The International Chamber of Commerce (ICC) Banking Commission has launched a working group to accelerate the digitalisation of trade finance.
The working group aims to help the trade finance industry progress towards greater digitalisation by moving away from time consuming and cumbersome manual processes involving paper-based instruments such as letters of credit (LC) to more automated and digitised processes.
The group will identify strategies to overcome the constraints of digitalising trade finance – such as a reliance on paper-based practices, a lack of recognition of the legal status of electronic documents, uncertainty over standards, and a general lack of clear legal and regulatory frameworks.
A key focus for the group’s activities will be in helping the industry realise the many benefits of digitalisation – including transparency, time and cost savings, reduced errors, and reduced compliance and operational risk.
The working group’s core activities will comprise of three streams. One stream will look at E- compatibility of ICC rules for trade finance. It will evaluate ICC rules, such as the uniform customs and practice for documentary credits, to assess e-compatibility and ensure they are e-compliant. This will enable banks to accept data rather than documents.
A second stream will develop a set of minimum standards for digital connectivity of service providers – particularly across legal, liability, information security and technology.
The third stream will examine the legal and practical issues related to the validity and value of data and documents in digitised form. It will conduct a legal survey to understand how the rights of third parties compare under paper and electronic bills of lading.
ICC Banking Commissions; senior policy manager, David Bischof tells GTR: “All 3 streams will start their work in the coming weeks, but the “rules” stream has already started. Once initial feedback has been received from the working group, a strategic outline will be put together comprising requirements, responsibilities, deadlines, etc.
“The timeline for this phase of the project is mid-July 2017.”
The working group will be chaired by Michael Vrontamitis, global head of trade, product management transaction banking at Standard Chartered and co-chaired by Alexander Goulandris, co-founder and CEO of essDOC.
The group, consisting of around 30 senior trade finance experts from various banks and corporates, will be co-ordinated by Bischof, who will oversee its daily operations. The group will also be the focal point for relevant external parties such as the international transaction banking association BAFT, the World Trade Organization (WTO) and the World Customs Organization (WCO).
“The digitalisation of the trade finance industry is already underway,” says Vrontamitis.
“In order to help the industry to reach a point of critical mass, where the benefits are fully realised, we need to develop a framework and create a digital ecosystem to enable connectivity and collaboration between stakeholders, in turn speeding up wider adoption.”
Olivier Paul, head of policy at ICC Banking Commission comments: “Digitalisation can bring about significant operational improvements – working capital benefits and a reduction in the time and costs of the trade finance business – with significant wider economic benefits. Yet e-compatibility and minimum standards are critical, as is legal certainty. This group will thus play a pivotal role in delivering a digital future for trade finance.”