The International Chamber of Commerce (ICC) Banking Commission has launched a working group to coordinate work towards the digitalisation of trade finance.

The group wants to accelerate the conversion of time-consuming and cumbersome manual processes involving paper-based instruments such as letters of credit (L/Cs) to automated and digitised systems.

Massive transformation

The Digitalisation of Trade Finance Working Group aims to identify strategies to overcome the constraints of digitalising trade finance, including the reliance on paper-based practices, a lack of recognition of the legal status of electronic documents, uncertainty over standards and a lack of legal and regulatory frameworks.

The establishment of the group fits with the ICC's 2020 Strategy and recognises what the chamber describes as the "massive transformation digitalisation is bringing to the trade finance industry."

e-compatibility, standards and legality

The working group has three core activities. It will evaluate ICC rules, such as the Uniform Customs and Practice for Documentary Credits (UCP) to assess e-compatibility and ensure they are 'e-compliant'. This would enable banks to accept data rather than documents.

To remove uncertainty in the industry and accelerate the uptake of digitalisation, the group will develop minimum standards in terms of legal requirements, liability, information security and technology.

The group will also examine legal and practical issues related to the validity and value of data and documents in digitised form, for example by conducting a legal survey to understand how the rights of third parties compare under paper and electronic bills of lading.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.