Realising the potential of digital transformation through blockchain, the Internet of Things (IoT), Artificial Intelligence and other digital developments is benefiting and challenging banks and their client bases worldwide. These improvements in trade finance offerings have the potential to reduce costs and promote greater economic inclusion in global finance – particularly for small- and medium-sized enterprises (SMEs).
Despite advantages, digitalised trade faces constraints to wider adoption. To overcome these barriers, ICC launched a Working Group on Digitalisation in Trade Finance in 2017 to serve as a coordinating body for all work related to digitalisation in trade finance undertaken by the ICC Banking Commission.
The main workstreams of the Working Group are:
- “E-compatibility” of ICC rules
First and foremost, the Working Group evaluated all existing ICC rules to make sure that they enable banks to accept electronic document and data, instead of paper documents only. Based upon the findings of the Working Group, ICC released in July 2019 the eUCP version 2.0 and eURC version 1.0.
In the future, the Working Group will continue to consider the e-compatibility of ICC rules and issue further updates when necessary. Already, the Working Group is in the process of drafting a new set of rules under the tentative title: Uniform Rules for Digital Trade Transactions (URDTT). The objective of the URDTT is to develop a high-level framework outlining obligations, rules and standards for the digitalisation of trade finance.
- FinTech adoption
This work stream is mandated to develop a set of minimum standards for digital connectivity for technology service providers across legal, liability, information security and technology (part model agreement/part technical standard document) to enable the acceleration of connectivity between supply chain partners.
- Laws and legal framework for use of data and electronic documentation
The Working Group also conducted a legal survey to understand the rights of third parties under paper vs. e-Bills of Lading. The objective was to provide guidance regarding the acceptance of data vs. documents (e.g. Bills of Lading) that banks use as security for trade finance transactions. The current focus lies on advocacy to adopt the UNCITRAL Model Law on Electronic Transferable Records (“MLETR”) as well as on the WTO plurilateral negotiations on trade-related aspects of electronic commerce.
Furthermore, the Working Group developed a digital trade roadmap setting out concrete policy changes that will promote the global digital agenda. The roadmap highlights the individual actions that can be taken by ICC, the banking industry and governments.
- This work is being undertaken by ICC national and regional offices, known as national committees. There is an initial focus on adoption by key countries and trade corridors in global trade to adopt the recommendations outlined in the Roadmap.
- “E-compatibility” of ICC rules
ICC’s evaluation of the wider trade ecosystem’s requirements has also demonstrated a need for the creation of open trade and technology standards to promote interoperability among the numerous blockchain networks and technology platforms that have entered the trade and trade finance space over the past two years.
Under ICC’s direction, a Digital Trade Standards Initiative (DSI) will soon be launched.