How Is Blockchain Transforming Shipping Finance?
The world of Shipping holds immense power in the way it supplements the trade game. With the advent of globalisation and bigger trading paradigms, the evolution of the Shipping industry has also seen a surge in various verticals, from adding more assets to meet the demand to procuring cost-effective operational services and laying the basics of how remittance is processed throughout the maritime economy.
With an estimated market cap of over $10 trillion a year, it is imperative to address the bottlenecks for Ship owners and service providers to pave the way for the seamless transfer of value and assets.
The penetration of Blockchain technology into Shipping started a while back and is now mature enough to be brought onto the financial infrastructure of Maritime as well. The journey of Blockchain supporting the use-case of digital assets, making them identifiable, is fascinating and has opened up the possibility of shedding the layers of centralisation and fragmentation in the world’s oldest business.
What forms the underlying Blockchain system?
Blockchain, in a nutshell, is a system of distributed databases imbibing the fundamentals of decentralisation, changing the very attributes of how information is carried forward. From storing information providing accessibility to transparent transactions, asset transfers, and valuations, everything becomes open-sourced when put on-chain, which is where the truth lies.
The modern-day blockchain-based solutions offer increased efficiency and scalability, adding layers of operation on trustless functionality. Through such properties, more traditional systems are exploring the right implementation points with the advent of technological integration.
Shipping Finance At A Glance
The prerogative of owning, licensing, chartering and funding Shipping assets has always been confined within the boundaries of the Shipping communities. The Ship Finance industry being as old as the business itself, started collaborations primarily with banks and grew from private equities to public ETFs after the formalisation of international trade systems.
Furthermore, with its massive scale of operations, the Shipping industry deals with bottlenecks at every step, with traditional systems in place to deal with oversea processes, remittance structures, document verifications, supply-chain management and more.
What has led to the introduction of digital technology in Shipping was focused more on building AI, Data Analytics and Automated management systems to solve the core management problems in the industry. But, there has yet to be a way to capture the difficulties contained in Shipping Finance as it is entirely processed through centralised payment gateways like SWIFT and Banks that are highly irregular and loss of value because of intermediaries is far away from negligible.
In addition, the Maritime liquidity flow is also very linear as it is mostly injected through institutional investors, restricting the fundraising options for Ship owners to add further procurement of resources into their arsenal.
A New Era for Maritime Economic Reform
Blockchain infrastructure solutions can be the key to unlocking this massive industry in a way that has never been done before to challenge the ongoing economic systems governing the Maritime ecosystem.
Starting with the easy participation of retail users to invest in Marine assets. Blockchain’s real-world asset tokenisation application is a great solution to turn any Marine asset into a digital asset which can be easily traded on public platforms to enable a new opportunity for the world to partake in the global trade circle and turn it into a decentralised commodity, accessible for fractional ownership and more.
Secondly, the way blockchain financial solutions have factored in extremely efficient transactional costs, fund tracking and instant payment methods can truly shift the Shipping Finance remittance layer to facilitate instant settlements across the industry operations.
Moving away from the asset and payment layers, with blockchain protocols put into decentralised, trustless and permissionless dimensions, Shipping Finance will be able to open up to new possibilities of transparent price discoveries, on-chain data validation and authentication, unified marketplaces to connect Maritime service offering agencies and true reform of Shipping Finance.
Retrospectively, the notion of expanding Maritime fleets by Ship Owners
ShipFinex Spearheading The Transformation
It is evident that the prospect of Blockchain in Shipping Finance is at an inevitable point now, and the promise of bringing the Marine economy into a new integrated application layer is exciting for 2 separate trillion-dollar industries; Shipping and Web3.
ShipFinex is at the epicentre of converging these 2 worlds to create an infrastructure layer solving the complexities and myriad of problems in Shipping Finance at its most fundamental level to offer an efficient platform for the accessibility of Marine assets.
Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of Marine Insight.
Based in Singapore and Vietnam, Suraz Troy Kottakki is a serial entrepreneur in Financial technology, Digital identity and Health Tech. He is passionate about the Digital transformation of traditional industries such as Maritime, Capital Financing and Public Healthcare by deploying Web3 technologies. Suraz is currently working on creating a web3 infrastructure layer for the Maritime industry at Shipfinex, leveraging his deep global experience spanning nearly two decades in Shipping and Oil Trading at British Petroleum. Suraz is also dedicated to the long-term vision to bring digital health identity to all by 2030.