Bills of lading, letters of credit and wet signatures are all examples of global trade still operating in analogue time, but experts think it is now time to modernise.
The Jeff Besos-funded tech start-up Beacon – who provide solutions to logistics planning and trade finance – caused a stir recently when calling the freight industry “rife for disruption”.
The UK secretary general for the International Chamber of Commerce (ICC) Chris Southworth agrees, telling the Daily Update today (21 July) that, in general terms, global trade is still using technologies from another era.
Southworth said there needs to be greater international regulatory alignment and better interoperability between technological systems before trade can truly modernise.
“The technology is there, it’s not the barrier at all, whether its blockchain or anything else,” he said. “The issue is a lack of scale – there are too many different laws doing different things.”
Southworth said everyone involved in trade needs to call on government to “modernise their rulebooks and laws”, getting rid of “old-fashioned” requirements for wet signatures.
Southworth called on international standards to improve the current interoperability issues that exist between different technological solutions.
He compares today’s situation to the Betamax and VHS format war in the 1970s and 80s.
“We don’t want a world where systems compete against each other,” he told the Update. “We want to mirror the situation where Apple and Android are talking together.”
He highlights the work the ICC are doing to act as a “convenor” for standards through programmes like the ICC Digital Standards Initiative, whose “sole purpose will be to convene all the stakeholders to connect the digital islands and technologies”.
The third issue, for Southworth, is a lack of awareness in governments. The practicalities and benefits of greater interoperability are “poorly understood” by politicians, with the issue not being one that gets them “excited”.
He says the complexity of global trade – which involves shippers, exporters and importers, freight forwarders, financiers and more – makes it a difficult area to push for change in.
However, he was keen to reiterate that the prize was a “world that looks like Apple and Android rather than Betamax and VHS” when it comes to interoperability.
Southworth highlights progress at an international level, with the WTO ecommerce negotiations among 88 countries being a “positive”.
He also noted that the UK – as a newly independent trading nation – was reviewing its own rules.
Deepesh Patel, a director at Trade Finance Global, highlights innovations from The Bankers Association for Finance and Trade to encourage digitisation throughout the supply chain.
“Some instruments – such as BAFT’s Digital Ledger Payment Commitment (DLPC) and the Electronic Payment Undertaking (e-PU) – are playing a role in facilitating trade finance transactions, leveraging a blockchain solution or platform,” he told the Update.
The coronavirus pandemic has hastened digitisation in some areas, especially as remote working and the need for greater sanitation has forced many parts of global trade to adapt.
For instance, payment and ID provider Nuggets told Loadstar they were moving away from wet signatures towards the use of biometric data (or facial recognition) to complete final mile deliveries for goods to consumers, using blockchain encryption to protect consumer privacy.
Patel says the pandemic has caused “a rush of interest” in the field of trade finance as well, but says “fundamental processes” are “very much the same” and that “adoption is still slow”.
However, he was more optimistic about the freight and logistics industry where “new technologies such as AI have made some progress in bringing the sector to the new digital age”.