The previous two parts have focused upon the challenges for documentary trade finance and how some, but not all of those challenges might be met by technology, principally through the mechanism of digitizing trade documents.
Whilst there can be no doubt that such digitization could dramatically reduce costs and processing times, such a solution simply swaps paper-based documents for digital “documents” within the existing trade-finance frame of reference.
Part III examines the extent to which trade finance might be able to escape from current practical and analytical frameworks by developing entirely novel ones. In this regard, trade parties could abandon the notion of “documents” altogether (whether paper-based or electronic) by simply transmitting key data as part of the financing structure; they could abandon reliance on bank-based trade finance by meeting their financing and liquidity requirements through more bespoke non-bank options; they could abandon generic trade finance structures by developing specialized trade finance mechanisms for particular trade sectors; or they could abandon traditional notions of payment by linking different sale transactions together. Whilst each of these options involves trade finance in the broadest sense of that term, the development of such innovative financing and payment structures enables trade finance to be moulded so that it serves the interests of trade parties, rather than those of the banks. Undoubtedly, such innovation can be facilitated by technological developments, but that is not necessarily the case: technology and innovation do not quadrate perfectly. Accordingly, Part III focuses on trade finance innovation.
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More on the topic The previous two parts have focused upon the challenges for documentary trade finance and how some, but not all of those challenges might be met by technology, principally through the mechanism of digitizing trade documents.:
- Whilst the previous part considered some of the difficulties that have dogged documentary trade finance, Part II looks to the future. Given the technological advances that have occurred since the advent of the documentary letter of credit, the former is increasingly threatening to eclipse the latter.
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- Hare C., Neo D. (eds.). Trade Finance: Technology, Innovation and Documentary Credit. Oxford University Press,2021. — 417 p., 2021
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