International insurance company Tokio Marine & Nichido Fire Insurance plans to launch a payment system for international transport in FY2023 using blockchain technology and digital currencies to reduce waiting times and costs for cross-border transactions.
The company claims the system, developed in collaboration with NTT Data and Tokyo-based blockchain company Standage, is the first of its kind in the world. The move comes as the industrial sector increasingly uses digital currencies to improve efficiency.
Tokio Marine, which is currently pending an international patent, uses blockchain technology to create electronic bills of lading – an important document usually issued by the carrier to the shipper that details the cargo and serves as a contract between the two parties.
Exporters send this document to overseas buyers to receive payment. The new blockchain-based approach means they can send invoices and receive payments in digital currencies instantly, instead of waiting up to a month for a physical copy to reach customers.
Concerned that bitcoin and similar options are quite volatile, Tokio Marine plans to use so-called dollar-pegged stablecoins. By eliminating the need for international remittances, the system is expected to reduce transaction costs by about 1% of the amount sent from the current average of 3%.
It also reduces the risk of non-payment. It is generally difficult for smaller companies with higher credit risks to secure upfront payments for their shipments. Many were unable to reach overseas clients because of how long it took to receive payment, and also because of the risk that they might not be paid at all.
Japan’s drive to digitize has only contributed to this development. The government’s Council to Promote Regulatory Reform in June called for a legal amendment encouraging the use of digital bills of lading.
International players are also working on fast solutions for cross-border payments. JPMorgan Chase launched the JPM Coin digital currency in 2020, which has since been adopted by over 100 financial institutions around the world. Using JPM Coin, the airline can pay for fuel automatically and instantly as soon as it confirms receipt of the package.
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