While the UK economy has recovered from the COVID-19 pandemic, it remains behind many of its G7 peers. The reason is inefficient paper-based processes that increase risk, delay payments and generate huge overheads. Save Firms?1.1bn and Put UK?ahead of G7 Peers.
Fortunately, momentum may be building. A new Electronic Trade Documents bill is advancing in the UK, and global standards are under review. Save Firms?1.1bn and Put UK?ahead of G7 Peers.
?1.1bn saved
In a pandemic induced environment that has highlighted the inefficiencies, risks and insufficient control associated with paper-based processes, it has become increasingly clear that trade document digitisation is no longer an ‘if’ but a ‘when’. As such, it is essential that digitisation is carried out hand-in-hand with standardisation and legal harmonisation to create a true digital trade ecosystem. Indeed, whilst overall documentary trade flow declined in 2020, usage of the multibank document exchange solution – SWIFT Digital Trade Channel (MT 798) – increased, indicating a strong appetite for digitisation.
The UK is leading the way with an industry-backed initiative to develop and roll out standards in this area.
?2.5bn in savings over five years
Amidst renewed focus on supply-chain resilience and performance, there is an opportunity to future-proof the industry by enabling greater digitisation. The digitisation of key trade documents could dramatically reduce costs, save time and improve supply-chain resilience.
Currently, there are a variety of systems in place for the issuance/advising and settlement/financing of trade documents. In order to achieve widespread digitisation, all stakeholders must accept a defined approach and commit to implementation, ideally guided by a neutral party.
The UK has taken a bold step in this direction by proposing a change to the law. If enacted, the Electronic Trade Documents Bill will put the UK at the forefront of international trade as a thought leader. It will also help businesses save?1.1bn in 10 years through reduced paper usage.
?2bn in savings over 10 years
The UK government is taking a leap forward in its journey towards fully digital international trade by removing the requirement for paper copies of trade documents to be held. The Electronic Trade Documents Bill will put digital and paper versions of commercial, transport and legal documents on equal footing.
The move will help businesses process their contracts faster and save on administration costs. It will also reduce the environmental impact of the millions of pieces of paper printed every day.
Consultant McKinsey has calculated that digitizing the issuance of documents such as bills of lading could unlock an additional $40 billion in global trade by speeding up the exchange of data, documents and electronic authorizations between trading partners. It can also accelerate the communication between trade insurance applicants and government institutions granting export credit.
?2bn in environmental savings
The G7 is a group of industrialized democracies that discuss global issues such as international security and trade. Its members make up around ten per cent of the world’s population and produce about 45 percent of global gross domestic product.
Although it does not have legal power, its decisions can still have significant ramifications.
As well as the seven member nations, non-State stakeholders are invited to participate in some meetings and sessions.
?2bn in savings over 20 years
There’s a lot at stake commercially in wider trade digitization. But true digitisation will not happen if legal barriers, fragmentation and inconsistencies are not addressed.
It could also accelerate the flow of information and documentation between buyers, sellers and shippers.
The pandemic elevated the importance of supply chain resiliency, and digitisation is an important tool to achieve this. However, achieving full digitisation of key trade documents will require more than technology platforms and software. It will require a new rulebook to address title and ownership, underpinned by legal certainty needs read more hear.
