MarketInvoice are winning business in supply chain and receivables financing by offering customer interfaces that simplify interactions and reduce time-to-cash. A large gap has opened up between the leaders and the rest.
Banks should not underestimate the importance of high-quality digital front ends. (See Exhibit 1.) These interfaces do more than improve customer convenience. By acting as gateways for supplying customers with complementary services over and above mere transactions, they can strengthen relationships in a way that fintechs struggle to achieve. Getting the front end right allows banks to be seen as service partners rather than document processors, thus letting them sustain their fees in the increasingly competitive digital world.