A Paperless Trade World


A Paperless Trade World

by Sanskriti Nagar

Paper, paper everywhere,

Of its pitfalls, beware!

Technology has put an end to ink and paper in several aspects of our lives. We don’t write letters anymore, we Whatsapp. We don’t sign with our cursive, looping letters, we use digital signatures. And of course, we don’t write anymore, we type.

Trade Finance is going paperless too, with banks increasingly adopting technology to eliminate paper, not only to enhance their operational productivity, increase transparency and security but also to lower costs associated with paper documentation.

But it isn’t merely a matter of reducing costs that is prompting governments and corporations worldwide to adopt electronic documentation. With the increasing complexities in supply chains and the speed with which goods are being demanded and supplied, trade is demanding more clean data and in the presence of stringent regulations, there is a need for information that is both structured and reliable. Data in an electronic form is easier to work with and is much more reliable than in forms filled with pen. Adopting technology for paperless trade allows both companies and countries to be more compliant with trade regulations and enables a comprehensive risk analysis.

Regional and cross-regional initiatives for paperless trade are on the rise. Corporates who are in the business of exchanging goods can no longer remain aloof to the adoption of technology for electronic documentation. The economic gains to be had from eliminating paper are evident from the below examples:

  • The implementation of a Single Window (SW), to facilitate information exchange between trade and government has allowed Singapore to process trade documents in 15 minutes compared to the earlier average of 4 days.
  • Use of technology to establish an automated information transaction system has allowed the Republic of Korea to save around $1.82 billion. These savings have come from the use of e-documents, automating administrative activities and improvements in how the information and documentation is stored and accessed.
  • Large enterprises in the manufacturing sector like BMW, retailers like Walmart and in several other industries are sustaining their supply chains by implementing Electronic Data Interchange systems.

With Asia emerging as the new trade hub, banks are increasingly getting down on the Asian ground to test their electronic initiatives. There are a number of initiatives being taken on a national, bilateral and sub-regional level in the region. The ASEAN Single Window and the Pan-Asian e-Commerce Alliance are two major initiatives being implemented in Asia-Pacific.

With the exchange of data and documentation electronically, trade inefficiencies are eliminated as the various parties in the supply chain interact with each other online. Banks that have adopted a paperless technology and extended them to their corporate customers have been able to drastically reduce trade cycles of their clients, in one instance, the trade cycle for a Colombian coffee association was reduced from 18 days to a mere 3 days.

The gains to be had with an automated trade finance solution are:

  • Greater efficiency
  • Better security
  • Reduced risk
  • Better quality of data
  • Reduced trade-transaction costs
  • Reduced loss of revenue due to fraud or non-compliance
  • Reduced delay in processing
  • New, value-added services can be introduced like automated tracking and monitoring
  • Superior customer experience
  • Higher STP
  • Quick response to the evolving business and regulatory requirements leading to lower costs and development time

Trade has traditionally been viewed as a paper-processing business. But banks cannot imagine continuing to be the principal bankers of their customer unless they simplify transactions for the trading parties. What this effectively means is integrating all the parties in the supply chain together, providing both easier transaction processes and a comprehensive real-time reporting mechanism.

The competitive advantage to be had by adopting paperless technology in trade finance is clearly evident. With the success of cross-border initiatives and innovative technologies causing a disruption in the paper-intensive business, banks and corporates can truly collaborate with each other to eliminate the shortcomings of paper and realize a trade world of sustainable supply chains. 

Date Modified: 

Tuesday, October 7, 2014
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