Blockchain technology can help banks, technology companies and other financial services institutions reduce the cost and turnaround time of trade finance. Diego Santamaria, a partner with Bain's Financial Services practice, discusses how companies that use blockchain platforms can think big, start small and grow fast.
Read the Bain Brief: Rebooting a Digital Solution to Trade Finance
Read the transcript below.
DIEGO SANTAMARIA: Banks, financial institutions, and technology firms have tried for decades to digitalize the documentary trade finance process. However, most of the transactions still rely on paper today. Blockchain technology promises to address bottlenecks in trade finance by offering two main advantages: lower processing costs and faster turnaround times.
These technologies must avoid repeating errors of the past to be successful. So in the past, other technologies were very fragmented and created digital islands. To be successful, these platforms must follow a three-prong approach.
First, think big. They must ensure the participation and collaboration of all relevant stakeholders in the ecosystem. Two, start small. They should start with a few innovators who are heavy users in one trade. And third, grow fast. We see a need for superconnector institutions who serve as bridges between the networks.
So the business case for blockchain technology is clear cut. In the past, similar technologies failed because of fragmentation and a noncoordinated approach. But with a more holistic and coordinated approach, we believe that these platforms can help trade finance reach full potential in the future.