GLEIF chief says entity identity is key to digital trade automation

Global trade digitisation could unlock an estimated $30 billion to $40 billion in trade growth and cut the trade finance gap by as much as 50%, according to figures cited by Alexandre Kech, chief executive of the Global Legal Entity Identifier Foundation. Kech argued in a Finextra opinion piece that those gains depend less on replacing paper documents than on allowing trusted organisational data to be reused across banks, logistics providers, customs authorities and trade platforms.

Kech said converting documents such as bills of lading into electronic form does not by itself automate trade if counterparties still need to type information into separate systems or repeat checks on firms that have already been reviewed elsewhere. In his view, digital trade requires a shared interoperability layer made up of standards, protocols and identifiers that allow institutions in different markets to rely on the same data.

The argument draws on work by the ICC Digital Standards Initiative, which has called for common approaches to interoperability and trust in trade. Kech said portable and verifiable organisational identity should form part of that infrastructure because many existing identity systems were designed for national, bilateral or closed-platform use.

How verifiable identity would work in trade finance

In a typical letter-of-credit transaction, an electronic bill of lading may be handled by a carrier, freight forwarder, customs authority, exporter’s bank and importer’s bank. Kech said each participant often checks the identity of counterparties according to its own procedures, which can create repeated reviews of the same organisations and add points at which a shipment or financing process can slow.

The Legal Entity Identifier, or LEI, is presented by GLEIF as a common identifier for the legal entity behind a transaction. Kech said the LEI is already used in regulatory reporting in more than 100 jurisdictions, giving firms and authorities a shared reference point across borders.

The verifiable LEI, or vLEI, extends that concept into digital interactions. According to Kech, it can allow systems to check not only the organisation involved, but also the role and authority of the person or digital agent acting for that organisation. That would let authorised parties verify data against a common root of trust rather than copying it into new systems or rerunning due diligence at each handover.

Kech said this kind of identity layer could support automation because structured trade data tells a system what has happened, while identity establishes who acted and whether that action can be accepted by another participant. Without that trust, he said, processes continue to depend on manual validation and reconciliation.

Coordination remains a barrier

Kech said adoption has been slowed by uneven priorities across the trade ecosystem. Some platforms, he said, continue to operate closed models and may view interoperability as a threat to their commercial position. He also pointed to concerns about accepting verification performed by another network, since firms need confidence in the way those checks were conducted.

Cost is another constraint. Kech said micro, small and medium-sized enterprises, particularly in emerging markets, may lack the resources to adopt new infrastructure at the same pace as large companies. He said GLEIF’s efforts to make organisational identity more accessible for smaller firms are intended to address that issue.

For banks and trade platforms, Kech said the practical test is to identify where organisations are being verified more than once after onboarding and to consider how verifiable identity could replace repeated checks. He also said firms that already have an LEI should assess whether they use it only for regulatory reporting or as part of broader digital trade processes.

This story draws on original reporting from Finextra Research.