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Swift enables global eBL interoperability in trade finance

Monday 11 December 2023 09:52 CET | News

Swift has tested an interoperability solution with BNY Mellon, Deutsche Bank, and four eBL platforms to promote the adoption of electronic documents for digitising trade.

 

Compared to their paper equivalent, electronic Bills of Lading (eBL) reduce the risk of document loss and fraud, speed up the transfer of documents, and shrink the carbon footprint associated with paper processes. McKinsey predicts that adopting eBL could save the industry USD 6.5 billion a year and enable USD 40 billion in global trade by 2030.

While the requirement for widespread eBL adoption is generally recognised, there’s still a long way to go. In 2022, only 2.1% of bills and lading and waybills in the container trade were electronic, according to the FIT Alliance.

Swift has tested an interoperability solution with BNY Mellon, Deutsche Bank, and four eBL platforms to promote the adoption of electronic documents for digitising trade.

Progress made towards eBL adoption

Various industry initiatives are underway to promote the adoption of electronic Bill of Lading (eBL). Notably, approximately 80 institutions have endorsed the FIT Alliance's 'Declaration of the electronic Bill of Lading,' committing to advancing digitalisation in international trade, beginning with eBL.

An important development is the passage of the UK Electronic Trade Documents Act (ETDA) in September 2023, granting electronic trade documents equal legal standing to their paper counterparts. This marks a milestone by providing legal equivalency to eBL generated under different systems for the first time, particularly significant as a substantial portion of global trade employs English law documents.

Hurdles due to interoperability

The current lack of technical interoperability between existing eBL platforms presents a significant obstacle to wholesale adoption.

The nine eBL providers authorised by the International Group of Protection & Indemnity Clubs (IGP&I) each have their own rules and customer bases, meaning that customers of one eBL system can’t take part in transactions handled by another eBL system. Instead, financial institutions, corporates, and others involved in a given trade transaction, need to connect to multiple systems – an approach which is both inefficient and costly.

Industry participants stated that such ‘digital islands’ are not sustainable. Interoperability is needed between different eBL platforms so that users can interact with each other using a single identity.

Given their long history of enabling global interoperability – and recent initiatives such as their solution to interlink central bank digital currencies (CBDCs) – Swift’s team believes it can play an important part in addressing the eBL challenge.

A collaborative solution

In 2022, Swift started working with its FIT Alliance partners and eBL platform providers to develop an API-based eBL interoperability model. Under this approach, firms could leverage a single connection to Swift to interact with trade transactions carried out using multiple different eBL platforms.

Then, earlier in 2023, Swift ran a Proof of Concept (PoC) to test how an interoperability solution could work in practice. In its first phase, they collaborated with eBL platforms edoxOnline and CargoX to test the use of a single ubiquitous API contract to open up a secure channel with Swift.

They then expanded the PoC to include two additional eBL platform providers – TradeGo and WaveBL – as well as BNY Mellon and Deutsche Bank. Using the same API layer, participants were able to reproduce the end-to-end flow transfer process of an eBL in a simulated trade transaction.

Outcome of recent efforts

The PoC successfully demonstrated that financial institutions could exchange eBL across multiple trade platforms using their existing Swift connectivity – instead of having to connect to each platform individually. By reusing their connection to Swift, institutions wouldn’t need to develop custom point-to-point integrations with multiple, fragile and complex dependencies.  

The solution would offer the high security, legal and compliance standards that financial institutions require when managing transactions. As such, it has the potential to enable interoperability between participants, while improving efficiency, reducing costs, and reducing the risk of fraud.

What’s next? 

While the solution has the potential to enable eBL interoperability over Swift, more collaborative work is needed before a production-ready solution can be developed. Swift will continue to engage with members and the broader trade industry to address additional challenges in the areas of legal interoperability, technical accessibility, ecosystem-wide standards, and adoption.


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Keywords: digitalisation, banks, trade finance, regulation, cross-border logistics, API
Categories: Banking & Fintech
Companies: BNY Mellon, Deutsche Bank, SWIFT
Countries: World
This article is part of category

Banking & Fintech

BNY Mellon

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Deutsche Bank

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SWIFT

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