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Effects on international trade and trade finance of a transition to electronic methods

by Dixon, Mark Kimberley

Abstract (Summary)
Malone, Yates & Benjamin (1987) made predictions about the impact of information technology and systems on the organisation of firms and markets based on transaction cost effects discussed earlier by Coase (1937) and Williamson (1975). Evans and Wurster (1999, 2000) examined these ideas in terms of “richness and reach”. Berger, Hancock & Marquardt (1996) proposed a framework for analysing efficiency, risks, costs and innovations in the payments system. In this, they called for additional research into risks and costs in various aspects of the international payments systems and offered a framework for such an examination. This dissertation examines these and other authors’ work from the literature, follows the development of actual systems newly implemented for international trade finance, and considers the impacts of electronic commerce on the field of international trade finance, in particular its effect on the costs and risks involved. This question is important because the burden of paper-based documentation that controls international trade is approximately 6% of $USD7.5 trillion per year. If efficiencies, even small ones, can be gained in this overhead cost, at an acceptable level of risk, then a substantial saving in real dollar terms can be achieved each year, improving the efficiency of world trade and easing the burden on both suppliers and consumers worldwide. The research questions are examined by means of a three round Delphi survey (three iterations of questionnaires with analysis and feedback between rounds) of a panel of experts drawn from international bankers, users of trade finance, and academic researchers into international trade finance and e-commerce. The survey first identifies the factors of greatest import and interest. It then digs deeper and seeks consensus on areas where there is divergent opinion, and finally seeks to critique a model based on the Berger, Hancock & Marquardt (1996) model. In the process the panel is able to estimate the approximate size of shifts in both costs and risks expected from the implementation of e-commerce methods. These are examined in light of the Malone Yates & Benjamin (1987) and Evans & Wurster (2000) theories and found to be consistent. This empirical confirmation of theoretical expectation, combined with estimates of the size of change are then used to make specific recommendations to various participants in the field of international trade finance so that they can reap the benefits of the transition in process.
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Source Type:Master's Thesis

Keywords:financial institutions international clearinghouses banking foreign exchange electronic commerce e trade finance

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Date of Publication:01/01/2006

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