In considering practical applications for Blockchain for banking processes, one of the specific areas that is in dire need of this type of technology is trade finance. Long reliant on complex banking correspondent relationships, the issuing and tracking
of documentary letters of credit, and prone to the risks of delivery of payment and goods on a global basis, trade finance can benefit from Blockchain's peer-to-peer connectivity and lower transaction costs. As evidenced by the recent announcement by Barclays
of a successful trade documentation transfer between two of its customers via a Blockchain platform, the use of the technology in trade finance will be a growing trend. Other global trade finance banks, such as Bank of America and HSBC, have announced similar
projects. In August of this year, the banking consortium, R3CEV, announced that fifteen of its members had participated in a similar trade finance use case.
Many of the questions concerning Blockchain technology, such as transaction speed and the use of cryptocurrencies, do not directly apply to its use in transferring the smart contracts of trade finance. However, two noted challenges that are commonly cited
by the banking industry, need to be addressed before wider adoption can become possible. The first is standards: any Blockchain-based trade finance service will require the implementation and adoption of a data standard and protocol that will populate the
specifics of the process. Much of the work for creating such a standard was performed in establishing the Bank Payment Obligation (BPO) initiative. Perhaps this standard, based on ISO 20022, can be adopted by Blockchain solutions going forward.
The second issue that needs to be addressed is integration. Once the standard is established, how will buyers, sellers, and any required trusted third party/intermediary, interface to the network? Without having to implement an entirely new technology infrastructure,
the parties involved in the trade finance process will need flexible tools to map and process documents and payments. The challenge of integrating the disparate sources of data has hampered previous initiatives from succeeding in resolving the automation of
global trade finance.