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How Automation Technology is Affecting Trade Finance

International trading can be a complicated business.

When exporters require the importers who are buying their products to pay ahead of the trade, they need to supply certain documents of proof. These proofs help to show that they have the products ready to send, upon receiving payment.

In return, the importer, working through a bank, provides trade financing to secure the goods from the exporter. This often takes the form of a loan, given to the importer, based on an export contract.

Like we said: it’s complicated.

Today, we’ll be taking a look at how automation technology has changed the way this kind of export/import financing works.

Trade Differently, With Automation Technology

Before we begin, let’s address the idea of automation.

Automated systems use a variety of controls to operate equipment without the intervention of a user. These can include machinery, computers, timers and vehicles, as well as various systems.

Putting Trade Finance On Autopilot

In most cases, trade finance starts with a standard letter of credit. In one of these transactions, payment for goods or services is held up until the seller provides detailed documents proving shipment.

These have fallen out of favour in recent years, and banks have taken up automation tech to remain active in international trade operations. Specifically, bank payment obligations (BPOs) are automated systems which perform the role of a traditional letter of credit. The system detects when shipments go out and releases the money from the bank, automatically.

A Note On Cryptocurrencies

Another big example of this kind of automated trade financing is BitCoin, the now-famous cryptocurrency pioneer which launched in 2009. To describe it as a platform that changed the face of trade finance would be an understatement, but, also, completely understandable.

Cryptocurrencies like BitCoin have been on the rise with users looking to make international payments. This popularity is likely because of their relatively high security and fast speeds, while still being affordable. And, as we’ll see with other automation systems, the fact that this is an inherently international payments system doesn’t hurt, either. Businesses using BitCoin are free to send whenever and wherever they want – the system settles payments within minutes, and can be automated, as well.

Blockchains, like the ones used by cryptocurrencies, have been at the centre of a lot of business disruption in recent years.

Using smart contracts to allow companies to automate processes that would need unnecessary man hours is just the start. Blockchain technology facilitates these exchange much faster and more reliably than ever before.

Cloud Finances

Cloud-based applications allow users to automate fund transfers anywhere there is an Internet connection. Secure broker apps can be set up and executed at any time, and automated actions can be set to notify bankers immediately.

Automation systems like these allow for intuitive, secure operations that you don’t have to trigger manually, anymore. And that level of service is invaluable for international transactions.

Automation Technology: Taking The Guesswork Out Of Trade Finance

“Out with the old, and in with the new,” has been the standard for tech, business, and everyday life for a long time now. So why expect anything less from trade financing platforms?

Interested in learning more about trade financing, the blockchain, and other monetary solutions? Get in touch with us, today, and discover a range of financial solutions to suit your unique lifestyle.

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