Arun Manglick - Blockchain & Bitcoin: January 2018

Here we'll cover how Blockchain can help existing Trade Finance and it's underlying problems.

Trade Finance

Trade finance today is a core business for all global, tier-one banks. Yet its 10 years behind modern technology.
However there are multiple issues:

Highly-Decentralized, Paper-Contract, Payment-Based Market
Manual and Document Intensive - Breaks in business cycles inhibit visibility and amplify challenges such as financial crime.
DOUBLE SPEND Fraud - Trade finance FRAUD COSTS businesses an estimated $14 billion a year.

Blockchain is uniquely positioned to rethink this "Highly-Decentralized, Paper-Contract, Payment-Based Market".
Blockchain will ensure address such challenges and operations using "Distributed Ledgers, Smart Contracts and Digital Payments" in Trade-Life Cycle.
BlockChain can Digitize Entire Workflow as well as providing a common workflow for all participants – Banks, Suppliers and Buyers.
I.e. Provide a common platform for businesses to Consolidate Workflows and Generate Smart Contracts and Digital Payments.
BlockChain will eliminate possibility of 'SUPPLIER FRAUD' in Trade Finance while participating in a private credit, transaction and payment network.
BlockChain brings power of

Blockchain-based Network Validation
Creating Digital Versions Of Transactions,
Generating Smart Contracts,
Centralizing underlying collateral information on a DISTRIBUTED LEDGER across a private network to increase efficiency,
Eliminate “DOUBLE SPEND” Fraud

Blockchain enables participating banks to audit & access underlying collateral in a secure,distributed database, which reduces supplier fraud.
Enhance Data Quality and Reduce Settlement Time.

Note: Double Spend: In trade finance, suppliers find a way to obtain financing from multiple institutions on the same transaction.

Reduced Costs and Fees - Payments transfers using digital currencies dramatically reduce third-party fees, saving billions dollars.
Digital currency to make the TRADE-FINANCE CYCLE more efficient

Privately hosted Ethereum network will be best in building a custom trade finance blockchain.

Private Permissioned Ethereum - Enable CONTRACT VERIFICATION from other participants without compromising sensitive client identities.
I.e Restricted to parties concerned, permissioned so that only authorized participating banks, rating agency, and suppliers have access).
Smart Contracts -

Automatically check Contract Terms-and-Conditions, which include triggering of payments through a low-cost private digital payment system.
Manages TRADE-FINANCE WORKFLOW of Approvals & Automatically Transfers Payment once all terms-conditions have been met and digital signatures are collected.

What is Smart Contract on BlockChain:

Smart Contract lives on the Distributed Ledger accessible to all parties to read, update and verify information.
Smart Contract is data and code

Data stores the current state of various counterparties and components of the workflow
Code is triggered when key events occur such as documentation completion, validation of shipping, shipment arrival etc.

Such elimination of manual steps greatly accelerates the time window from Order-to-Ship and Receipt-to-pay
Common ledger on the block-chain is a highly reliable source of truth making reconciliations easy and verifications quick.

Hope this helps!!

Arun Mannglick

Arun Manglick - Blockchain & Bitcoin