Why The Packaging Industry Is Adopting Fintech To Drive Change
According to an IMF paper on trade finance, about 80% of international trade is financed by some form of short term trade credit which is extremely vulnerable to disruption. This is especially problematic in the packaging industry, where lack of transparency across the supply chain makes identifying risk difficult.
More and more businesses have looked to digital transformation to eliminate these problems. This includes the adoption of fintech services and blockchain technology to transform payment systems and mitigate risk.
The Blockchain, for instance, can improve the visibility of the supply chain, preventing fraud and illegal trade and allow businesses to identify potential risks. This transparency further allows companies to take advantage of insight into material fluctuations and shortages, giving them the opportunity to forecast more accurately.
Here are the top three ways packaging companies of any size can benefit from fintech technologies.
Transparency over the entire supply chain
In long and complex supply chains, like those in the packaging industry, trust and transparency is often a matter of good faith and existing relationships. Fintech can help build the infrastructure that connects different parties in the packaging trade ecosystem and provide much-needed transparency over the entire supply chain.
A digital B2B marketplace, such as the OPN Platform, unites packaging suppliers and buyers in an open and transparent decentralized blockchain-powered system. The OPN Platform uses an Ethereum blockchain, which is incredibly difficult to defraud, giving it a low risk factor, as well as integrated payment systems like Stripe to facilitate instant global payments. Continuous quality assurance and verification gives all parties access to full, accurate data about their partners as well as a high level of security for peace of mind.
We previously reported on ports adopting blockchain technology to improve operations. The first ports who adopted blockchain technology showed immediate improvements in infrastructures, cargo handling, and safety and security.
Secure hassle-free payment
Traditionally, trade finance has been a manual and paper-heavy process. Blockchain and integrated financial services like Stripe and WePay have transformed the payment process, creating a sophisticated, frictionless experience.
These advanced payment platforms can be used as a digital ledger to record and verify transactions across several sectors and industries. While traditional trade finance requires each party to maintain its own administration and databases, blockchain technology integrates all the necessary information in one secure digital record which can be monitored by all parties. This is especially advantageous to SMEs who have had limited exposure to such technically-advanced platforms.
Of course, being able to enjoy the benefit of instant payments is limited when companies continue to use traditional legacy systems and processes. Utilizing fintech lowers processing costs, streamlines the procurement process and reduces the risk of non-payment. Plus transforming your payment infrastructure allows all cross-border payments to be fast and trackable, with fewer delays.
In his interview for the European Payments Council B2B Payments and Fintech Guide, Swift Chief Executive for EMEA and Asia Pacific, Alain Raes, expects instant payments to become the norm for domestic B2B and retail payments in the next five years.
Access to Global Markets
Thanks to technology, the packaging market is becoming increasingly globalized. Fintech-powered digital marketplaces open the market to new vendors, suppliers and buyers across the globe and make payment effortless. They have also paved the way for greater SME inclusion. Digital marketplaces level the playing field for SMEs who are now able to benefit from automation, fewer intermediaries and financial support.
Seamless, trusted payment systems, vendor verification and transparency provide procurement teams with a greater understanding of the global landscape, and allows them to make easier, confident decisions around new suppliers, payment terms and forecasting.
The digital revolution combined with structural changes in finance is fast-tracking growth and innovation and opening the doors to all new players. According to McKinsey, global digital commerce volume passed $3 trillion in 2017. This will more than likely double by next year. Management consultancy iBe predicts that B2B online marketplaces will account for about 30% of all worldwide online B2B sales by 2024.
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