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Connecting digital islands: Swift supports trade digitisation with new interoperability trials

Connecting digital islands: Swift supports trade digitisation with new interoperability trials

24 May 2023 | 6 min read

In collaboration with edoxOnline and CargoX, we’re innovating to accelerate digital trade by connecting electronic Bills of Lading (eBL) platforms and improving interoperability.

Momentum is growing in the drive to digitise trade. And banks, corporates and the wider industry are all focused on the ultimate destination: a fully digital trade economy.

The potential rewards are clear. According to the International Chamber of Commerce (ICC) and the Boston Consulting Group, trade digitisation could boost trade revenues by up to 20%, cut processing times by 60%, and save global trade banks up to USD 6 billion annually.

Digital trade could bring value to all players across the transaction chain by delivering operational efficiencies and reducing manual entry, as well as enabling data-led reporting, cash flow management and fraud mitigation. But to get there, the industry needs to collaborate and platforms must be able to interoperate.

Connecting digital islands

As part of our vision to deliver instant and frictionless cross-border transactions, we’ve been exploring how we can ensure interoperability between emerging platforms that are at risk of becoming unconnected ‘digital islands’. This includes exploring how we can interlink central bank digital currencies (CBDCs) as they are rolled out across the world, as well as conducting experiments to test how we can enable interoperability between multiple tokenised asset platforms.

We’re now focussing our innovation lens on trade finance as well. In a new set of interoperability trials, we’re exploring how we can apply our expertise in global transaction orchestration and standards to a key challenge impacting the adoption and usage of digital trade solutions worldwide.

eBL: The future of trade documentation

Traditionally paper-based, a ‘Bill of Lading’ is a legally binding document that provides the carrier and the shipper of goods with all the details needed to accurately process a shipment and ensure the smooth transportation of goods across sea, land or air.

As part of the drive to digitise trade, Bills of Lading have now started to be created and stored electronically on digital platforms. These platforms allow all the key participants in international trade transactions – e.g. shippers, traders, ship agents, banks, inspectors, custom agents, chambers, customs, etc. – to connect and securely share eBL in real time.

And we shouldn’t underestimate the potential for electronic Bills of Lading to transform international trade: a recent study by McKinsey estimates that the scaled use of eBL could unlock an additional $40 billion in global trade.

So what’s the problem?

Today, in order for a transaction to flow efficiently, all stakeholders (banks, corporates, vendors, etc.) need to be onboarded to the same platform. However, there are currently ten eBL platforms authorised by the International Group of Protection & Indemnity Clubs (IGP&I), and none of them can connect to each other. This means that all players need to sign up to multiple providers – each with different processes and rulebooks – which is time-consuming and costly, and there are often gaps in the chain. 

“Clients have told us that if all the parties involved in a trade transaction are not operating on the same digital platform, they will just revert to paper – because the effort of trying to get everybody to work together is impossible,” says Nick Kerigan, Managing Director, Head of Innovation at Swift. “So, we’ve been exploring how our network could play a role in connecting the different players and platforms together.” 

Developing an interoperability model

To address this challenge, we’ve been collaborating with our Future International Trade (FIT) Alliance partners – the Digital Container Shipping Association (DCSA), International Federation of Freight Forwarders Associations (FIATA); the Baltic and International Maritime Council (BIMCO) and the ICC – alongside the eBL platform providers, to develop an interoperability model.

This model leverages eBL standards and specifications, while allowing any party to transact by only signing up to one eBL provider – the aim being to encourage a broader adoption of eBL.

Using this solution, we could receive data from one trade platform via an Application Programming Interface (API) and pass it to a different platform. This would enable companies to trade with each other and exchange eBL, regardless of which eBL platform they’re using – thereby eliminating the need for different players to join the same platform.

As such, the solution has the potential to speed up document exchange while reducing costs, automating processes and improving security. This, in turn, could lead to greater supply chain interoperability and transparency in international trade.

The proof of concept

In recent months, we’ve been developing a proof of concept for this solution, using an Electronic Transport Document API that leverages the DCSA’s industry specifications.

We've also collaborated with two of the authorised eBL providers: edoxOnline and CargoX. Following initial scoping and testing phases in early 2023, the two platforms took part in a series of trials to demonstrate the solution’s potential. The trials focused on the timely and secure interaction of the two platforms following a typical Bill of Lading lifecycle of creation, transfer, and surrender.

“Developed in collaboration with the industry, our proposed solution offers a highly secure single window that avoids the need for multiple inefficient connections,” says Terry Hubert, Global Trade Strategist at Swift. “The goal of the proof of concept is to have visibility over exchanging eBLs across trade platforms, with Swift as a connecting network.” 

Supporting frictionless trade

Moving forward, the proposed interoperability solution could play an important role in supporting frictionless trade transactions and reducing the industry’s reliance on paper. It could also make supply chain processes more transparent, efficient, and reliable, while improving the accuracy and traceability of data.

“This would mean that transactions could move quicker and with much more transparency. Paper, costs and the risk of demurrage would be reduced, and transactions would be settled faster,” said Alejandro Pernías, CEO of Global Share, edoxOnline. “The global adoption of eBL will take time, but we believe this solution is one of many viable solutions to help bridge that challenge.”

“By interacting through a connecting partner that serves as an identity proxy a new level of interoperability is achieved that facilitates frictionless global trade. This solution has the potential to significantly improve traceability and accuracy of trade data transmitted, and ultimately enable a more efficient and reliable supply chain process and experience,” says Peter Kern, VP (Commercial) at CargoX. “Transparency in the supply chain is a key factor and richer, more trustworthy trade data will also ensure more effective financial risk controls.”

Next steps

The results of this proof of concept will be shared with the community later in 2023. A second phase of the project is also planned to further validate our solution with additional eBL platform providers as well as banks. This extended work will include an industry consultation on a legal interoperability framework to support and protect participants.