The path to global trade interoperability

By Jacco De Jong, Global Head of Sales, Bolero

2020 was an unprecedented year in which we saw seismic paradigm shifts and disruptive changes across society and the global economy. Many companies and industries were pushed over the figurative technological tipping point, and business has been transformed forever as a result.

Digital transformation has alleviated significant pressures and, in some cases, brought great riches to those able to adapt but conversely left others further behind.

In 2021, we see countless corporates, banks and carriers aggressively pursuing and implementing a digitisation agenda and move away from analogue, paper-based processes that amplified the delays and disruption caused by the pandemic.

And with more and more players joining the field, trade silos are developing which leads to the further fragmentation of international trade as a whole. These schisms hinder the ability to build and develop the network effect generated by interoperability which means reaching critical mass becomes difficult which therefore delays the overall digitisation of global trade. Successful adoption of digital solutions in both finance and logistics requires a win-win-win model where the service providers their customers and their customers benefit.

Just as collaboration between trade parties is a pillar for successful transactions, the trade finance community should certainly look to embrace the different ecosystems and collaborate to finally revolutionise trade for this new digital age.

Electronic bills of lading for example are already enabling trading counterparties to get their hands on cargoes days or weeks faster, freeing up working capital along the global supply chain. Now we need to take another major step forward in document standardisation and interoperability so we can share the transformative efficiencies brought by different technologies such as AI but also IoT which enable the real time tracking of inventory.

To truly understand the true power of interoperability between the finance and logistics industries, there needs to be the alignment of 3 key elements: Technical framework defines the data exchange format and the related semantics; Business partner framework defines the roles, actions and instructions of each partner in the context of the shipment; Legal framework defines the multi-party agreement of the business partners and the legal recognition by the authorities of any interchanged data and documents.

Each of these frameworks have their own standards and practices evolving separately among the Finance and Logistics domains. Therefore, it requires expertise on both industry domains and across these frameworks to make end-to-end interoperability happen.

We are noticing that there are many initiatives that are showing real signs of progress, and this is largely in part due to the different players adopting innovative technology platforms. Ultimately, this bodes well for the trade finance community.

For more than two decades, Bolero has been taking its SWIFT background into logistics and thus creating this convergence of Letters of Credit, Guarantees and the electronic Bills of Lading and working with many organisations such as the International Chamber of Commerce (ICC), P&I Clubs, BIMCO, UN-CEFACT and more recently DCSA. This allows ship owners, shipping lines – whether in bulk or containerised cargo – to support their shippers and enable them to embrace the expansion of digital trade finance.

The passage into law of the Electronic Transactions (Amendment) Bill in Singapore is another significant step forward toward the digitisation of significant trade documents such as the bills of lading. The amendments, which largely adopt the UN’s UNCITRAL Model Law on electronic transferable records, will have important consequences for all parties involved in trade transactions, given the importance of Singapore as an entrepot and financial centre.

The shipping and finance worlds are moving closer together to achieve greater efficiency based on digital processes and interactions. Yet as businesses adopt solutions that give them greater agility and protection from physical disruption, they should consider how well they integrate with the wider world of trade and its systems.

Platforms need to demonstrate not only gains in terms of speed, security, and automation but also the ability to achieve full integration with the entire global supply chain. We understand standards are not only about technology but also about legal compliance and the assurance that documents are legally watertight in a respected jurisdiction. However, platforms must be safe, fast, agile, and perfectly suited to the multi-faceted demands of banks, carriers, forwarders, and corporates.

Advances in document digitisation mean we are on the brink of exciting changes in the global trade system. Everyone must, nevertheless, understand that for new standards in documentation such as bills of lading to work effectively and securely right around the globe, they must be underpinned by platforms that already have an established network of significant banks, carriers, forwarders, and corporates. Innovation has to be accompanied by or embedded in, real-world solutions that big players are ready to adopt.

Today, many organisations in global trade will digitise to become far more agile. The financial and physical supply chains will map onto one another more closely and the efficiency gains will be very substantial. But this will also place a premium on the interoperability of the systems or solutions banks, carriers and corporates implement.

Solutions offering seamless integration and established networks for shippers and trade counterparties are highly prized and create further trust, whilst providing faster access to credit and rapid completion of transactions.