Blockchain technology has caused disruption in the business world. Although until now its best-known applications have been focused on cryptocurrencies, more and more organizations are deciding to implement blockchain technology in their business.
Undoubtedly, international trade is a wide enough and interesting world where this technology can play a differentiating role in which this technology can drastically improve logistics functions, customs, documentation, payments, financing, contracts and much more. However, we must first properly define the concept of “blockchain”.
What is the “blockchain”?
It is a digital tool or technology that allows you to store data that is grouped into blocks. These blocks are chained together and often hold information such as transactions, contracts, or other data. It can be for public use in which everyone can intervene (Bitcoin or Ethereum), for restricted use, private or managed by a consortium of companies (USPS Delivery, Supply Chain East Track Trade)
The blocks are stored chronologically, with an alphanumeric code (#hash) and also use a cryptographic key. In this way, the information is immutable and guarantees that nothing has been altered in the transmission process. The information is reproduced as many times as there are nodes, which protects the integrity and makes it difficult to hack.
Another fundamental element is that the information is shared and distributed (thanks to a P2P network) among the actors and participants by means of a synchronized copy. For data movements, the verification and approval of the members is necessary, so the blockchain is democratic and decentralized.
In general terms, the competitive advantages and benefits offered by this technology have 4 main approaches:
Agility of bureaucracy
Blockchain uses in international trade
Logistics, customs and supply chain: a blockchain tool allows real-time tracking of goods in transit and provides transparency in shipments to facilitate, anticipate and optimize decision-making. According to the World Economic Forum, blockchain logistics platforms could increase world trade by 15%, improving competitiveness, economic development and employment. Platforms like TradeLens, created by Maersk and IBM, is the best known in this regard. Also initiatives such as LACChain's CADENA, where 8 customs offices of Latin American countries share company data and transactions. In Europe, Blockchain Customs Technology, the owner of eCustoms, has implemented AI models in the blockchain solution to speed up customs processes.
“Smart Contract”: an agreement between the two parties that is executed and completed autonomously and automatically, without the need for intermediaries or interpretation. Being distributed to thousands of computers, it provides security and surveillance, in addition to eliminating bureaucracy, censorship and high costs.
Documentation: in international trade there are tedious and complex intercommunication processes of essential documents such as certificates of origin, commercial invoices, B/L, etc. Not only would there be no need for physical documents with this technology, but it facilitates transactions between all types of actors, increases efficiency in that the exporter would only have to enter the data once and they are also shared in a common space and authorize in real time. All this is summarized in standardization and homogenization of processes.
Online banking and digital currencies: the blockchain offers end users fast, secure and cheap cross-border payment solutions as ways to avoid fraud or scams (thanks to data encryption and scrambling). The Santander consortium is already implementing these practices.
Financing and payments: financial institutions are working on alternatives to save on costs, time and intermediaries. An example is the digital letter of credit: by this means a transaction process would last approximately four hours, unlike traditional letters of credit, whose processes last seven to ten days of interbank communication. Komgo or Finacle Trade Connect already use this method
Insurance: the automatic verification of the identity of the policy holder and the validity of the contract, as well as the mechanical processing of claims would be some of the advantages that the blockchain would offer.
Very significant are the applications that this technology has to intellectual property in terms of ownership, struggle with identity theft and evidence of merchandise stocks, safer and more transparent solutions in e-commerce or in the tracking and traceability of food from origin to consumption, as well as the registration of quality data of food through a QR code, as the French company Auchan Retail has already developed.
Blockchain: an opportunity for SMEs
According to a study by consultancies Accenture and McLagan, it is estimated that the savings in business costs by implementing blockchain technology would be between 15% and 20%.
The competitive advantage that blockchain can bring to exportingSMEs is key for them to position themselves in a greater position of equality with respect to their large competitors, since it is a process that democratizes and speeds up all the functions related to international trade, according to explained Eduardo Ubide, Competitive and International Intelligence Consultant at Imeanticipa.
Written by Manuel Alcocer Álvarez