Even if blockchain fatigue may have set in among bankers, there’s at least one use case they’re still clearly excited about: trade finance.
At least, that was the impression given at the Blockchain Summit in London this week, where a range of bankers talked enthusiastically about the digital trade finance platforms they are building and the cost reductions they believe will result.
Perhaps most notably, Amit Varma, the CTO of Citibank, was unusually vocal and specific in describing the savings his institution expects the technology to bring to the chain of players involved in each stage of global trade, from manufacturing to shipping to distribution.
He told attendees:
“We expect to see a reduction of 70 percent to 80 percent in costs on supply chain management by using blockchain.”
By contrast, in other business lines, bankers have their heads down these days, trying to live up to the hyped promise of blockchain optimization, all while having to deal with the thorny business of integration with their legacy systems. But one refreshing aspect of a largely paper-based system like trade finance is that there’s less in the way of creaking architecture.
“Blockchain is good for areas that have resisted digitization,” said Xavier Laurent, the head of blockchain community at the French financial institution Credit Agricole.
And the ultimate example of this may be trade finance.
The flip side is that in some parts of the world, the process may continue to resist digitization. Laurent said that while trade finance is global, some governments slow things down and are stuck in the paper trail.
“We will have some jurisdictions where all transactions are going on the blockchain,” Laurent said. “But there are other geographic regions where the legal and regulatory risk means you will still use paper.”
Platforms and tokens
Still, underscoring the energy around this use case, Varma described, in general terms, a new, fully automated trade platform Citi is building, which he said would combine blockchain with artificial intelligence (AI) and the internet of things (IoT).
The AI will drive trigger points in the system (i.e. the conditions that have to be met before a payment is made), Varma said, adding that an AI-enhanced platform could go as far as issuing a contract. In addition, IoT sensors could be used to do verifications normally done by humans.
“Shipments monitored using IoT devices can give everyone on the blockchain an idea of where the shipment is,” he said, adding:
“We are moving towards real time, to a point where the blockchain platform will trigger a payment when goods are received.”
However, Varma kept other details close to the vest. He did not say how close the platform was to being completed, much less tested or put into use, and when asked by CoinDesk he would not even give the project’s name.