Abstract
Purpose
Blockchain technology (BT) presents a decentralized approach that has promising potentials to alleviate many of the long-lasting risks and inefficiencies in trade finance (TF) and supply chain finance (SCF) operations, providing international traders greater access to working capital. Despite this, the actual adoption of the technology and related issues in this space has remained under-researched. This paper examines the state of the practice to identify the main drivers and inhibitors faced by TF/SCF parties in their BT adoption efforts.
Design/methodology/approach
This exploratory study applies a multi-stakeholder perspective and a mixed-methods approach using semi-structured interviews with practitioners in various stages of BT implementation in TF/SCF initiatives across North America, Europe and Asia. The study then determines the priority of the identified factors using the Bayesian best-worst method (BWM).
Findings
The findings show that while the discussion has focused on the technological drivers of BT adoption for TF/SCF, practitioners rely more on non-technological factors such as peer adoption and fostering innovation. The findings also reveal how practitioners address common BT issues, including scalability and interoperability.
Originality/value
The study offers insights into important requirements for realizing the full benefits of BT in support of TF and SCF from an extended technology-organization-environment (TOE) perspective. On a more general level, it highlights what is required to transform this industry toward digitization.
Keywords
Citation
Sangari, M.S., So, K.W. and Mashatan, A. (2025), "Breaking the mold: the pursuit of decentralized trade and supply chain finance", Industrial Management & Data Systems, Vol. 125 No. 1, pp. 279-305. https://doi.org/10.1108/IMDS-03-2023-0197
Publisher
:Emerald Publishing Limited
Copyright © 2024, Mohamad Sadegh Sangari, Kar Wai So and Atefeh Mashatan
License
Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
1. Introduction
Trade finance (TF) and supply chain finance (SCF) are popular financial mechanisms in supply chain management (SCM) to provide buyers and sellers, especially small and medium-sized enterprises (SMEs), with flexibility in accessing working capital (Pfohl and Gomm, 2009; Ahn et al., 2011; Zhao et al., 2015). TF refers to the financial instruments usually supplied by banks in the form of short-term loans to trading parties and safeguards against the risk of transaction fraud (Ahn et al., 2011; Clark, 2014). Common instruments include the letter of credit (LC), open account and cash-in-advance (Schmidt-Eisenlohr, 2013). As a TF product, SCF builds on the idea of reverse factoring, which is a fundraising scheme where buyers arrange for a financial institution to pay the sellers in advance. It implies lower costs and less risk as banks rely on the buyer’s reputation and trade credit history (Gelsomino et al., 2016). SCF optimizes payables and receivables in trade transactions and is an alternative method for suppliers and buyers to acquire liquidity (Lamoureux and Evans, 2011).
Despite their crucial role in international trade, TF/SCF mechanisms face major challenges and inefficiencies, including siloed information and the lack of supply chain visibility (Gelsomino et al., 2016; Chen et al., 2021), manual and paper-based processes that increase processing times, errors and risks (Chang et al., 2019a, b; Rijanto, 2021; Ioannou and Demirel, 2022) and inefficient onboarding through the “know-your-customer” (KYC) process (Hofmann et al., 2018). The prevalence of “double-financing” forces financial intermediaries to mitigate their risks through prudent verification processes (Hofmann et al., 2018; Kowalski et al., 2021). There is a clear need for innovative solutions to address these issues, as reflected in the widening of the TF gap to $2.5 trillion and the rejection of 45% of SME financing requests (Beck et al., 2023).
Blockchain technology (BT) has the potential to address many of the TF/SCF challenges and inefficiencies. Its decentralized nature enables a unified view of transactions across participants and eliminates the need for transaction reconciliation and intermediation. BT provides an immutable record of transactions, minimizing the risk of discrepancies and errors. The automation and streamlining enabled by smart contracts eliminate the need for manual and paper-based processes. BT allows for secure identity verification to expedite customer onboarding, and the transparency and immutability of BT records make it difficult to manipulate data or engage in fraud. These unique characteristics set BT apart from other technologies in addressing existing challenges and building a more trustworthy and resilient TF/SCF ecosystem (Chang et al., 2019a; Du et al., 2020; Kowalski et al., 2021; Rijanto, 2021; Wang et al., 2022). It is estimated that BT can reduce TF costs by more than 50% (Ledger Insights, 2018) and reduce LC processing time by 90% (Ledger Insights, 2021).
The promises of BT have fueled initiatives to develop BT-enabled TF and SCF platforms (Chang et al., 2019b; Ioannou and Demirel, 2022). However, their development and application remain in early stages (Patel and Ganne, 2020; Kaur et al., 2024; Gong et al., 2024). Some of the more established platforms (e.g. We.Trade and Marco Polo) have failed to gain traction in the market (Ledger Insights, 2023). These observations emphasize the need to understand the issues limiting the widespread and sustained adoption of BT-enabled TF/SCF and the challenges faced by early adopters. BT diffusion in TF/SCF is also a multi-stakeholder process, depending on successful adoption by banks and trading partners as the suppliers and customers of these services. It depends on the effectiveness of platforms developed by technology providers and the active participation of consultants to facilitate technology adoption and integration. These issues further highlight the complexities of BT adoption in this space and the need to understand the perspectives of different stakeholders.
While existing studies explore the potential for BT in TF/SCF (e.g. Chang et al., 2019a, b; Wang et al., 2022), BT adoption issues in these contexts are underrepresented and have not been adequately explored in empirical settings. Numerous studies offer general insights into BT adoption in supply chain and inter-organizational processes. However, these do not necessarily capture the distinctive characteristics of TF/SCF that can significantly influence adoption decisions. These characteristics include the need for both efficient and secure financial processes, high regulatory and standardization requirements in long-established processes, diversity of stakeholders and their expectations, and specific benefits and risks from technology adoption (Ioannou and Demirel, 2022). The lack of empirical insights on the key motivations and challenges of BT implementation in TF and SCF has been noted in the literature (Babich and Hilary, 2020; Rijanto, 2021). Therefore, this paper is guided by the following research questions (RQs):
What are the main driving forces and motivations for TF/SCF parties pursuing BT adoption?
What are the main barriers and challenges currently faced by TF/SCF parties in adopting BT?
Answering these questions contributes to the literature and practice in multiple ways. First, it takes a multi-stakeholder approach and employs semi-structured interviews with practitioners from banks, technology providers, consultants and trading parties that are actively involved in BT initiatives. The literature highlights the need to understand the motivations and obstacles to BT adoption of different TF/SCF parties (Ioannou and Demirel, 2022). This is because the TF/SCF ecosystem relies heavily on multi-actor collaborations, and one actor’s decision to adopt the technology affects and is affected by others (Sternberg et al., 2021).
Second, while recent research examines barriers to BT-enabled SCF identified in the literature (Kaur et al., 2024), the RQs explore both drivers and barriers to BT adoption from the perspective of the state of the practice. This uncovers the actual reasons for inadequate or slow adoption of BT and the gaps between expectations and actual use of the technology in TF/SCF. It also identifies BT adoption dynamics in this domain and the factors that shape the decision-making of parties for pursuing the technology. Addressing RQ1 characterizes the expectations and requirements for stakeholders, which is needed for stakeholder alignment in multi-party BT initiatives in TF/SCF. The findings for RQ2 highlight the role of different stakeholders in unlocking the anticipated benefits of BT within the TF/SCF ecosystem.
Third, this study investigates non-technological determinants of BT adoption and their significance compared to technological factors. The literature emphasizes the distinctive characteristics of BT as primary drivers of its adoption. The RQs investigate BT benefits and challenges that extend beyond the attributes of the technology. To this end, the study employs the technology-organization-environment (TOE) framework, which enables a balanced perspective on the technological and non-technological considerations in technology adoption decision-making. The comprehensive and flexible nature of TOE allows the effective capture of adoption determinants for technological innovations in inter-organizational settings.
Fourth, this is the first study that uses a mixed-methods approach to investigate BT adoption in TF/SCF. The RQs focus on what must be prioritized, as not all issues can be addressed at once. Prioritization is essential to develop strategies to bridge existing gaps, inform decision-making, guide successful implementation and realize the technology’s full potential. The study leverages the best-worst method (BWM) – a multi-criteria decision making (MCDM) technique – to determine the relative importance of the identified factors. Specifically, it uses Bayesian BWM, which allows for a more robust evaluation than the original BWM.
Despite differences between TF and SCF, given their common process inefficiencies and participating actors, this study investigates BT adoption in these domains in tandem. The remainder of the paper is organized as follows. Section 2 reviews the literature and the theoretical framework. Section 3 outlines the study design and methodology. Section 4 reports the results. Section 5 discusses the insights drawn from the results. Section 6 presents managerial implications, and Section 6 provides research limitations and future directions.
2. Background
2.1 BT in TF and SCF
LC is the most common technique used in TF. It involves two banks serving as intermediaries in a trade transaction: the issuing bank, usually the buyer’s bank, which guarantees payment and the confirming bank, usually the seller’s bank, which guarantees the line of credit. LC resolves a dilemma wherein the seller is reluctant to sell goods without payment, while the buyer is hesitant to pay for goods before receiving them (Schmidt-Eisenlohr, 2013). However, the procedure is rife with high uncertainties and cumbersome paperwork. It raises trust-related issues, is susceptible to tampering and carries a high risk for the buyer’s bank. The issuance of LCs entails considerable costs and formidable obstacles for less credible traders (Clark, 2014; Chang et al., 2019a; Kowalski et al., 2021).
The SCF literature also documents several challenges and inefficiencies inherent in existing procedures (e.g. Gelsomino et al., 2016; Choi et al., 2023). Reverse factoring, or supplier finance, is a common SCF solution that involves a financer providing early payments to the supplier based on an approved invoice and receiving payment from the buyer on agreed-upon terms. However, it suffers from credit risks, delays and disputes over invoices (Wuttke et al., 2016; Gong et al., 2024). Although SCF is more reliant on technology than traditional TF instruments, allowing for financing at a reduced cost, it is hindered by inadequate automation, limited visibility, and a lack of transparency (Paul et al., 2022; Wang et al., 2022).
BT involves a decentralized ledger comprising a sequential, append-only chain of confirmed blocks. It utilizes cryptographic links and is designed to resist tampering and establish immutable records (International Organization for Standardization, 2020). New transactions are hashed, digitally-signed and appended to the preceding block of transactions, which is then published to all nodes. This establishes trust and consensus among the actors involved (Yaga et al., 2018; Chang et al., 2019a, b). BT operates as a trustless system by preventing changes to transactions once they are recorded (Wang et al., 2022). BT networks usually function without the need for a central authority; all participants can independently verify records without needing an intermediary (Wang et al., 2019).
These benefits have motivated the development of several BT platforms that provide the infrastructures, functions and tools that enable technology developers and businesses to build BT-enabled solutions for TF/SCF services and instruments. Several platforms (e.g. Contour, TradeFinex, TradeWaltz) aim to alleviate inefficiencies in processing paper-based trade documents, particularly with LC digitization. Other platforms, such as Hyperchain, facilitate SCF transactions and access to financing for SMEs (Chang et al., 2019b; Ioannou and Demirel, 2022). The platforms need to be integrated into existing systems and processes (e.g. payment systems, record-keeping, logging) for organizations to obtain the technology’s full benefits.
In the contexts of TF and SCF, the major weakness of existing technologies, such as electronic data interchange (EDI) or bank payment obligations (BPO), stems from the information silos produced by organizational systems. The reconciliation of information is a crucial concern in TF/SCF transactions, which require multiple actors to share data. BT’s decentralized architecture and immutability eliminate the need to reconcile and validate data across participant nodes, ensuring that once information is recorded on the distributed ledger, it becomes a shared, tamper-resistant single version of the “truth”. This, in turn, eliminates discrepancies and the need for reconciliation of centralized or siloed databases in traditional systems (Hofmann et al., 2018; Paul et al., 2022). The immutable and tamper-evident nature of BT also reduces fraud and document manipulation, addressing a major risk in TF/SCF (Chang et al., 2019b; Rijanto, 2021).
BT can reduce information asymmetry and improve information flow by enabling near real-time settlement of recorded transactions across a distributed network while assuring a high level of information integrity (Chang et al., 2019a, b). Additionally, smart contracts can be used to automate LC transactions and payments, which can reduce delays in receiving funds. BT’s decentralized properties can be used for a cost-effective KYC database of “long-tail” SME sellers that banks on the same TF/SCF network can access for seller verification and risk assessment (Hofmann et al., 2018; Rijanto, 2021). On the other hand, BT has technological limitations that can affect its ability to address the information-sharing problems encountered in TF/SCF. Data are assumed to be error-free and accurate when entered into the ledger, as inaccuracies or falsified data would be shared across all nodes (Babich and Hilary, 2020). Another limitation of BT concerns data security, specifically what is known as the “51% attack problem” (Paul et al., 2022). Since trade transactions typically involve the exchange of information related to high monetary amounts, relevant systems become more susceptible to hacking. Moreover, smart contracts have inherent risks, such as the risk of errors and security vulnerabilities being executed without additional verifications (Kowalski et al., 2021).
The unique potential of BT to address the issues currently encountered in TF and SCF procedures is discussed extensively in the literature (e.g. Kowalski et al., 2021; Ioannou and Demirel, 2022; Kucukaltan et al., 2024). For instance, Toorajipour et al. (2022) devise a trust-free, peer-to-peer LC mechanism utilizing BT and smart contracts for transaction initiation, fulfillment and termination. Chang et al. (2019a) present a BT-enabled TF architecture for recording TF transaction information and three smart contracts for LC, trade and logistics processes. Within the SCF context, Du et al. (2020) propose a BT-based platform for managing accounts receivable factoring that integrates homomorphic encryption to preserve privacy. Zheng et al. (2022) develop a BT-enabled credit reporting system to address the issues and inefficiencies in credit identification in SCF.
Overall, the application of BT in TF and SCF is still nascent, and the diffusion of the technology is at an early stage. At this point, the main adopters of the technology and leaders in active BT projects are financial institutions and technology providers, both startups and incumbents (Ioannou and Demirel, 2022). Banks are the traditional providers of financing services in the TF/SCF context, and they play a key role in ensuring the security of financial transactions. Their involvement extends to delivering financing solutions tailored to the specific needs of their customers (i.e. trading parties) while adhering to risk mitigation requirements. Technology providers establish BT infrastructures to support financing processes and the interactions between banks and trading partners. Consultants and trading parties are also important stakeholders in BT initiatives in TF/SCF. Consultants are often experienced TF/SCF professionals who provide guidance and expertise to banks and trading partners around technology adoption and integration (Lanzini et al., 2021). Buyers and sellers are the end-users and primary beneficiaries of TF/SCF products. They provide data concerning goods and payments and would benefit from enhanced operational efficiency resulting from new technology initiatives (Rijanto, 2021; Sternberg et al., 2021; Kowalski et al., 2021). The literature points to additional stakeholders in the TF/SCF ecosystem, including customs brokers, freight forwarders, third-party logistic companies, insurance companies and regulatory actors (Sinha and Chowdhury, 2021).
2.2 Drivers and barriers of BT adoption in TF/SCF
The main drivers of BT adoption in TF/SCF that are reflected in the literature concern its potential to tackle existing challenges and inefficiencies within the ecosystem. Enhancing trust between trading partners, addressing information sharing issues and streamlining KYC processes are identified as key motivations (Rijanto, 2021), all of which are particularly relevant, given the multi-party nature of TF/SCF mechanisms. These drivers align with the core drivers for BT adoption in other supply chain and inter-organizational settings (e.g. Gurtu and Johny, 2019). The TF/SCF literature notes that the growth of global trade and SMEs’ demand for financing alternatives have put pressure on banks to supply greater volumes of funding (Hofmann et al., 2018). The efficiency gains offered by BT enable banks to provide innovative TF/SCF services to their clients (Ali et al., 2020; Trabucchi et al., 2020). These gains provide a significant motivation for banks to explore the potential of BT in TF/SCF (Chang et al., 2019a; Rijanto, 2021).
The literature also points to several barriers to BT adoption. One challenge pertains to the scalability of the underlying proof-of-work (PoW) protocol that requires every participant to validate new transactions in their respective nodes (Biswas and Gupta, 2019; Rijanto, 2021). Sustainability challenges may also emerge with increased transaction volume due to the high energy demands of performing PoW validations; the costs incurred may outweigh the benefits of greater transparency in data sharing (Biswas and Gupta, 2019; Öztürk and Yildizbaşi, 2020). Privacy is another challenge towards adoption, which is highly relevant for TF/SCF records that contain sensitive business intelligence, such as financing rates and contractual terms. The lack of data standardization and appropriate governance structures can also lead to greater uncertainty and risk (Lohmer et al., 2022). These technology-specific barriers have been identified as the most influential hindrances to BT adoption for SCF (Kaur et al., 2024).
BT is typically associated with cryptocurrencies and is known for its use in money laundering and facilitating transactions in the underground economy (Biswas and Gupta, 2019; Kouhizadeh et al., 2021). This presents a risk for TF/SCF actors, particularly banks, who do not want to be associated with such activities. Other barriers to BT development and implementation include a lack of technical expertise and management commitment and support; the latter can stifle investments in BT projects, particularly during times of economic uncertainty (Kouhizadeh et al., 2021). Legal uncertainties regarding the enforceability of smart contracts and data stored in BT ledgers, particularly across borders, present additional risks for organizations (Lohmer et al., 2022). Table 1 provides a summary of the key drivers and barriers to BT adoption in TF/SCF, as identified in the literature.
2.3 The technology-organization-environment framework
Tornatzky and Fleischer (1990) propose the TOE framework to understand different factors affecting an organization’s decision to adopt new technology. The technology dimension is focused on the features of technological innovations and the firm’s existing technologies. The organizational dimension includes the characteristics and resources of the firm, and the environmental aspect includes factors external to the firm (Baker, 2012). The TOE framework is widely applied to study the adoption of new technologies, including BT, in SCM (e.g. Kouhizadeh et al., 2021).
When applied to the SCM context, the environmental dimension of TOE can be divided into the inter-organizational and external dimensions (Jia et al., 2020) to more precisely examine the supply chain and collaboration among enterprises in a common BT network (Kouhizadeh et al., 2021). The nature of TF/SCF operations requires the establishment of networks that allow collaborative relationships to execute transactions and exchange information with other supply chain members. Table 2 summarizes the key areas of focus in each dimension of the extended TOE framework when applied to explore BT adoption issues in TF/SCF.
3. Research methodology
This study follows a mixed-methods approach, which is particularly useful in developing a robust and holistic understanding of a phenomenon through complementing one set of results by another. This approach addresses the limited generalizability of qualitative methods and the lack of contextualization in quantitative data (Golicic and Davis, 2012). A qualitative study was conducted to explore the drivers and barriers of BT in TF/SCF from the perspective of different stakeholders involved in evaluation, proof-of-concept (PoC), development, or production of BT projects. This approach ensures that the current state of BT adoption is captured to gain a comprehensive view and in-depth insights into the research questions, which is important in emerging domains (Edmondson and McManus, 2007). An exploratory study is particularly appropriate because BT development in TF/SCF is still emerging, and there is a limited understanding of the state of the practice and the successes and challenges of adopting organizations. It uncovers contextual elements influencing the adoption process and relevant issues that may not be immediately evident. Next, the BWM analysis is conducted to examine the relative importance of the identified factors. This analysis builds on the qualitative results to identify key considerations and to further validate the factors emerging from the interviews through a consensus-building collective evaluation. The BWM assessment reflects the degree of shared understanding among participants regarding the key factors, ensuring that the factors are not isolated to specific participants and have broader relevance. This enhances the generalizability and robustness of the findings.
This study applies a multi-stakeholder perspective and focuses on stakeholders actively conducting or collaborating in BT implementation, including financial institutions, technology providers, consultants, and buyers and sellers (Chang et al., 2019b; Rijanto, 2021; Sternberg et al., 2021). This approach is appropriate because the success of BT relies on its advantages being shared among different parties within the ecosystem (Rijanto, 2021). The multi-stakeholder approach allows the identification of potential conflicts of interests, the alignment of goals and the development of strategies that effectively address the requirements and interdependencies among stakeholders in the adoption process.
Technology providers and major international financial institutions lead most of the active BT projects in TF/SCF (Ioannou and Demirel, 2022). Despite not being end-users of BT, consultants and technology providers develop a rich perspective on BT adoption issues due to their extensive collaborations with banks, buyers and sellers. These stakeholders are also in a unique position to gain a holistic view of the challenges. Considering the interconnectedness of TF/SCF operations and the highly collaborative nature of BT initiatives, each stakeholder develops an understanding of the interests and challenges of others. Therefore, for both the qualitative and quantitative phases of this study, participants were asked to give their views on their respective roles, motivations and challenges, and to reflect on the dynamics in the ecosystem and the role of other stakeholders. This also yields insights into potential points of friction, the interplays and the dynamics shaping the adoption landscape.
3.1 Qualitative phase
Semi-structured interviews were conducted with TF/SCF experts in the BT domain who were directly involved in BT initiatives. This method allows for the preparation of questions to collect data in a structured manner while leaving space for follow-up questions on emergent themes and for the purpose of gathering additional insights (Bryman and Bell, 2011). An interview protocol was developed, which began with a general discussion of why the interviewee’s organization became interested in pursuing a BT solution, with a particular focus on the business problem to be resolved. Next, the questions were asked about the specific motivations and drivers that led their organizations to consider BT and the technological, organizational, inter-organizational and external barriers faced in their adoption efforts. The interview questions were adjusted to cover details relevant to the stage of BT implementation in the respective organization. When needed, the insights from related literature were used as prompts or suggestions to extend the discussion.
The sampling frame included banks, technology providers, trading parties and consultants engaged in various stages of BT initiatives in TF/SCF. Target participants were individuals in senior leadership roles with high decision-making responsibility and authority. Given the strategic and centralized nature of decisions on technology adoption, interviewing a single individual in such a role was deemed adequate to capture the decision-making process and considerations influencing BT adoption within each organization. In addition to being actively involved in the BT initiative, participants were required to have a high level of TF/SCF experience. The study employed a purposive and snowball sampling strategy to recruit participants. Initial contacts were established through industry networks, and referrals were used to recruit additional participants. Participants were invited via an email that introduced the study and its objectives. To ensure a comprehensive representation, the study recruited participants across geographical locations.
Before each interview, informed consent was obtained from the participant to take part in the interview and for the session to be recorded. The interview sessions were conducted by two or three researchers, and each lasted approximately 60 min. The sessions were facilitated using Zoom to record the interview and auto-generate audio transcription for data analysis. A total of 11 interviews were conducted with participants in the targeted roles. Table 3 summarizes the interviewee profiles. Study participants received a $100 gift card as a honorarium.
The interview transcripts were anonymized, cleaned and checked for accuracy by listening to the recordings and correcting errors. Content analysis was then conducted in NVivo 12. Inductive open coding, thematic categorization and abstraction processes were performed by the researchers over the course of several revisions following Elo and Kyngäs (2008). An inductive approach was considered appropriate because there is limited existing research on the topic. In total, 166 open codes were generated and then grouped into 30 categories, identifying 12 drivers and 18 barriers. The resulting categories were abstracted according to the TOE framework as technological, organizational, inter-organizational, or external. The coding was primarily conducted by one researcher and reviewed and cross-checked by two others. The three researchers had regular discussions to resolve inconsistencies in coding and interpretation (Miles and Huberman, 1994).
3.2 BWM analysis
The BWM, proposed by Rezaei (2015), was employed to determine the weights of the identified drivers and barriers corresponding to their relative importance. Compared to other MCDM methods that could be used for this purpose, such as the analytic hierarchy process (AHP), BWM produces more reliable results through more consistent comparisons, reduced deviation and improved conformity. The BWM data collection requires less effort from participants, which reduces participant fatigue (Rezaei, 2015). The method is widely applied in SCM studies and in research on information system adoption, including BT adoption in various enterprise use cases (e.g. Munim et al., 2022).
In this paper, the Bayesian BWM (Mohammadi and Rezaei, 2020) is used that takes advantage of probabilistic modeling in group decision-making and avoids the issues associated with typical average operators. Bayesian BWM utilizes the concept of credal ordering to capture the degree to which one factor is preferred over another from the perspective of a group of evaluators. A questionnaire was designed and administered in Qualtrics to collect data from study participants. For each of the technological, organizational, inter-organizational and external categories, respondents were presented with a list of the factors identified in the qualitative phase, along with a brief description of each factor. Then, they were asked to select the most and the least important factors (i.e. the best and worst) and to make pairwise comparisons to identify their preference of the best factor over each of the other criteria and the preference of each other criteria over the worst factor. The procedure was performed separately for driver and barrier factors. All interviewees consented to participate and completed the questionnaire.
4. Results
4.1 Drivers of BT adoption in TF/SCF
4.1.1 Technological drivers
Decentralized control and decreased reliance on central intermediaries were noted by interviewees as a substantial benefit of BT for all stakeholders, specifically banks, who can assume lower risks and inefficiencies in identity verification in KYC processes. Consulting participants emphasized the alleviation of inefficiencies created by paper-based and “computer-paper-computer” data-sharing models and the real-time data sharing between participants. Compared to existing inter-firm information systems, the decentralized and distributed ledger system, combined with consensus algorithms and cryptographic techniques, allows for the direct and secure exchange of transaction data among parties without intermediaries. It also ensures the provenance of data and addresses issues of data manipulation and reconciliation, reducing the risks and costs associated with paper-based models. Interviewees noted that the reduction of verification and disputes and the resulting cost savings are powerful drivers for adoption.
The first benefit is excluding the paperwork and getting [a] 44% efficiency improvement. The time for orchestrating trade documentation will be half and the cost will be halved. They are not using papers received at the office, but just using X [platform]. (Participant I)
The tamper-evident nature of BT records also creates improved audit trails.
For auditing purposes or whatever you need to do for traceability, you can have the full cryptographic history available on the blockchain ledger. (Participant F)
Interviewees representing trading organizations cited the importance of providing end-to-end visibility.
You can have access to information, you could know in real-time where your goods are, when you get them, when you expect to get them, so it gives you full access to the information within the whole process. (Participant A)
Democratizing the whole chain of the whole process is the big revolution that is going on, not only as a segment gave access to funds, forcing stakeholders to work in a leaner way in a more democratic way. (Participant B)
For banking participants, the risk of fraud was one of their greatest challenges. Most banks do not typically share credit risk profiles and transaction information with other financial institutions.
A [a large financial institution] lost $600 million on just one client last year in Singapore. One of the frauds that the trader was suspected to have committed was duplicate financing. This type of fraud is also getting the attention of regulators, where they want to set up a trade finance registry to address the issue of double-financing, and blockchain is a good fit to store this information. (Participant G)
For invoices, there are already solutions; for instance, that you must register in a governmental system, so you cannot finance any invoice twice. But [this system] is not used everywhere all over the world. Also, if you financed goods or anything else, you want to be sure you only [financed] it once. A global register where invoices could be checked by everyone and blockchain can play a role there. (Participant C)
Interviewees saw the potential of BT to address the gaps in prior TF/SCF digitization efforts, especially as industry actors are typically conservative institutions that are resistant to change. Existing electronic TF databases cannot guarantee the authenticity and validity of transaction data and electronic warehouse receipts. Electronic bills of lading also raise privacy and confidentiality concerns. Interviewees also highlighted that BT initiatives are accompanied by a network-wide technology infrastructure that enables other TF/SCF digitization efforts by introducing downstream cost savings for participants, reducing the time-to-market and facilitating future efficiencies. Interviewees noted smart contracts as a unique BT feature that makes it superior to existing technologies. This was particularly relevant for interviewees representing organizations in the evaluation and PoC stages of BT adoption. Smart contracts coupled with the immutable properties of BT ledgers can also be leveraged to automate invoice verification and payment.
Because the information is now reliable, extending quick payment options to carriers and importers is now possible. We can even extend a discount on their invoice or decrease the payment terms from 90 days to 45 days. (Participant J)
Technology providers noted that the increasing availability of new types of BT platforms, such as Hyperledger and R3 Corda, that support permissioned or consortium BT configurations has resulted in compelling BT solutions for the TF/SCF industry. Interviewees specifically noted that the availability of open-source BT platforms fosters collaboration with the technology platforms.
Being Hyperledger members, we engage with the technical teams anytime we have challenges. How Hyperledger set up the structures, the governance, and everything is one of the reasons we have joined. We also stay on Hyperledger because it’s very much open-sourced and having open governance where we have a voice to provide feedback. (Participant E)
4.1.2 Organizational drivers
According to the interviewees, BT enables more organizations to extend their working capital in new ways through SCF and TF. This is particularly important to SME buyers and sellers affected by economic crises and who cannot access traditional asset-backed financing or trade credit as a result. Interviewees also recognized that leveraging BT to provide SCF and TF for buyers and sellers in developing countries remains an untapped opportunity.
This is a challenging time for micro, small, and medium because of the COVID outbreak. In developing countries, globally, you see how small and medium enterprises, they’re facing new challenges [with accessing financing]. The problem is not all located in some specific areas but affects SMEs worldwide … The big brands used to work with the small sub-sellers, so the more you go for, let’s say share distributing visibility, the more you allow all the stakeholders within the supply chain to access funding. (Participant B)
Banking participants mentioned that they are always looking to launch new financing products to retain and attract clients. Interviewees expressed their organizations’ interest in pursuing evaluation and PoC of BT projects to support their innovation agenda. They also commented that they want to invest in innovative technologies to drive market advantage through enhanced product offerings, which are particularly sought after by financial service participants.
We want to be market-leading. We want to bring something different than other banks by being the first bank in the nation that brings a distributed ledger system to our clients. (Participant D)
Interviewees noted that enabling a comprehensive technology ecosystem, when BT is used in conjunction with other technologies, is an important consideration in the adoption decision. These interviewees remarked that organizations are constantly in the process of evaluating new technologies, and each technology alone is typically unable to adequately address practical problems. BT adds value to the organization’s technology ecosystem and supplements other emerging technologies, such as the internet of things (IoT). This enables the development of new business models and enhances existing business services, and thus serves as a significant motivator of BT adoption.
We are now making a new PoC with IoT sensors that sends the manufacturer’s products from their warehouse to port by truck. The business process data will now be stored in blockchain. (Participant I)
All separately, each technology doesn’t really add value. You have to use [blockchain] in a combination, which is our cocktail to provide all kinds of value. (Participant C)
4.1.3 Inter-organizational drivers
From an inter-organizational perspective, interviewees saw the adoption of BT by TF/SCF network participants as a main driver. The participants noted that the major BT projects being led by global banks drives other actors to join. This is particularly important for buyers and sellers, many of whom may have insufficient credit or lack established relationships with banks to access financing services.
With really good bank coverage, even though corporates and trading partners are still joining. You’re going to have 100 times more corporates than banks, but you need banks in there first so that corporates will join. We launched our solution across their network so we’re in over 50 countries even though we’ve only been in production since January 2021. (Participant H)
Interviewees noted that BT allows the proactive management of working capital and the associated risks within the supply chain. This is achieved by reducing information asymmetry in the TF/SCF network. Being proactive in managing working capital improves buyer-supplier relationships and enhances operational efficiency across the supply chain. One interviewee who worked with several clients in the evaluation and PoC stages of BT adoption noted most organizations are operating in a reactive mode in their working capital planning.
One of the risks is container shortages, and one of the problems is not having accurate visibility. Without this, it is difficult for organizations to plan downstream. Right now, organizations are in a reactive mode. With blockchain, hopefully, we can have proactive risk management. (Participant A)
According to the interviewees, BT has also become an enabler of coopetition between TF/SCF stakeholders. Collaboration among banks can reduce operational TF/SCF costs and diversify funding. In this space, coopetition is beneficial for banks and trading companies. Rival banks can collaborate and share information in BT consortia without compromising control and can establish mutually agreed-upon rules and standards for all members. BT allows the creation of joint participant value and motivates the establishment of larger consortia by partnership members. This is facilitated by a single shared version of truth among multiple parties, operations without a central authority and tamper-proof data. Technology providers mentioned that, before BT-enabled platforms, banks engaging in TF/SCF transactions lacked a digital platform for efficient collaboration. With BT platforms, banks can form new business relationships and grow their TF/SCF product revenue as a result.
It is very much a coopetition. Trade finance is very much a collaborative space because the banks need to engage with each other … We are building upon the relationships that are already there with the banks or even creating new relationships because of Y [platform]. (Participant E)
4.1.4 External drivers
For technology providers, being able to collaborate, educate and seek feedback from governments and regulators has accelerated the development of BT solutions in TF/SCF. These touch points have also enhanced regulators’ understanding of how BT can promote efficiency and reduce the risk of fraud in this space.
Banking is a heavily regulated industry so one of the things we needed to do was to [show] what our platform can be like to regulators. We’ve worked with the European Central Bank, we worked with the Italian regulators, Spanish regulators, and other regulators for all the markets [we serve]. We’ve engaged with them on a very one-on-one basis so that [regulators] know what our platform is doing so that we can make sure that our platform is applicable for any financial regulatory laws that may be in place. (Participant E)
Interviewees remarked that their organizations became interested in evaluating or developing BT due to growing industry interest. Banking participants, in particular, commented on the impact of competitors adopting BT. Interviewees mentioned that the adoption of BT by major competitors also influences their timeline for adoption.
As more banks become interested in this new technology, we could see there’s a threat, and we need to better understand the threat. (Participant C)
Interviewees across all stages of BT implementation pointed to the demand for liquidity aggravated by the COVID-19 pandemic as a driving force for BT adoption in TF/SCF. They explained that as the demand for supply chain services surged and the shipment of goods was prolonged, the demand for liquidity and financing increased. The increased pressures and disruptions in global trade and supply chain operations necessitated more effective solutions to stabilize liquidity and working capital for trading companies. The increased demand for liquidity also motivated alternate forms of financing and further highlighted inefficiencies in existing TF/SCF processes. These changes in the ecosystem present a unique opportunity to drive the TF/SCF industry towards digitization. They deliver a much-needed “wake-up call” and can serve as a catalyst for organizations to evaluate new technologies, including BT, that can increase the resilience of their business operations. Interviewees also recognized that BT exploration and implementation requires careful planning and resources. Thus, more organizations initiate their evaluation of technology to account for that timeline.
Table 4 summarizes the identified drivers, categorized according to the extended TOE framework.
4.2 BT adoption barriers in TF/SCF
4.2.1 Technological barriers
Interviewees were unanimous in the view that there is a need for further development of the underlying technology, including BT consensus mechanisms, data privacy, security and performance. Organizations fear that if they become early adopters, their risks of development cost and disruption to business operations will grow, particularly when a single supply chain actor contributes to a complex network of financial processes. Technology providers were specifically concerned that no BT providers have reached sufficient scale to properly test the limits of the technology for resiliency and scalability as TF/SCF transaction volume grows. This concern was highlighted in terms of costs and environmental impacts when evaluating the technology from the public relation standpoint. One interviewee elaborated on their organization’s efforts to actively develop solutions to address scalability.
We are going to redefine scalability. We will probably adopt some sort of model: one identity equals one node in our network. A whole database representing the whole full stack of the application for every identity might be overkill. We might launch [one node] for a country or industry in a country or one large bank or a large conglomerate that has a lot of different entities within it. We will allow these entities to share a node. We believe our customers don’t care too much about ultimate decentralization; they just want meaningful decentralization. (Participant H)
Interviewees remarked that as current BT projects are closed-permission networks, firms and banks face the challenge of joining the “right one” and fear the increased risks and costs of being unable to share information with other consortia. Technology providers mentioned the perceived need for interoperability as an unnecessary barrier preventing further BT adoption in TF/SCF.
The ‘fable of interoperability’ has wasted time and lost us years in how we could have progressed otherwise. Platforms wasted time trying to make [protocols] interoperable, which is incredibly difficult from a technical and commercial standpoint. (Participant H)
Instead, they propose “participant interoperability” as a more realistic and actionable alternative. In this way, all participants can reap the efficiency benefits of smaller networks among TF/SCF partners and have the option to join other networks as needed.
The only interoperability that does work and we promote is “participant interoperability”, meaning if you want to be a participant in another blockchain network, ours, and a dozen others, that’s completely fine. (Participant J)
Throughout the interviews, participants remarked on TF/SCF being traditional industries in which organizations are wary of the costs and risks of adapting existing technology to integrate BT, for example in payment gateways, logging services, client software and infrastructure. For some, the integration of BT into their existing enterprise resource planning (ERP) and other record-keeping systems remains a major unresolved challenge.
Organizations have their own systems that work and they have their own processes that have been working. Letting go of those processes and becoming a part of this network definitely takes time because each enterprise is unique. Each enterprise has its challenges and it’s very difficult to know what their challenges are. (Participant K)
Several interviewees expressed concerns about security risks with BT and smart contracts, including hacking, the possibility of data leaks and unauthorized access to sensitive financial information. These risks may be higher due to the multi-million-dollar value of goods being transferred in TF/SCF networks. Participants remarked on the perceived openness of BT records (with each consortium participant receiving a shared copy of updates) as a further vulnerability. As a result of these concerns, the technology has been subject to a lengthy internal education and audit process.
For all the different sorts of protection in terms of cybersecurity, etc., you have to go through that education process with all of these very conservative institutions before they adopt it. (Participant H)
Interviewees also expressed that the lack of standards for the data being exchanged on different BT networks increases the risk for participants, particularly if they want to leave a BT consortium for another network.
4.2.2 Organizational barriers
Interviewees raised concerns regarding the privacy and confidentiality of trade secrets (e.g. transaction prices of intermediate products, order quantities, manufacturers’ financing quotas) when using BT in TF/SCF. BT mitigates such concerns by employing cryptographic techniques, private and permissioned networks, and methods such as zero-knowledge proofs. Notwithstanding these features, participants expressed concerns about privacy and confidentiality and a hesitancy to adopt BT before these issues are addressed; this is particularly the case for banks as they are governed by regulations that dictate how customers’ financial information can be processed.
Banks are so sensitive about who can access their data. They are concerned with who owns the data, who owns the keys, how the data is being accessed, and who can access the various production environments. How can I make sure that my customers’ data is protected? (Participant E)
Interviewees stressed that adopting BT presents additional risks, jeopardizing existing TF/SCF processes due to the significant changes introduced as a result. These risks pertain, in particular, to processing financial transactions since incorrect transactions cannot be canceled or reversed once they are confirmed. Transaction processing risks are also increased when suspicious blocks exist on the network. These risks necessitate rigorous verification processes and mitigation strategies that align the different risk appetites of adopting organizations.
Banks can actually run at different speeds, but some have [a] different appetite for risk. For example, you might have some banks and they have a low appetite for risk and, therefore, aren’t willing to accept. (Participant E)
In organizations in the evaluation or PoC stages of BT adoption, the lack of management commitment and support was also mentioned as a barrier, specifically for traditional enterprises.
When there are cost cuttings, innovation takes the biggest hit in traditional enterprises … Unlike Amazon, Google, or startups that have the technical talent and policies, it is difficult to move away from the legacy, so that’s okay why we don’t create this digital factory kind of thing. (Participant K)
According to the interviewees, BT projects require a unique intersection of skills in the underlying technology and TF/SCF expertise. Technology providers, in particular, remarked that a lack of skills in the financial aspects of SCM is an obstacle to successfully adopting and identifying opportunities for BT integration into TF/SCF processes. Consulting participants noted that they were often hired to fill the gap in TF/SCF knowledge in organizations evaluating BT solutions. However, a limited number of consultants are available to meet this demand.
[The] bulk of [TF/SCF] knowledge is very difficult for a small company to have. As consultants, we try to systematize the spark of knowledge and make it accessible to small [companies] in blockchain development. (Participant B)
Interviewees commented on the barrier of having to recruit and attract technical talent to develop BT applications and lead complex implementation efforts. This particularly applies to technology providers who require large teams to engineer BT products, but banking and trading participants also mentioned the need for technical staff on their BT projects. Interviewees expressed concerns about many non-technical stakeholders in the TF/SCF ecosystem not fully understanding BT and continuing to associate the technology with cryptocurrency, which has negative associations with illegal activities. These participants remarked that since the banking sector is generally risk-averse, this lack of understanding introduces a barrier to adoption.
There is still a lot of confusion with the industry itself when people hear, you know, blockchain, you think about Bitcoin and illegal activities. That must be fixed. (Participant B)
4.2.3 Inter-organizational barriers
Interviewees representing organizations in the production phase pointed out that sustained adoption of BT by TF/SCF parties has been slower than anticipated despite growing excitement from industry members. Leaders view this as the technology’s inability to overcome the initial “hype” and prove productive to organizations.
Our European project has been live for three years now, and the adoption has been quite slow. It always starts with a lot of excitement, you know, the pre-launch excitement is what we’re going to do, this is how it’s going to take the market by storm, and then it is launched, and you have your first transactions, and then that’s it. (Participant G)
Technology providers also described a “chicken and egg” problem with BT adoption in this space.
Banks inherently want to meet the needs of their clients, who are buyers and sellers, so it is really a chicken and egg, I guess. You know, who moves first, so bank will say if my corporate clients want to use your solution, then I will join. And then you go to a corporate, and they say when my banks are on the platform, then I will join … However, most of our investors are banks. The banks have a vested interest in us succeeding, even though there are very few corporates on the platform to start with. (Participant H)
Data ownership and control were also seen as important for financial institutions. Compared to existing centralized solutions over which banks have complete control, BT’s decentralized nature requires distributed governance among all consortium participants. As more and more transactions are recorded in the shared BT ledger, organizations become increasingly dependent on the consortium for information exchange, which may create a “lock-in” effect.
Where is the data, who owns the data? That’s still very important for a financial institution. They still think in a very old-fashioned way and prefer a database or a cloud solution that they have control over … You need good standards and also the governance of the network. This is very important for banking participants. (Participant C)
Interviewees also highlighted the institutional alignment and collaboration between consortia participants as a barrier to adoption. While such issues are common in inter-organizational contexts, they are even more pressing in TF/SCF due to the differences among parties within a global ecosystem. Interviewees remarked on the specific challenge created by the requirement that every organization in the consortium must agree to all policies and decisions. This is unlike the flexibility organizations typically have with existing technologies.
You still have the challenges of the consortium. Every partner on the supply chain has to agree, unlike a traditional system. (Participant K)
We needed industry collaboration to make this work. There are just too many parties and [we have] to get them all to agree to a common solution. (Participant H)
4.2.4 External barriers
Consulting participants and those representing organizations in the evaluation and PoC stages remarked that the lack of regulation and governmental policies on the use of BT creates barriers to the onboarding of TF/SCF participants. Interviewees emphasized that the lack of regulatory certainty increases the risks of adopting BT solutions, such as BT data not being accepted by regulators as satisfactory legal evidence. Without widespread adoption of BT solutions across TF/SCF participants, there is little interest from regulators. This increases the regulatory risk from the perspective of organizations evaluating BT.
It is very uncertain what the legal and regulatory environment looks like in any given country for these blockchains because transactions tend to be cross-border … Today, Bitcoin and Ethereum are largely unregulated, which is good for the people that want to use it for nefarious purposes, [but] really bad for anybody that wants to use it pretty legitimately. (Participant F)
Consulting participants highlighted the need for a significant mindset change in the industry regarding several aspects of leveraging BT, including decentralized data storage, collaboration-based policies within the consortium and real-time data sharing with multiple parties. Interviewees stated that trying to change the current processes is a considerable challenge. Organizations are also more risk-averse when considering new processes that affect working capital.
The biggest challenge that we all have in relation to blockchain is change. Banks have been used to doing trade finance for many years. (Participant E)
Change management is definitely the biggest barrier to adopting blockchain technology today. For organizations, to adopt a collaborative way of working where data is exchanged in real-time across all parties at the same time takes time. It involves changing the mindset of organizations do things today across people and processes. (Participant A)
Banking participants raised the uncertainty of market demand for TF/SCF products, customers’ behavior and future sales. When evaluating the technology, organizations may refrain from adoption until the demand for financing products is more established since BT adoption generally requires several years of committed development and funding.
We are still in a stage where we’re trying to understand the market. How much demand is coming from our clients for supply chain finance and trade finance? What is the future of financing? (Participant D)
Table 5 summarizes the identified barriers.
4.3 Results of BWM analysis
Following the procedure for Bayesian BWM analysis, the local weights of the identified factors within each TOE category, as well as the relative importance of different TOE dimensions, are calculated to obtain the global weights. Table 4 presents the global ranking of drivers, with “adoption by the TF/SCF network peers” identified as the most important. Credal rankings, which measure confidence levels (Mohammadi and Rezaei, 2020), indicate high agreement among participants that this is the most important consideration among the various inter-organizational adoption drivers (1.0 and 0.92 when compared to other factors in the category). The participants’ perspectives were also strongly aligned on ‘governmental and regulatory support’ being the most important external driver (credal ranking values of 0.95 and 0.88).
In terms of barriers, the “lack of widespread BT adoption by TF/SCF participants”, which is an inter-organizational factor, was identified as the most important. The global weights reported in Table 5 identify “egal and regulatory uncertainties” as the second most important barrier. Participants strongly agreed on these factors representing the most significant barriers in the inter-organizational and external categories (ranking values of 1.0, 0.82, 1.0 and 0.94). These barriers also correspond to the two top-ranked drivers, highlighting their crucial roles in adoption. There was a high level of agreement among participants that “lack of management commitment and support” is the most significant organizational barrier to adoption (values of 0.97, 0.96, 0.95, 0.86, 0.84). Consistent rankings for “availability of BT platforms” as a technological driver and “BT immaturity” as a technological barrier indicate strong consensus among participants that the state of the underlying BT technology is less critical than non-technological issues. The consistencies in the rankings, along with the high levels of agreement among participants, provide evidence of the generalizability and robustness of the findings.
5. Discussion
Within the TOE framework, the results indicate that practitioners view technological factors as less important than non-technological considerations in the decision to adopt BT-enabled TF/SCF solutions. This finding contributes to the literature that sees technological features of BT, such as automation using smart contracts, traceability and decentralization, as key motivators in pursuing the technology to support TF/SCF operations (Chang et al., 2019a, b; Rijanto, 2021; Wang et al., 2022). It also contributes to the literature on BT adoption in supply chains, where technology-specific factors are prioritized over other considerations (e.g. Gurtu and Johny, 2019; Zhang et al., 2022). The research adds to the existing body of knowledge by identifying a range of organizational, inter-organizational and external drivers that are prioritized by TF/SCF practitioners when evaluating BT adoption. The findings help to demystify the hype around BT in this context.
From a theoretical standpoint, the findings show the significance of the inter-organizational dimension in creating a detailed understanding of environmental considerations in the TOE framework to explain technology adoption decisions in TF/SCF. The results suggest that the successful alignment of the technology with the organizational characteristics and capabilities of banks and trading parties, their collaboration and relationship dynamics, and industry norms and characteristics are particularly important to realize the potential of BT to address existing inefficiencies in TF/SCF. Additionally, the drivers and barriers identified in the technological dimension, including the diversity of BT options and the challenges of BT immaturity, emphasize the importance of strategically evaluating and carefully selecting a suitable BT platform.
Compared to the barriers to BT adoption in SCF that are prioritized in the literature (Kaur et al., 2024), the findings established using the extended TOE framework and the multi-stakeholder analysis of the state of the practice specifically identify and prioritize a lack of widespread adoption by TF/SCF participants, fear of being locked into a BT consortium and the need to align the interests of multiple parties. The lack of peer adoption, concerns about consortium effects and additional risks in operational processes are among the significant barriers that are not included in existing studies of BT adoption in TF/SCF (e.g. Ioannou and Demirel, 2022; Kaur et al., 2024; Gong et al., 2024). Moreover, uncertain demand for TF/SCF products is recognized among the impediments to adoption for banks, which further explains the impact of high investment costs reported in the literature (Rijanto, 2021).
In addition to the technological factors, several of the drivers and barriers from other categories stem from the unique characteristics of BT rather than general issues related to technology adoption in inter-organizational contexts. The fear of being locked into a consortium, risks in operational processes and the need for adoption by network peers are issues related to BT specificity. Supporting the organization’s innovation agenda, enabling the overall technology ecosystem and enabling coopetition are among other priorities that originate from the unique features of the technology. Regarding issues of institutional alignment, although this is a well-known barrier in inter-organizational settings, the challenges are significantly elevated for BT due to its distributed governance structure and the need for consensus among the parties. This is more of an issue for TF and SCF, which operate in global networks.
The identification of adoption by network peers as the most important driver and barrier provides evidence that a critical mass of adopters is needed to reap the benefits of the technology (Sternberg et al., 2021). This finding aligns with the findings in the literature concerning the impacts of network characteristics on technology and innovation adoption (e.g. Lee et al., 2013). It emphasizes the assertion in network theory that the interconnection of entities in the TF/SCF network significantly shapes the dynamics of BT adoption. This is consistent with studies that suggest that low rate of BT adoption among network peers is a barrier in the supply chain context (Kouhizadeh et al., 2021), as many organizations are concerned about investing in the initial hype not producing real value. This also implies that further adoption of the technology by major players could accelerate adoption in this context.
The significance of supporting the organization’s innovation agenda in driving BT investments is consistent with findings on the value of innovation in supporting technology adoption efforts (Troshani et al., 2011). It highlights the important role that BT can play in the transformation of the TF/SCF industry to align with the requirements of digital business and nurture a more innovative ecosystem. On a more general level, this finding suggests that BT can play an important role as an enabler or facilitator of innovation in more traditional contexts.
Identifying coopetition as a driving factor for BT adoption is another significant finding of this study. Practitioners remarked that BT enables them to form new business alliances across vast geographic regions. By using a BT consortium approach, participants are able to onboard competitive banks that would otherwise be unable to build collaborative relationships. The finding from the state of the practice further supports existing research regarding BT consortia supporting collaboration among competitors in closed networks (Ioannou and Demirel, 2022). Collaboration among TF/SCF providers also has synergistic effects, producing a more robust technological lending system and expanding business to larger geographic regions. This finding also provides evidence of how coopetition can be practised and leveraged to advance new technology initiatives in a traditional context.
The range of identified drivers and barriers highlights the significance of institutional environment characteristics, including the regulative, normative and cognitive forces (Scott, 1995), in shaping the behavior of TF/SCF parties considering BT adoption. The regulative force is primarily reflected in the high priority of regulatory factors as drivers and barriers, particularly given that TF and SCF are highly regulated domains. Several factors, including adoption by network peers and difficulty in changing established processes, require that attention be given to the role of the practices, workflows and relationships that have historically governed this industry. It implies that normative forces play an even more crucial role in BT-enabled TF/SCF than for other inter-organizational information systems because of the depth and breadth of change that it brings. In terms of cognitive forces, a shared understanding exists of the need for innovation through digitization and collaboration among TF/SCF parties. However, the challenges of institutional alignment issues in a global context, coupled with negative beliefs about the technology, pose major challenges to BT adoption in this domain.
6. Managerial implications
Compared to previous studies, the findings here suggest that addressing the technological immaturity and shortcomings of BT, such as scalability and security, is insufficient to boost its adoption in TF/SCF as there are more important non-technological barriers in effect. The assessment of the identified drivers and barriers reveals a paradoxical situation for BT adoption in TF/SCF. It implies that while BT has considerable potential to facilitate inter-organizational TF/SCF transactions, it faces major hurdles due to the issues inherent in this inter-organizational context. The findings from the multi-stakeholder perspective reveal existing discrepancies among TF/SCF stakeholders’ expectations and objectives when deciding about BT adoption. Specifically, there exists an inherent tension between the risk-averse nature of financial institutions and the desire for increased availability of funding and streamlined processes by trading partners. Another important tension stems from the distributed governance in BT, which has the potential to redistribute control in the existing ecosystem. This is particularly beneficial for SME parties but results in banks losing some degree of control.
Most of the identified factors pertain to banks as the main providers of financing products and the key investors in related technology solutions. Therefore, special attention needs to be paid to banks’ motivations and concerns for effective BT-driven transformations. The findings highlight the need for re-engineering and improving operational TF/SCF processes to facilitate BT adoption and contribute to innovation and other digitization efforts in this domain. Banks and major trading organizations play a central role in meeting this need. For BT adoption, they need to develop mitigation strategies that correspond to the process risks arising from the new technological context. Additionally, the findings imply that technology providers need to develop BT-enabled TF/SCF platforms from a technology ecosystem perspective so that the platforms support technology integration capabilities and the leveraging of other digital transformations by TF/SCF participants.
The findings imply that collaborative initiatives with regulatory bodies to develop appropriate regulatory frameworks, joint initiatives between banks, trading parties and technology providers to develop industry-wide standards, and fostering a culture of technology-driven innovation are key strategies to facilitate BT adoption. As regulatory bodies are typically opaque and rigid organizations that respond to change slowly, being able to directly involve them in BT projects represents a major turning point in the acceptance of the technology in this context. Moreover, collaboration among technology providers and TF/SCF stakeholders can cultivate a shared understanding of their actual requirements so that pragmatic solutions can be identified that address technological challenges related to interoperability, scalability, security and privacy. The synergistic approach among banks and trading parties can be driven by leveraging their shared motivations, including improving traceability and reducing disputes in the existing financing procedures. These tangible benefits can also serve as incentives that encourage sustained participation and collaboration among stakeholders. This is particularly relevant to financial institutions; they lead the initial wave of investment, and their buy-in can prompt other participants to adopt the technology. The shared benefits and tangible efficiency improvements to encourage buy-in can address the existing chicken and egg problem with BT adoption, which is the most important issue in this space.
7. Limitations and future research
Due to the limited number of BT projects in TF and SCF, there was a limited sample from which empirical data could be collected. Although study participants adequately represented the target stakeholders, future research is needed with larger samples to increase the generalizability of the findings. We also carried out single interviews within each organization, allowing us to enhance the diversity of our sample given practical constraints. Additional interviews would provide us with richer data and enhance the data quality. Empirical data were gathered from representatives of the main stakeholders in BT projects in this space. Further research with a larger and more balanced sample could allow a more accurate assessment of the relative importance of BT adoption issues for different stakeholders. Future research could also explore the perspectives of other supporting actors in the TF/SCF ecosystem, including insurance companies, custom brokers, freight forwarders and transportation carriers.
With the growth in the development of BT and its implementation in TF and SCF, further research is needed on the actual benefits that can be realized from leveraging BT versus the perceived benefits as the initial drivers of adoption. The impacts of BT adoption in support of innovation and coopetition are subjects for future studies from both theoretical and empirical perspectives. The problem of overcoming the identified BT adoption barriers, especially from the SMEs’ point of view and in developing countries, is another important avenue for scholarly attention.
Key drivers and barriers to BT-enabled TF/SCF in the literature
Source(s): Table created by authors
TOE dimensions to study BT adoption in TF/SCF
| Dimension | Key areas to explore |
|---|---|
| Technological (T) | BT characteristics, such as functionality, compatibility, complexity, security, and reliability, availability and appropriateness of BT solutions, legacy systems, and how they integrate with BT |
| Organizational (O) | Structure, culture, resources, capabilities, and readiness of TF/SCF parties, their internal processes, policies, strategies, and management styles |
| Inter-organizational (O-Inter) | Collaboration, relationship, and partnership within the TF/SCF network, risk and trust dynamics, inter-organizational processes and information sharing |
| External (E) | TF/SCF industry characteristics, norms, and standards, market conditions and trends, regulatory environment, and global economic conditions |
Source(s): Table created by authors
Study participants
| Id | Expert role | TF/SCF participant | Location | Years of experience | Years of BT involvement | Stage of BT implementation |
|---|---|---|---|---|---|---|
| A | Trade Finance Consultant | Consultant | Montreal, Canada | 30 | 5 | PoC |
| B | Trade Finance Consultant | Consultant | Milan, Italy | 20 | 4 | PoC |
| C | Senior Business Manager | Bank | Amsterdam, Netherlands | 15 | 3 | Production |
| D | Commercial Banking Executive | Bank | Toronto, Canada | 10 | 2 | Evaluation |
| E | Chief Technology Officer | Technology provider | Dublin, Ireland | 25 | 3 | Production |
| F | Chief Technology Officer | Technology provider | Calgary, Canada | 17 | 4 | Development |
| G | Managing Director | Technology provider | Singapore, Singapore | 20 | 5 | Production |
| H | Chief Product Officer | Technology provider | Singapore, Singapore | 15 | 5 | Production |
| I | Managing Director | Technology provider | Tokyo, Japan | 10 | 4 | Production |
| J | Executive Vice President | Buyer/Seller | Toronto, Canada | 30 | 5 | Production |
| K | Technology Lead | Buyer/Seller | Toronto, Canada | 21 | 3 | PoC |
Source(s): Table created by authors
Identified drivers for BT adoption in TF/SCF
| Driver | Key roles associated | No. of quotes | No. of codes* | BWM weight | Rank |
|---|---|---|---|---|---|
| Technological | |||||
| Decentralized control of data: Eliminating the need for intermediaries for holding the data, managing risk, and verifying identity | B, P | 21 | 6 | 0.0209 | 16 |
| Improve traceability and authenticity of trade documents: Providing a trustworthy and traceable history of document transactions, improving audit trails | B, P | 16 | 7 | 0.0354 | 13 |
| Reduce verification and disputes: Reducing the need for extensive manual verification processes, replacing paper-based, siloed documentation | B, P | 24 | 7 | 0.0379 | 11 |
| Reduce fraud and double-financing risks: Creating a tamper-resistant environment and verifiable record of transactions and documents which is impossible to counterfeit | B | 18 | 3 | 0.0405 | 10 |
| Effective enabler of TF/SCF digitization: Addressing the gaps in previous digitization efforts, providing a network-wide technology infrastructure that facilitates other TF/SCF digitization efforts | B, T, C | 14 | 5 | 0.0354 | 14 |
| Automation of TF/SCF processes using smart contracts: Automating workflows, document exchange, verification, and payment, ensuring transactions adhere to predefined conditions using self-executing agreements | B, P | 27 | 4 | 0.0363 | 12 |
| Availability of BT platforms: Increasing the range of available BT platforms to fulfill the specific requirements of stakeholders | T | 10 | 6 | 0.0352 | 15 |
| Organizational | |||||
| Increase availability of funding: Facilitating enhanced, more efficient financing through process efficiency gains and reducing transaction costs | P | 21 | 6 | 0.0816 | 5 |
| Support organization’s innovation agenda: Fostering investment in innovative technologies and products to drive market advantage | B, C | 12 | 4 | 0.1039 | 3 |
| Enable overall technology ecosystem: Developing new/existing business models and services by leveraging BT together with other technologies as a catalyst | B, T, C | 5 | 2 | 0.0792 | 7 |
| Inter-organizational | |||||
| Adoption by the TF/SCF network peers: Creating network effect, especially when banks join the platform, signifying benefits for other parties to join | B, P | 30 | 6 | 0.1070 | 1 |
| Enable proactive working capital management in the supply chain: Removing inequality that result from large enterprises managing the information flow, enabling proactive management of working capital and the associated risks within the supply chain | P | 18 | 5 | 0.0817 | 4 |
| Enable co-opetition between banks: Facilitating collaboration and synergistic effects among banks, reducing financing cost and increasing funding supply through diversification | B | 6 | 4 | 0.0484 | 9 |
| External | |||||
| Governmental and regulatory support: Collaborating with regulators in pilot projects, improving mutual understanding of capabilities and limitations | T, C | 14 | 4 | 0.1068 | 2 |
| Industry interest in BT: Increasing BT adoption in SCM and finance, especially by major actors to avoid falling behind competition | B, P, T | 25 | 5 | 0.0793 | 6 |
| Increased demand for liquidity: Exacerbated gaps in the TF/SCF ecosystem, prolonged shipments, and the need for more effective solutions to stabilize liquidity and working capital | B, P, C | 7 | 3 | 0.0705 | 8 |
Note(s): B: Banks; T: Technology providers; P: Trading parties; C: Consultants; * No. of extracted open codes
Source(s): Table created by authors
Identified barriers to BT adoption in TF/SCF
| Barrier | Key roles associated | No. of quotes | No. of codes* | BWM weight | Rank |
|---|---|---|---|---|---|
| Technological | |||||
| BT immaturity: The need for further development in the underlying technology, concerns about unexpected development costs and risks | B, T | 16 | 5 | 0.0364 | 17 |
| Limited scalability and performance issues: Concerns about handling growing transaction volumes, resiliency, and sustainability | T | 21 | 8 | 0.0443 | 11 |
| Lack of interoperability between SCF, TF, and SCM BT projects: Technological challenges, risks, and costs of integration and communication with other platforms, as they are closed-permission | B, P, T | 23 | 7 | 0.0453 | 9 |
| Compatibility with legacy technology systems: Risks and costs of integration with existing technologies and record-keeping systems, risks of disrupting financial flows and processes | B, P | 19 | 3 | 0.0365 | 16 |
| Cybersecurity concerns over BT: Concerns about hacking and data breach in distributed ledgers, malicious smart contracts | B, P, T | 4 | 1 | 0.0301 | 18 |
| Lack of industry-wide standards for BT: Absence of standardization for technology implementation, resulting in fragmentation, technological uncertainties, and risks | B, T | 10 | 2 | 0.0471 | 7 |
| Organizational | |||||
| Privacy and confidentiality of financial data: Concerns about ownership and access to confidential trade secrets | B, P | 10 | 5 | 0.0456 | 8 |
| Lack of technical talent skilled in BT: Limited availability of technical expertise and skills to lead complex technology implementations | T | 7 | 3 | 0.0393 | 14 |
| Risks in operational processes: Risks due to irreversibility of incorrect transactions, suspicious blocks on the network, the need for rigorous verification and mitigation for transaction processing | B, P | 11 | 7 | 0.0406 | 13 |
| Lack of management commitment and support: Failure in long-term commitment to technology investment, lack of supporting innovation and transformational change | B, T | 13 | 7 | 0.0550 | 6 |
| Lack of TF/SCF knowledge: Limited access to required expertise to identify opportunities for technology integration | T, C | 6 | 2 | 0.0386 | 15 |
| Lack of BT understanding from non-technical stakeholders: Negative perceptions towards the technology, as associated to facilitating underground economy, creating inflated adoption risks | B, P, C | 7 | 4 | 0.0450 | 10 |
| Inter-organizational | |||||
| Lack of widespread BT adoption by TF/SCF participants: Limited initiatives, slower than anticipated adoption, limited evidence on successful applications beyond the hype | B, P | 18 | 7 | 0.1169 | 1 |
| Fear of a “locked-in” effect to a BT consortium: Concerns and risks of becoming too dependent on the consortium participants due to distributed governance, limiting flexibility and adaptability | B | 19 | 4 | 0.0958 | 3 |
| Institutional alignment issues among TF/SCF members: Challenges to meet collaboration requirements for successful adoption and establishing consensus on policies and decisions | B, P, C | 17 | 5 | 0.0646 | 5 |
| External | |||||
| Legal and regulatory uncertainties: Lack of regulation and policies on technology use, increasing risks in a highly-regulated environment | B, P, T, C | 26 | 12 | 0.1011 | 2 |
| Difficulty in changing established TF/SCF industry processes: The need for a significant mindset shift for the industry, challenges with re-engineering current processes in a risk-averse ecosystem | B, P, C | 24 | 4 | 0.0740 | 4 |
| Uncertain demand for TF/SCF products: Uncertainties about market conditions and client behavior in a turbulent landscape, increasing risk of long-term commitment | B | 5 | 3 | 0.0438 | 12 |
Note(s): B: Banks; T: Technology providers; P: Trading parties; C: Consultants; * No. of extracted open codes
Source(s): Table created by authors
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Acknowledgements
This work has been supported by the Social Sciences and Humanities Research Council (SSHRC) and the Natural Sciences and Engineering Research Council (NSERC) of Canada, as well as by Ripple Inc. through University Blockchain Research Initiative (UBRI). Toronto Metropolitan University (formerly Ryerson University) is in the “Dish with One Spoon Territory”. The Dish with One Spoon is a treaty between the Anishinaabe, Mississaugas, and Haudenosaunee that bound them to share the territory and protect the land. Subsequent Indigenous Nations and peoples, Europeans, and all newcomers have been invited into this treaty in the spirit of peace, friendship, and respect. We thank them for allowing us to conduct research on their land.