‘Blockchain’ may be the financial services industry’s mantra of choice at the moment, but how can the technology realistically be applied to trade finance? That is the question Petra Burckhardt, Commerzbank’s Global Head, Product Management Trade Services, asks in Global Trade magazine.
In her article, ‘Evolution, Not Revolution’, Burckhardt notes that the technology may indeed enhance both the efficiency of trade and the security of transactions. Using blockchain’s secure and transparent network of computers – essentially, a secure ledger that is ‘distributed’ among all participants – she explains that banks could mitigate payment risk for their corporate clients, improve their liquidity, and reduce the chance of fraud.
Yet she also stresses caution. Before jumping on the blockchain bandwagon, she notes that banks and other trade finance participants must look at the realistic prospects for trade finance, explore use cases for the technology, and find specific problems that blockchain can solve. She also points out that practical usage of blockchain will rely on collaboration and harmonisation among banks – given that its key benefit, interconnectivity, would be lost should various distributed ledger technologies be used.
The article can be read online here.