BIS Hub and HKMA Launch Trade Finance Digitization Challenge
The BIS Innovation Hub in Hong Kong SAR and HKMA jointly launched a TechChallenge initiative to highlight the potential for new technologies to enhance trade finance mechanisms. The initiative is supported by the Asian Development Bank (ADB), the International Chamber of Commerce (ICC), the International Institute of Finance (IIF), PBC and the Wolfsberg Group. As part of this initiative, the BIS Innovation Hub has published three problem statements and invited private firms to submit innovative solutions focusing on connecting TradeTech platforms, tech-driven trade finance inclusion for SMEs, and TradeTech infrastructure for emerging markets. The TechChallenge is administered by the Deloitte Asia Pacific Blockchain Lab and the deadline for submissions is August 31, 2020. The top proposals will be announced and showcased at the Hong Kong Fintech Week in November 2020.
Solutions will be judged by a panel comprising representatives of the public and private sectors, including experts from the partnering organizations listed above and leading global TradeTech platforms. Financial sponsorship will be available for shortlisted entrants to further develop their solutions. The following is the description of the three problem statements:
- Connecting digital islands and increasing network size and effects. Trade finance platforms operate as networks where participant banks have access to customer data that are stored on the platform. However, the existing trade finance platforms run on different applications and technology solutions and have different participants, thereby becoming akin to "digital islands." The aim of this part of challenge is to connect trade platforms, enable the interchange of information, make them more interoperable to increase network effects, and explore other means to increase network size. Possible technology solutions include connecting trade finance platforms through secure, authenticated exchange, accessibility, or portability of standardized data and increasing bank participation on trade finance platforms through technology approaches that can reduce the liability risk of banks for data corruption and cyber risks. Yet other solutions could include facilitating access of corporates to trade finance platforms through portable blockchain/Distributed Ledger Technology (DLT)-enabled digital identity (enabling KYC) and facilitating access for corporates to trade finance platforms through digitization of company registries featuring application programming interface (API) and connection to Legal Entity Identifiers (LEIs) that platforms can leverage for KYC.
- Trade finance inclusion for SMEs. The aim of this part of challenge is to improve trade finance inclusion for small and medium enterprises (SMEs) through technology, including through tech-driven SME risk-profiling, trade authenticity verification, and fraud risk assessment. Possible technology solutions could include or combine novel technologies such as those based on internet of things, artificial intelligence, machine learning, federated learning, blockchain/DLT or quantum computing. Possible solutions could also leverage non-traditional data, include or combine a platform-based approach connecting different data sources and a platform-based approach connecting SMEs to the financial institutions in the LEI database or connecting SMEs to large counterparties to increase access to trade finance.
- TradeTech for emerging markets. The aim of this part of challenge is to develop technology solutions that support trade finance functionalities for emerging markets. Possible technology solutions could include low-end mobile devices with intuitive user interfaces that feature connectivity to public and private trade infrastructure; technology solutions that facilitate the development of open data and API standards; a platform-based approach that leverages the automated single window of one or more jurisdictions to connect to business-to-business services such as trade finance; and open-sourced technology solutions that support the establishment of national trade finance platforms.
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Keywords: International, Asia Pacific, Hong Kong, Banking, Trade Finance, Digitization Challenge, Fintech, Regtech, BIS Innovation Hub, DLT, Artificial Intelligence, BIS
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