International system of “business fingerprints” will slash prices for SMEs and consumers
Small and medium-sized enterprises will boost supply chain transparency and make trading across borders cheaper, faster, simpler and more sustainable by embracing a unified system of global “business fingerprints”, according to a report from the International Chamber of Commerce United Kingdom, the World Trade Board and the Global Legal Entity Identifier Foundation (GLEIF).
Scaling the Use of Digital Identities in International Trade takes stock of the use cases of 20-digit combinations of letters and numbers called Legal Entity Identifiers (LEIs). Similar to a company number, each unique sequence corresponds to a particular business, creating a global standard for cross-jurisdiction party identification and a shared identity framework for international trade.
LEIs allow governments, regulators, banks and businesses to better understand global trading ecosystems. This strengthens visibility to supply chain risks and opportunities for businesses of all shapes, sizes and geographies, helping to enhance trust, lower risk, cut administration processes and reduce costs.
In the current system, banks, companies and governments have to separately verify and authenticate the identity of every buyer or seller in a heavily paper-based, overly complex and fragmented environment. As a result, a single cross-border trade can take up to three months to transact, involving 30 parties, 40 documents and 200 data elements. This outdated way of doing business ultimately passes the financial burdens of inefficiency onto consumers and SMEs, forcing them to pay higher prices to trade and purchase goods.
With the implementation of the Electronic Trade Documents Act last year, companies can now eliminate paper-based processes and begin standardising the trading system in ways that were previously impossible. LEIs make it easier to understand global supply chain, identify trading parties, onboard new businesses seeking to export and import, and closely monitor suppliers of critical goods and services as we move from paper to digital trade processes. Embracing a common identity framework is therefore key to strengthening critical supply chains and underpinning the way we trade internationally in the future.
Chris Southworth, secretary general of the International Chamber of Commerce United Kingdom, said: “The passage of the Electronic Trade Documents Act into UK law was a paradigm shift in international trade, but far more must be done to realise the benefits of this long-overdue modernisation. Current identity infrastructure is not fit for purpose and is stalling trade digitalisation.
“Governments – in the UK and abroad – must do more to incentivise the uptake of LEIs as business fingerprints across the trading community and their global supply chains. Without a wholesale change in approach to accelerate adoption, creating an efficient, data-driven trade infrastructure fit for the 21st century will be too slow to capture the economic benefits on offer.”
Simon Paris, chair of the World Trade Board and chief executive of Finastra, said: “The World Trade Board’s 2023 ‘Financial Inclusion in Trade Roadmap’ highlighted the adoption of digital identities, such as the Legal Entity Identifier (LEI), as one of the critical factors necessary to enable fair access to trade finance for SMEs. Our Roadmap called for best practice guidelines on LEI issuance and utilisation, as well as a clear explanation of the benefits across economic sectors. We are delighted to have collaborated on this new report to highlight the advantages of LEI adoption for companies, particularly SMEs, which are notably underrepresented in the global trade arena.”
Stephan Wolf, chief executive of GLEIF, said: “Security in trust and trade connected with payments means acceleration, cost saving, fraud protection, SME inclusion, and customer satisfaction on a global scale. The LEI and its digital twin, the virtual LEI, are essential building blocks for achieving these objectives.”
Ram Iyer, founder and chief executive of Vayana, said: “Vayana proudly supports this pioneering study on Legal Entity Identifiers (LEIs) in collaboration with GLEIF, the World Trade Board, and ICC. LEI is a vital tool for enhancing transparency and efficiency in global trade and commerce. Rubix Data Sciences (Rubix) – a portfolio company of Vayana, is India’s first LEI Validation Agent and works closely with Legal Entity Identifier India Ltd (LEIL) to validate applicant data before LEIs are issued, thus protecting the integrity of the LEI system. Rubix also creates awareness about LEIs amongst Indian business entities and assists them in obtaining LEIs seamlessly.
This report highlights the pivotal role of LEIs in facilitating Trade Transactions and Reducing Risks, especially for SMEs. We are committed to driving LEI adoption in India and overseas, empowering businesses to integrate with the global economy.”
Paul Baker, founder and chairman of International Economics, said: “Being the unique globally recognised identification system for legal entities, LEIs are a cornerstone for digital trade, and an essential trigger for efficiency and trust in cross-border transactions.”
