Trade finance has been undergoing a digital revolution for decades. But the advancement of new technologies such as blockchain and distributed ledger technologies (DLT) have accelerated this. A recent 2020 study by TFG and WTO shows 12 initiatives using DLT in trade finance (both open account and documentary trade).
So, here goes…!
Contour, recently rebranded from Voltron, is delivering a Corda-powered open industry platform to create, exchange, approve, and issue letters of credit. Following a production launch at the end of Q3 2020, each participant will be able to host their own node on the business network. The application will be a complete end-to-end workflow for letters of credit including co-drafting applications, issuance, amendments, presentation, connectivity to digital document providers, discrepancy resolution, and settlement. It will also be protected with bank compliant security measures.
The revenue model for Contour’s permissioned platform has not been officially announced but is anticipated to be based on monthly subscription fees and transaction fees based on volume, not value. The founding banks and principal participants include Bangkok Bank, BNP Paribas, CTBC, Citi, ING, HSBC, SEB, and Standard Chartered.
In the future, Contour plans to roll out a guarantees solution, which will be expanded to cover both standby letters of credit and guarantees in its production launch. They are also looking to create a solution for documentary collections utilizing digital documents rather than paper.
2|EC3 Platform [Skuchain]
Skuchain’s EC3 (Empowered Collaborative Commerce Cloud) is a blockchain-based platform that provides an end-to-end solution for supply chains and trade finance. The platform has several core applications, including EDIBUS, ICF, and a Transaction Manager. EDIBUS allows enterprises to share EDI documents, excel spreadsheets, CSV files and the like with their supply chain ecosystem members while maintaining field-level control over data privacy. ICF (Inventory Control & Finance) allows enterprises to use the Distributed Ledger Payment Commitment, a global standard for a payment commitment on a blockchain network, to obtain supply chain finance. The Transaction Manager makes use of smart contracts that Skuchain calls Brackets. These Brackets are used to digitize assorted traditional trade finance documents like Letters-of-Credit and make them accessible through the blockchain.
EC3 customers are able to freely write their own business flows for a transaction and connect with bank back offices at relevant points in a transaction. That kind of flexibility allows for expanded financing options like deep-tier financing or inventory financing. They have also made use of an instrument called a Distributed Ledger Payment Commitments (DLPC) as an alternative to the Letter-of-Credit.
Skuchain currently works with several large enterprises and their bank partners in the mining and minerals, electronics, automotive and apparel industries. These firms pay subscription and transaction fees to use EC3, and have led Skuchain to currently operate into the USA, Asia, South America, Europe, and Africa, but the platform is by no means restricted by geography. One particular draw for EC3 is that, while it is based on Hyperledger Fabric, it is fully interoperable with networks built on Corda and is also able to port onto those built with Ethereum.
3|eTradeConnect [Hong Kong Trade Finance Platform Company Limited (HKTFPCL)]
eTradeConnect is a Hong Kong, China-based trade finance consortium operated by the Hong Kong Trade Finance Platform Company Limited. The DLT-based platform currently offers products and processes to members including purchase order and invoice creation, pre-shipment trade finance and post-shipment trade finance on open account trade, duplicated financing checks, and payment status updates. In the near future, eTradeConnect plans to release cross-chain technology that will allow for connectivity amongst different DLT trade platforms.
Current participants in the platform include: Australia and New Zealand Banking Group Limited; Bank of China (Hong Kong) Limited; Bank of East Asia Limited, DBS (Hong Kong) Limited; Hang Seng Bank Limited; Hongkong and Shanghai Banking Corporation Limited; Standard Chartered Bank (Hong Kong) Limited; Agricultural Bank of China Ltd., Hong Kong, China Branch; BNP Paribas, Hong Kong, China Branch; Industrial and Commercial Bank of China (Asia); Shanghai Commercial Bank Limited; and Bank of Communications Co., Ltd., Hong Kong, China Branch.
Built using the Hyperledger Fabric framework, eTradeConnect’s permissioned network was built in partnership with Ping An Technology (Shenzhen) Co., Ltd and Shanghai OneConnect Financial Technology Co., Ltd.
4|India Trade Connect [Infosys Finacle]
India Trade Connect is a DLT-based trade finance initiative that supports a comprehensive set of end to end trade and supply chain business functions including open account, letters of credit, bank guarantees, bill collections, C2C and B2B transactions, bill discounting, reverse factoring, and invoice financing.
The permissioned platform, developed by technology agnostic Finacle Trade Connect and certified to work on all leading DLT vendors like R3 Corda, Hyperledger and Ethereum, operates using a competitive fee model aligned to the volume of transactions.
Finacle Trade Connect is pre-integrated with partners like essDOCS and Traydstream to approve eTitle documents for the trade cycle and automate document checking and validation for trade finance and supply chain finance cycles. It is also in the process of being integrated with VISA B2B Connect to provide B2B payments processing and settlement.
Having launched operations in India, with aims of achieving a global footprint, India Trade Connect comprises some of the leading banks in India, including ICICI Bank, Axis Bank, Standard Chartered Bank, YES Bank, Ratnakar Bank Limited, Bank of Baroda, Federal Bank, IDFC First Bank, Canara Bank, Kotak Mahindra Bank, Indusind Bank, South Indian Bank, and State Bank of India.
Finacle, the primary technology partner for India Trade Connect also has a solution for KYC called Finacle Identity Connect. This is a blockchain based solution that simplifies the KYC process requirements of banks. It helps digitalize KYC processes, enable self-identity, validate national identity, and ensure a unified repository of information.
komgo is a live, fully decentralized commodity trade finance network built on the Quorum blockchain infrastructure. Investors and shareholders of the company include Citi, ING, Credit Agricole CIB, BNP Paribas, Societe Generale, ABN Amro, Macquarie, MUFG, Natixis, Rabobank, Gunvor, Mercuria, Koch, Shell, Total Trading, SGS, ConsenSys, and Jupiter Opportunity Fund. More than 150 companies are currently using the platform.
komgo offers three main families of products to its users:
- Digital trade finance related products (including Letters of Credit, Standby Letters of Credit, receivables discounting, and inventory financing), allowing commodity houses and other players to submit digital trade data and documents to financing institutions and apply for credit directly on the platform.
- A KYC solution, standardizing and facilitating the process while maintaining privacy by transmitting data on a need to know basis: users and non-users benefit from a single source of trust to exchange documents on a secure and private network to perform KYC tasks.
- A certification feature, that allows komgo users and non-users to stamp their documents on the network to ensure their authenticity.
In particular, the letter of credit and standby letter of credit product is very mature with over 20000 LCs issued and a six-year track record. These volumes are continuing to ramp up as large corporates and banks sign up.
Komgo, which is built on the permissioned Quorum framework, has global operations with headquarters in Geneva and Singapore and plans to open a USA-based office in 2021. They generate revenue through subscription fees and professional services charges for activities like integration.
6|Marco Polo [TradeIX]
The Marco Polo Network, powered by R3’s Corda DLT platform, consists of over 30 banks comprising a global reach. The fundamental aim of the network is to facilitate working capital finance solutions via a distributed trade finance platform. Currently, this includes receivables finance and payment commitments, with and without financing, as well as payables finance – with the aim of including a payments product in the near future. It also provides secure, distributed data storage and bookkeeping, identity management, and asset verification among other features. APIs and legacy system compatibility allow banks to easily integrate to their corporate clients with their ERP systems via the Marco Polo ERP App. This helps to limit internal disruptions and eases communication with enterprise clients.
The first transactions on Marco Polo were conducted in March 2019. These transactions, facilitated by the German banks Commerzbank and LBBW, were between the technology company Voith, the pump and valve manufacturer KSB and the logistic company Logwin. Since then, over 35 financial institutions and other participants such as Accenture, Microsoft, Mastercard, and Pole Star have joined the network.
Marco Polo operates following a license and transaction fee model and is gearing up to launch its supply chain finance products in the course of 2020.
Minehub is designed to be the digital supply chain platform for the mining and metals industry. The platform supports the end-to-end coordination of post-trade settlement processes for physical commodity transactions, including contracting, logistics, specifications, finance, and document management.
MineHub is built on HLF 2.2. The initial focus is on enabling digital trade between the primary actors – sellers, buyers and lenders – but the roadmap for 2021 includes support for inspectors, insurers and agents.
Minehub has been running 6 projects in raw materials, including iron ore, copper concentrate and scrap metal, involving multinational corporations as well as SMEs in all continents.
Minehub worldwide operations will generate revenue through a two-tiered model. A utility layer for operations teams will be accessible to all for a low-cost subscription fee, while premium services available for more value-based pricing.
8|People’s Bank of China Blockchain Trade Finance Platform / Bay Area Trade Finance Blockchain Platform
Originally unveiled as the Bay Area Trade Finance Blockchain Platform before broadening its geographic scope, the People’s Bank of China Blockchain Trade Finance Platform is a collection of four blockchain applications: account receivables financing, bill rediscount, tax filing, and international trade information collection. The China-focused platform has garnered participation from 48 banks. The representative banks include Industrial and Commercial Bank of China, Bank of China, and China Construction Bank. Besides major participating banks, Beijing Financial Assets Exchange has also joined the network.
The platform’s underlying DLT technology has been independently developed by the Digital Currency Institute of the People’s Bank of China. At present, they are working on a cross-platform project with Hong Kong Monetary Authority’s eTradeConnect. eTradeConnect in turn has a relationship with the we.trade network, contributing to the development of a more global reach for the platform and its members.
The permissioned platforms non-profit business model allows them to focus on providing the most readily needed features and applications to many of the firms that most need them. While it targets SMEs, the solution isn’t purely about trade finance. It also covers supply chain accounts receivables, rediscounting by the central bank, automated tax filing, and supervision of international trades.
TradeFinex can be described as a hybrid blockchain and network-of-networks. Underpinned by XinFin Network’s XDC protocol, TradeFinex connects multiple platforms by operating as a blockchain agnostic middleware. They are already live with an agnostic integration for micro, small, and medium-sized enterprise (MSME) originators, connecting them with decentralized liquidity pools through the proprietary tokenization protocol for meeting MSME funding requirements.
The globally reaching network operates as both permissioned and permissionless: permissionless for public verification but permissioned for selective data sharing. This hybrid approach allows TradeFinex to provide its participating members with reporting features of accredited investors by their virtual assets net worth as well as the ability to tokenize offline obligations from originators.
The current participants, Validus (Singapore MAS regulated), Enigio, Ramco (Singapore), ITFA, and WOA, pay network utility fees to gain access to the platform.
In the future, TradeFinex plans to launch a liquidity aggregator service using on-chain tokens.
10|TradeWaltz [NTT Data]
TradeWaltz is a new platform built by NTT DATA that will enable all participants in the highly complicated international trade ecosystem to share information and deliver value to all users. TradeWaltz’s ambition is to create an information platform that makes international trade secure by sharing electronic documents with guaranteed authenticity of each transaction and providing reliable information that people can easily and safely access whenever necessary.
As of March 2020, the participants in TradeWaltz included: MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., Tokio Marine & Nichido Fire Insurance Co., Ltd., Sompo Japan Nipponkoa Insurance Inc., Mitsui Sumitomo Insurance Company, Limited, Sumitomo Corporation, Mitsubishi Corporation, Sojitz Corporation, Toyota Tsusho Corporation, Marubeni Corporation, ITOCHU Corporation, Kanematsu Corporation, Mitsui & Co., Ltd., Kawasaki Kisen Kaisha, Ltd., Nippon Express Co., Ltd., Nippon Yusen Kabushiki Kaisha, and Ocean Network Express Pte. Ltd.
11|UAE Trade Connect
Expected to launch in December 2020, UAE Trade Connect (UTC) is a permissioned DLT platform, developed by Avanza Innovations on the Hyperledger Fabric framework. To date, the PoC and pilot tests have attracted eight banks that will participate in the production launch. These banks are First Abu Dhabi Bank (FAB), Emirates NBD, Mashreq Bank, Commercial Bank International (CBI), National Bank of Fujairah (NBF), Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), and Rak Bank. UTC will be operated and governed by Etisalat, the UAE’s national telecommunications company, who will act as a neutral, state-owned entity to grow the platform by adding new banks and launching new use cases.
UAE Trade Connect addresses several of the issues with duplicate and fraudulent invoice financing that have posed considerable problems to banks in the industry. The industry-wide solution aims to check for duplicate and fraudulent invoices submitted by banks using the blockchain network.
UTC converts physical data into digital data, using OCR and DLT. Many of the manual controls currently adopted by Banks will be able to be performed by the solution using machine learning technology. A security-first design means that banks’ confidential information will remain protected throughout the solution as their data will not be shared with any other bank in the chain, allowing both banks and their clients to interact in a trusted marketplace. It will generate revenue by charging banks for each transaction that they verify.
we.trade is a European-based trade finance consortium with plans to expand globally in 2021. Through a license fee and transaction fee model, we.trade currently has a number of products that are live, including: Auto-Settlement: automation of payment based on pre-agreed conditions; Bank Payment Undertaking (BPU): confirmation of buyer’s bank to make a payment to the seller; BPU Financing: a financing option for the seller based on the BPU; and Invoice Financing: a financing option for the seller based on a single sales invoice.
we.trade’s future product deployments will include enterprise resource planning (ERP) connectivity, open application interfaces (APIs) readiness (for 3rd party and back-office integration), additional payment triggers, and the addition of partial/multi payments, enhanced client directory, and insurance and logistics services.
Working with IBM to deploy the permissioned network on the Hyperledger Fabric framework, we.trade has attracted a number of shareholders and other member organizations. These include: CaixaBank, Deutsche Bank, ERSTE Group, HSBC, KBC, Rabobank, Société Générale, UniCredit, Nordea, Santander, UBS and IBM as shareholders as well as UniCredit Germany, Eurobank (Greece), CSOB (Czech Republic), KB(Czech Republic), CSAS (Czech Republic), and CBC (Belgium) as member organizations.