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In a collaborative effort with BNY Mellon, Deutsche Bank, and four electronic Bills of Lading (eBL) platforms, Swift has successfully trialled an interoperability solution. This solution is designed to facilitate the widespread adoption of electronic documents, which are vital for the digitalisation of trade.
The benefits of digitising global trade are manifold, including cost reduction, enhanced transparency, fraud mitigation, and addressing the $2.5 trillion trade finance gap. Paper-based Bills of Lading, known for causing delays and inefficient processes, present a notable area for improvement.
Electronic Bills of Lading (eBL) offer advantages over their paper counterparts, such as reduced risks of document loss and fraud, faster transfer of documents, and a smaller carbon footprint. McKinsey estimates that eBL adoption could result in a $6.5 billion annual saving for the industry and facilitate $40 billion in global trade by 2030.
Despite the recognised need for widespread eBL adoption, progress remains slow. In 2022, just 2.1% of bills of lading and waybills in container trade were electronic, as per the FIT Alliance.
Several industry initiatives are in progress to promote eBL adoption. Approximately 80 institutions have endorsed FIT Alliance’s ‘Declaration of the electronic Bill of Lading’, committing to driving digitalisation in their industries, starting with eBL.
A milestone in this journey was the enactment of the UK Electronic Trade Documents Act (ETDA) in September, which equates electronic trade documents with their paper equivalents in legal significance, also allowing eBLs created under different systems legal equivalency for the first time.
However, the current lack of technical interoperability among eBL platforms remains a major barrier to widespread adoption.
The nine eBL providers authorised by the International Group of Protection & Indemnity Clubs (IGP&I) operate independently, with distinct rules and customer bases, complicating transactions across different eBL systems.
This necessitates connections to multiple systems by financial institutions, corporates, and others involved in trade transactions, a process both inefficient and costly.
Swift has responded to industry calls for interoperability among different eBL platforms, allowing users to interact using a single identity. Leveraging its extensive experience in global interoperability and recent initiatives like interlinking central bank digital currencies (CBDCs), Swift is well-positioned to address the eBL challenge.
In 2022, Swift began collaborating with FIT Alliance and eBL platform providers to develop an API-based eBL interoperability model. This model would allow firms to use a single Swift connection to interact with trade transactions across various eBL platforms.
Earlier in 2023, Swift conducted a Proof of Concept (PoC) to test this interoperability solution. The first phase involved collaboration with eBL platforms edoxOnline and CargoX, testing a universal API contract to establish a secure channel with Swift.
This PoC was later expanded to include TradeGo, WaveBL, BNY Mellon, and Deutsche Bank. Participants successfully replicated the end-to-end eBL transfer process in a simulated trade transaction, demonstrating the potential for financial institutions to exchange eBLs across multiple trade platforms using existing Swift connectivity.
This development suggests that a production-ready solution for eBL interoperability over Swift is within reach, though further collaborative efforts are required to address challenges in legal interoperability, technical accessibility, ecosystem-wide standards, and adoption.
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.
Shirish Wadivkar, Global Head, Wholesale Payments & Trade Strategy at Swift said, “Standards set with the industry – combined with global interoperability facilitated by Swift – can enable eBL providers and digital trade platforms to seamlessly interact with banks, corporates, and the wider trade ecosystem. Such industry-wide collaboration is essential to achieve a ‘zero paper trade’ future.”
Next Steps
The approach demonstrates potential in enabling eBL interoperability through Swift, yet additional collaborative work is necessary to develop a production-ready solution. Engagement with members and the broader trade industry will persist, aiming to address challenges related to legal interoperability, technical accessibility, and the establishment of ecosystem-wide standards and adoption.
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