Legislating to unlock digital trade opportunities
Trade is still incredibly reliant on paper and that has remained unchanged for centuries. It’s estimated that there are an average of 28.5 billion trade documents1 printed and flown around the world every day. That’s a staggering number.
As those involved in trade may have experienced, in many cases goods arrive at their destination before the documentation has. For example, while transit periods between Singapore and Bangladesh might take 5 days, the legal documentation that acts as proof of ownership of those goods can take 10 days when financing or risk mitigation is needed.
There are workarounds in place to authorise the release of the goods, but this is just that – a workaround – it’s cumbersome and involves additional cost. If there isn’t a workaround, then the goods just sit there until the paperwork arrives.
In order to ditch the paper and digitise trade, speeding up and simplifying the process, we need to have appropriate legislation in place – and we need it across all jurisdictions globally.
The UK’s Electronic Trade Documents Act became law last month, meaning that electronic trade documents will have the same legal outcomes as their paper equivalents. We’re part of the International Chambers of Commerce taskforce that’s driving its adoption.
This is an important step, but we need more than one law in one country. We need other markets to adopt similar legislation to digitise international trade – this is where we can help.
HSBC is a big player in the global trade industry, we have a big footprint and can make a big difference.
By collaborating with various industry bodies and key players in the digital trade ecosystem, we can bring together extensive expertise and robust technology to make paperless trade a reality in the future.
At the same time, we’re focused on digitising our own operations and the way we service our clients.
Investing in solutions
We’ve invested in our digital capabilities so clients can interact with us digitally from a trade finance perspective.
HSBC Trade Solutions is a new one-stop e-platform that processes trade finance transactions. It’s not just an upgrade of our IT systems but a holistic transformation of how we interact with clients.
We’ve also invested in solutions that deal with paper more efficiently. By using a variety of technologies, including optical character recognition and artificial intelligence, our systems can recognise and classify what type of trade document it is, extract the relevant data and make it efficient for our colleagues to handle paper.
And, while paper documentation may still be required when goods are physically moved, a lot of our clients are now trading electronically. So, we’re making our trade finance solutions available in various electronic venues and marketplaces so that our clients can sell more or buy more seamlessly.
The road ahead
We’re making real progress towards solving an incredibly difficult problem – but this is a problem that cannot fully be solved without appropriate legislation in place globally.
This is important because digitising trade creates opportunities equally for large and small corporates. Trade creates jobs, it creates wealth and is good for society. Anything that we do to make trade simpler and faster has much wider benefits.