In 2018 the World Economic Forum said the trade finance gap stands at $1.5 trillion and could become $2.4 trillion by 2025. But one study suggested blockchain could reduce this by $1 trillion through smart contracts and a distributed infrastructure. 80-90% of global trade relies on trade finance (American Express), and working with blockchain technology firms like BlockApps can increase transparency, increase participation, and lower risk.
This current challenge is due to various complexities in the process, such as its sprawl across multiple borders and jurisdictions, siloed data sources across multiple organizations, complete lack of trusted data, and its antiquated paper-based tracking system where multiple parties are holding the same records on different paper.
With the larger view of the ecosystem the reason for this gap becomes clear.
- With a lack of trusted real-time data, banks and financial institutions have taken a risk averse approach to trade finance.
- Companies who have qualified for trade finance still find a slow, and costly process to manage internally and within the ecosystem