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Blockchain Use in the Financial Services Sectors
Published in Shaun Aghili, The Auditor's Guide to Blockchain Technology, 2023
Antonio Ramirez, Bhanu Theja Satyani, Jovid Ismailov, Lovepreet Singh
Trade financing is required by trading companies to facilitate the international trade of their goods and services overseas in the forms of trade credit, insurance and guarantees for a short period. Trade financing help to secure the funds needed for importers and exporters to buy goods, thereby facilitating such business transactions. Trade finance is an umbrella term with many parties involved, including banks, importers, exporters, insurance companies and trade finance companies. According to the World Trade Organization (WTO), world trade in 2020 plummeted by 9.2 percent, due to the COVID-19 pandemic. Nevertheless, every crisis hides some opportunities; the same is applicable to trade finance. International trade has shifted more rapidly toward digitalization as opposed to labor- and paper-intensive processes.
The role of blockchain in financial applications
Published in Noura Metawa, M. Kabir Hassan, Saad Metawa, Artificial Intelligence and Big Data for Financial Risk Management, 2023
Ahmed A. Elngar, Mohammed Kayed, Hosny H. Abo Emira
Blockchain is set to revolutionize the trade finance sector. Trade finance applies to all the financial enterprises related to international trade and commerce. Many trade finance activities today still rely on paperwork such as invoices, letters of credit, or bills. Multiple order management systems provide carrying out this work online, but the process takes a lot of time.
Investigating the themes in supply chain finance: the emergence of blockchain as a disruptive technology
Published in International Journal of Production Research, 2022
Berk Kucukaltan, Rifat Kamasak, Baris Yalcinkaya, Zahir Irani
More sophisticated research methods explored blockchain technology in banking systems and trade transaction processes. The study by Chen and Wang (2020), which employed a fractional-order calculus game model framed by the theory of nonlinear dynamics, verified the feasibility of blockchain use in the financial credit banking system. Yu, Huang, and Guo’s (2021) study focused on the impact of supply chain financing in multi-sided market settings. The authors analysed both a traditional model with Platform Undertakes Guarantee strategy and a novel model with Customer Undertakes Guarantee strategy by using the method they developed based on the principles of the Stackelberg game. The study yielded optimal decisions for four leading players: a multi-sided platform, a customer, a bank, and multiple transportation service providers. In a conceptual paper, Bogucharskov et al. (2018) discussed the impact of blockchain application on two key trade finance instruments, factoring and digital letter of credit. The researchers concluded that blockchain technology could provide firms with a high level of functionality and security and reduce transaction costs in SCF processes. Although trust and security concerns were slightly stated, the focal concern of the blockchain papers in the banking and trade finance domain was cost reduction and process facilitation.
How to effectively use distributed ledger technology in supply chain management?
Published in International Journal of Production Research, 2023
Amandine Herbe, Zarah Estermann, Valentin Holzwarth, Jan vom Brocke
The DLT affordance to simplify trade finance, internal financial transactions and supply chain finance has the potential to address supply chain financing challenges. In inbound logistics, providing suppliers with liquidity in a timely manner is challenging. When default payment terms are too long, some organisations use supply chain finance providers, which offer pre-financing payments to suppliers. When a manufacturing firm engages in business with a supplier, it has to prove to that supplier that it has sufficient funds to proceed with a payment: the lack of trust and the risk of the default require an auditor or intermediary, which charges the manufacturing firm with verification costs. Since a challenge in supply chain finance is the need to faster process cross-border payment transactions in order to save costs, DLT can reduce inefficiencies through supply chain finance instruments, such as reverse factoring and dynamic discounting. In supply chain finance we touch DLT where it is about financing the flow of goods or where the supply chain is used to provide financing for the company. Trade AX or We Trade are examples of trying to simplify and speed up the processing of payment transactions cross-border and thereby achieve cost savings. (Quote from interview 9, February 25th, 2020)A DLT system can decrease transaction costs between stakeholders and make cross-border financial processes simpler and more transparent: the DLT system can prove the financial status to the supplier without an intermediary (Ko, Lee, and Ryu 2008). Thus, it would reduce payment delays and liquidity crises. The DLT system would act as a trustworthy digital intermediary taking over the pre-financing activities, which could decrease the fee charged by the finance provider. By digitising cross-companies finance processes, trade finance could also become more efficient and less paper-based (Saberi et al. 2019).
Impact of blockchain technology on the optimal pricing and quality decisions of platform supply chains
Published in International Journal of Production Research, 2023
Feng Tao, Yao-Yu Wang, Shi-Hu Zhu
The second research stream related to our paper is the application of blockchain technology. Similar to Bitcoin being known and familiar to the public, blockchain, the core technology of Bitcoin, gradually attracted people’s attention in 2008 (Nakamoto 2008). The advantages of decentralisation, traceability and security have led to this technology being quickly applied in many industries, such as international trade, finance, and operations management, as well as platform supply chain management (Chang, Iakovou, and Shi 2020; Babich and Hilary 2020; Choi, Feng, and Li 2020a, 2020b; Koh, Dolgui, and Sarkis 2020; Zhang, Li, and Wang 2021; Wang, Tao, and Wang 2021). Different features of blockchain technology are applied to solve corresponding challenges in operations in practice (Iansiti and Lakhani 2017; Zhao et al. 2016; Wang, Han, and Paul 2019; Pournader et al. 2020). Specifically, since blockchain can validate, store, and share a distributed ledger among contractors, a smart contract is one of its applications, and it can self-execute automatically with a high degree of security (Christidis and Devetsikiotis 2016; Saberi, Kouhizadeh, and Sarkis 2018). For example, by formulating a multi-objective function, Dolgui et al. (2020) modelled a blockchain-based smart contract as a flow-shop scheduling problem and developed an algorithm to obtain a balance between lead time and cost. Moreover, because blockchain can trace all transaction data both continuously and quickly and verify the authenticity of these data, another major application of blockchain is to engender trust in transactions and lower costs in the supply chain, which has proliferated extensively in recent years (Mondal et al. 2019; Wang, Han, and Paul 2019; Choi 2019; Bai and Sarkis 2020; Hastig and Sodhi 2020). For example, Choi, Feng, and Li (2020a) took price as an exogenous parameter and developed a duopoly model between two platforms that played a Nash game, in which they derived an equilibrium product information disclosure strategy during the implementation of blockchain technology.