John Bugeja, co-founder of Trade Advisory Network

The digitalisation of the supply chain through the adoption of platforms has clear benefits that the financial services sector ignores at its peril, a trade expert has claimed.

The proliferation in digital platforms across financial services has positively impacted the trade and supply chain finance sector, said John Bugeja, co-founder of Trade Advisory Network.

“Digitalisation of the supply chain has a number of benefits to both the principle parties within the supply chain, like the seller and the buyer, and other involved parties, such as those financing it,” he said. “Using Distributed Ledger Technology, commonly and less accurately referred to as blockchain solutions, enables accurate and paperless documentation and processing across an entire supply chain, improving efficiency, reducing cost and unlocking cash trapped in outdated, paper-based processes.”

In addition, said Bugeja, the enhanced visibility and certainty offered by DLT solutions mitigates risk and should, therefore, increase availability of financing to smaller, less established businesses within a chain: “Technology is an enabler in this respect, but credit appetite is influenced by many other factors including credit policy, which may take some time to catch up with the benefits of digitalisation,” he added. “The processes involve the ability to capture and verify data from many of the events in the physical and financial supply chains. As a minimum, purchase order data will typically be captured and verified by both principle parties followed by invoice data once goods have been shipped. This data emanates from the financial supply chain. More sophisticated solutions capture additional data from the physical supply chain, such as electronic bills of lading issued by a carrier confirming that the goods have been shipped. This provides visibility of contractual performance and, once an invoice is approved by the buyer, creates an electronic record that a payment obligation has been created. This visibility can be useful in supporting both post-shipment and pre-shipment finance, subject to suitable credit policies being in place, as noted earlier.”

by Guy Matthews