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Digitize or digitalize?

There is a lot of talk about digitalizing trade - but what do we mean?


What's the difference between "digitize" and "digitalize"?


How can cross-border trade and trade finance be made "digital" - what's involved?


Digitize or digitalize - definitions


  • Digitize (or digitise) applies to objects - like a document.


  • Digitalize (or digitalise) applies to a process - like cross-border trade and trade finance as activities.


Ditgitize or digitalize

Types of digitization of documents


There are four levels of digitization of documents:

Image

taking a photo of a physical document or making a digital copy of it using a scanner

enabling a copy of a document to be transmitted by email, similar for example to faxing it

OCR and IDP

OCR (optical character recognition) scrapes a physical document to lift data from it, which IDP (intelligent document processing) can organise into a useful data structure

the data from the paper document is extracted and made useful enabling operational processes to be automated and digitalized, the paper document continuing to exist alongside

Digital agreement

completely removing the physical aspect of a document to create a fully digital version, for example, legal agreements signed by "Docusign"

by-passes the paper document completely and, where contracts are involved, the digitally-signed document being the principal evidence of an agreement

DNI

a digital (and non-physical) version of a bearer document ("digital negotiable instrument") entitling the possessor to claim performance of an obligation by the person issuing it

used in trade to create digital versions of bills of lading, bills of exchange and promissory notes - see more here an excellent paper by Clifford Chance on this topic

Using digitized documents to digitalize trade


Cross-border trade and related trade finance is an excellent use case for digitization.


There are a lot of documents involved in trade.


The Digital Standards Initiative ("DSI") supported by the ICC has analysed most of the documents involved in trade.


The DSI identifies 36 documents including transport documents, customs forms, packing lists, invoices, inspection reports, certificates and so on. A detailed explanation of each document and its role is set out in the DSI paper.


Digitalizing trade involves translating paper-based processes into digital-processes - and, inevitably, digitizing documents.


There are paper documents inevitably involved in trade; documents come from a variety of sources and each trade is, potentially, different.


  • If the document is a paper document, then it can be digitized into an image (not very useful) or data can be extracted from it using OCR and IDP.

  • Some of documents can be created directly as digital versions

    • As a digital agreement (eg: a bilateral commitment to pay an invoice by a buyer) or

    • As a digitial negotiable instrument (eg: an electronic bill of lading or electronic promissory note).


Digitization driving digitalization - it's here


The technologies to make these processes happen efficiently are here now, proven at scale and ready to use.


Most of the time, it is possible to digitalize trade using a combination of OCR/IDP and digital agreements. There is no need to use DNI (digital negotiable instruments) - so the process is quite simple to implement.


The savings are considerable.


PrimaTrade's clients have been able to realise substantial savings on their sourcing costs (over 1% on the cost of goods) and significant operational wins by digitalizing their internal processes.

Don't delay - find out more about digitalizing trade by contacting us here.

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