Secure paperless trade finance takes a leap – Data sharing experiment had promising results

Every year, 4 billion paper documents are sent to enable Trade Finance globally, meaning all the required data shared between the stakeholders in the process, e.g., contracts and documents between the customer, the provider, their banks, and the logistic, among others.

The trade conducted within these paper documents is estimated over EUR 14 trillion worth, but the reuse of the data is almost non-existent, which results in a lot of delays and inefficiencies in the process.

The business ecosystem lacks openly available data sharing governance models and technical capabilities. Corporates would need to share data in a trusted and scalable manner without heavy point-to-point integrations. Until now, paperless trade finance has not taken steps further despite the advantages.

Focusing on the Letter of Credit

Global industrial group Wärtsilä and leading Nordic bank SEB participated in an innovative co-creation project aimed at digitalizing the Export Letter of Credit (L/C).

During the project, Finnish data economy company Digital Living International implemented the fully digital L/C document exchange based on Finnish Innovation Fund Sitra’s data sharing platform called IHAN Testbed, and Nixu Corporation which supported the process with its digital identity and cybersecurity expertise.

The experiment's purpose was to show that corporate data sharing can be executed technically, functionally, with good governance, and without the fear of critical business information being misused. The aim is that paperless trade finance is done securely, efficiently and that the well-established digital processes can be used in other contexts.

Findings

The project was implemented after the planning phase in a notably short time, just within 2 months. The quick timeline holds a great promise on the efficiency of the capabilities and solutions used. The key findings were made in six areas reflecting on the targets of the experiment.

1. The project proved that a data sharing network can be created between different stakeholder organizations, in this case SEB and Wärtsilä, and data between them can be shared securely with a consent.
2. The L/C initiation process stages can be run in a fully electronic manner without paper documents or email confirmations. This was proven by standardizing and harmonizing the data contents from the example cases and generalizing the data products.
3. There are no technical obstacles in productizing the APIs on bank and exporter’s end into standardized data sets.
4. The data can be consented to both from the advising bank to exporter and vice versa. However, this will require company specific adaptation.
5. The methodologies used in this experiment can be applied to any financial or industrial process resulting in similar automation. Therefore, new business models and the data can be further extended to another use case as well in logistics.
6. There are no technological restrictions for the stakeholders to build these capabilities themselves, thanks to the commonly available and open web standards and rulebooks.

Future possibilities

International Chamber of Commerce (ICC) has set goals to change the status quo of the industry. It aims for standardized and trusted data sharing between companies.

Cybersecurity has a lot to do with the ecosystem of the digital trade in financial services: there is the technical security architecture, cybersecurity governance, privacy, vulnerability scanning, and the continuity of the system as a whole. That’s why Nixu experts are happy to take part in all digital data sharing projects from the beginning.

Further info

Full report of the study: www.digitalliving.fi/cases/CorporateDataSharing_PoC_final_report_2021_02_09_PublicVersion.pdf 

Wärtsilä press release: https://www.wartsila.com/media/news/17-02-2021-wartsila-participates-in-paperless-trade-finance-experiment-2863569

SEB press release: https://sebgroup.com/press/news/seb-and-wartsila-in-ground-breaking-test-of-secure-data-sharing