UAE has rolled out a new nationwide blockchain-based trade finance platform with an aim to combat fraud and financial crime risks such as duplicate or under-invoicing.
The UAE Trade Connect (UTC) is co-created by Etisalat Digital along with a consortium of seven leading local banks, led by First Abu Dhabi Bank (FAB) and global technology company Avanza Innovations.
The idea of the platform was first proposed by FAB to tackle key issues in the trade finance space and it overall took two years from concept to actual delivery. It started functioning after six months of trials.
The steering committee that oversaw the project consists of the Central Bank of the UAE, Commercial Bank International (CBI), Commercial Bank of Dubai (CBD), Emirates NBD, First Abu Dhabi Bank (FAB), Mashreq Bank, National Bank of Fujairah (NBF), and RAKBANK.
“The Central Bank promotes financial and monetary stability, efficiency and resilience in the financial system. The launch of the UTC digital trade platform is one of the key steps towards achieving this goal as it will help to minimize the risks of fraud inherent in the existing paper-based system in trade finance. It also reflects the banking sector’s commitment to step up the digital transformation process to prepare the UAE to enter into the new digital banking era.”
The platform is based on blockchain and other disruptive technologies enabling data to be shared in a secure manner. Technologies like Artificial Intelligence (AI), Machine Learning, Optical Character Recognition (OCR) and Robotic Process Automation (RPA) read invoices to identify duplications, frauds and dubious transactions within the banking trade finance offering.
Speaking at a webinar during the launch event, Zulqarnain Javaid, CEO of UTC, stated that the “UAE Trade Connect will be a game-changer for the trade finance space. This program was considered to be such an important part of digitization that even during the first year of the COVID-19 pandemic, all of the banks committed their IT resources to it.”
Currently, the platform will focus on addressing the risks of double-financing and invoice fraud before turning to other key areas of trade finance, such as digitalizing bills of lading and e-invoices. UTC is aimed at driving the digital transformation of trade in the UAE by enabling banks, enterprises and government authorities to collectively benefit from future technologies.
Reda Ezzat, SVP and head of Trade & Structured Finance at Mashreq, highlighted how the UTC will aid SMEs in the UAE, “globally, SMEs represent 90 percent of all business worldwide. They contribute 40 percent of the GDP in developing countries; in the UAE, the same data applies. A key challenge for SMEs is access to finance. The UTC will help banks in the UAE improve their risk appetite, and this will reflect on SMEs getting easier access to finance.”