Major trading companies around the world are recognizing the transformative impact of Ethereum blockchain technology in operating global supply chains, managing trade finance, and unlocking new business models.
International trade is a $16 trillion market that accounts for the exchange of capital, goods, and services across international borders or territories. It is broadly split into two categories:
• 75% of various goods typically shipped by shipping containers or ground transportation
• 25% commodities
From a shipping and transportation viewpoint, the trade and financing industry primarily suffers from a lack of trust and coordination between exporters and importers, particularly within emerging to developed markets. Additionally, the industry maintains various operational inefficiencies due to the complex nature of operational processes in the international trade of goods and commodities. For instance, shipping and trading still heavily rely on human resources and are affected by manual and paper-based processes which are very costly, slow, and error-prone.
There comes Blockchain!
Blockchain enables data to be recorded in a secure digital format by providing real-time information on transactions between different parties, be they corporations, supplier networks, investment pools, or an international supply chain.
Six benefits of blockchain
• Facilitate the traceability of traded goods, which helps reduce logistics costs and safeguard operations from start to finish.
• Contribute to the digitalization of the entire rules of origin process at every stage, which is key to streamlining certifications and customs clearance.
• Address the challenges of cross-border data exchanges between public agencies or authorities and private companies.
• Streamline operations and reduce transaction costs by increasing interoperability between players and facilitating access to information for all parties involved.
• Transfer payments more quickly and cheaply than is currently possible through the SWIFT network. As well as reducing transaction times, blockchain commissions are lower and without maximum limits, which is especially advantageous for exporting SMEs.
• Reduce the time needed to issue a letter of credit from seven to 10 days to as little as four hours.
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