Blockchain is transforming the supply chain industry and facilitating cross-border transactions. 2020 saw British-Australian mining, metals and oil company BHP Billiton complete its first transaction with Chinese steel company Baowu on MineHub Technologies' blockchain platform. China Minmetals and BHP Billiton have also used MineHub's platform to share cross-border data between companies, such as some information related to emissions and metals analysis.

Similarly, Japanese manufacturer Toyota has tracked auto parts across countries, factories and suppliers by using blockchain technology and has shared information in real time with manufacturers, finance companies, insurers, service providers, regulators and customers. By using these platforms, Toyota hopes to reduce recall rates and improve safety.

Most supply chains are both lengthy and complex. In addition to physical goods, supply chains involve the non-physical movement of information and money, such as payments.

Without blockchain, information exchange relies heavily on email and paper documents. A single cross-border trade transaction involves the exchange of an average of 36 different documents and 240 copies. And the process must verify the legitimacy, authenticity and accuracy of these documents.

Communication and document exchange are also prone to fraud. Between April and September 2014 alone, China identified $10 billion worth of fraudulent trade transactions. Concerned about such issues, Chinese banks have charged higher interest rates, making the trend for collateralized finance lower.

The consequence is a significant gap between supply chain finance and trade finance supply and demand. According to the Asian Development Bank, the global trade finance gap reached $1.5 trillion in 2018.

Consumers are also victims in supply chain fraud cases. For example, when a Chinese consumer buys a meat product labeled "Australian beef", there is only a 50 percent chance that the meat inside is Australian beef, but in fact it is highly likely to contain dog or horse meat.

Blockchain is a decentralized ledger that maintains a digital record of transactions on multiple computers simultaneously. After a block of record is entered into the ledger, the information in that block is linked to other blocks so that an immutable chain of records is formed. Because of this relationship, the information recorded on the blockchain cannot be altered.

The value proposition of blockchain is embedded in decentralization, which eliminates the need for trusted third parties in value transfer, resulting in faster and less expensive transactions. The fact that blockchain-based transactions are immutable allows blockchain to be used for auditing and transparency.

By eliminating paper records, reducing fraud and improving regulatory compliance, blockchain offers significant cost-saving opportunities. According to BanQu, a U.S. blockchain software company, blockchain adoption has helped companies achieve an average 15% reduction in supply chain costs and a 50% reduction in risk exposure.

Given the growth of fraudulent transactions in the Asia-Pacific region, blockchain technology's ability to reduce potential fraud by improving supply chain transparency and traceability is worthy of consideration for players across the region.

One study suggests that the cost of fraud per transaction in Asia Pacific will be approximately $4 in 2021, compared to $3.40 in 2019, suggesting that the problem of transaction fraud will only get worse.

Blockchain systems can also eliminate other risks, such as fraudulent invoices. It is estimated that the global trade finance gap could be reduced by about $1 trillion through the use of blockchain technology. Small and medium-sized businesses in emerging markets could benefit from the implementation of blockchain technology rather than from tariff elimination or trade agreements.

Supply chain finance and trade finance are very popular blockchain applications today. Major platforms in this area include Easy Trading Connect, Komgo, Chained Finance, eTradeConnect, Contour and the Bay Area Trade Finance Blockchain Platform.

In addition, governments are also focusing on the use of blockchain in the supply chain. The Australian government's National Blockchain Roadmap, issued in 2020, identifies supply chain tracking as a key use of blockchain technology.

Among notable solutions, Alipay Australia uses blockchain and logistics data generated by "Internet of Things" devices to provide trade finance.

As goods move along the supply chain, milestone payments are ultimately made to the supplier's digital wallet. For example, 30% is paid to the supplier when the goods are cleared in Australia, 30% is paid when the goods are cleared in China, and the rest is transferred when the product is delivered.

Blockchain solutions can also be used to address risks in the food supply chain. Chinese e-commerce giant Alibaba has partnered with companies in New Zealand and Australia to develop a blockchain-based solution called the Food Trust Framework for tracking high-value food products imported from New Zealand and Australia.

Each item is assigned a QR code that allows consumers to view product details. Each step in the supply chain is authenticated, and information related to production, transportation, customs, inspection and transfer of ownership is stored by Alibaba and other participants.

Blockchain improves supply chain transparency and provides a shared source of facts within the supply chain. Blockchain's unique value proposition stems from its potential to combat fraud, which is particularly important in the Asia-Pacific region, where the cost of fraud in commercial transactions is increasing significantly and continuously.

A number of recent high-profile cases of food supply chain and banking fraud have prompted these industries to begin accelerating blockchain adoption. As fraudsters and criminals become more sophisticated, the importance of blockchain platforms in the fight against fraud will become increasingly important in the future.

Supply chains in the Asia-Pacific region will benefit greatly from the transparency and efficiency that blockchain can provide. Trade networks and supply chains powered by blockchain technology will continue to reduce issues such as fraud and inefficiency. Economic development across the region will also be boosted through the adoption of blockchain technology.