Blockchain-Based Trade Finance Initiatives
Asif Bhat, Ph.D.
Experienced Software Engineer | Cloud-Native Expert | Innovating with AI & Blockchain Solutions
For decades, trade finance has been experiencing a digital revolution. However, with the advent of new technologies such as blockchain and distributed ledger technology (DLT), this process has been expedited. Below are some blockchain-based trade finance initiatives.
1. Contour
Contour, which was recently rebranded from Voltron, provides an open industry platform powered by Corda for the creation, exchange, approval, and issuance of letters of credit. After the business network's production debut in late Q3 2020, any member will be allowed to host their own node. The program will enable a comprehensive end-to-end process for letters of credit, including co-drafting applications, issuing, amending, presenting, connecting to digital document providers, resolving discrepancies, and settling. Additionally, it will be secured by bank-grade security procedures.
Although the income model for Contour's permissioned platform has not been disclosed formally, it is expected to be based on monthly membership fees and volume-based transaction fees. Bangkok Bank, BNP Paribas, CTBC, Citi, ING, HSBC, SEB, and Standard Chartered are among the founding banks and key players.
Contour intends to roll out a guarantee solution in the future, which will be expanded to include standby letters of credit and guarantees at production launch. Additionally, they are attempting to provide a solution for documentary collections that makes use of digital materials rather than paper.
2. EC3 Platform (Skuchain)
Skuchain's EC3 (Empowered Collaborative Commerce Cloud) is a blockchain-based technology that enables supply chains and trade finance to operate seamlessly. Several key applications are included on the platform, including EDIBUS, ICF, and a Transaction Manager. EDIBUS enables companies to share EDI papers, excel spreadsheets, and CSV files with other members of their supply chain ecosystem while retaining field-level data privacy management. ICF (Inventory Control & Finance) enables companies to acquire supply chain finance by utilizing the Distributed Ledger Payment Commitment, a global standard for a payment commitment on a blockchain network. The Transaction Manager makes use of smart contracts dubbed Brackets by Skuchain. These Brackets are used to digitize a variety of classic trade finance documents, like Letters of Credit, and make them blockchain-accessible.
EC3 users have the freedom to create their own business processes and link to bank back offices at critical stages throughout a transaction. This level of adaptability enables the addition of new finance alternatives such as deep-tier lending or inventory financing. Additionally, they have utilized a process known as Distributed Ledger Payment Commitments (DLPC) as a substitute for the Letter-of-Credit.
Skuchain now collaborates with a number of big businesses and their banking partners in the mining and minerals, electronics, automotive, and clothing sectors. These businesses pay subscription and transaction fees to utilize EC3, which has enabled Skuchain to expand throughout the United States of America, Asia, South America, Europe, and Africa, although the platform is not geographically limited. One advantage of EC3 is that, while it is based on Hyperledger Fabric, it is completely compatible with Corda-based networks and can also be ported to Ethereum-based networks.
3. eTradeConnect - Hong Kong Trade Finance
Platform Company Limited (HKTFPCL) eTradeConnect is a trade finance consortium located in Hong Kong and administered by the Hong Kong Trade Finance Platform Company Limited. Members may already access a variety of goods and services via the DLT-based platform, including purchase order and invoice production, pre-and post-shipment trade finance on open account trade, duplicated financing checks, and payment status updates. eTradeConnect intends to deploy cross-chain technology in the near future that will enable communication across various DLT trading platforms.
The platform is currently populated by the following participants: 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; and Invesco Limited.
eTradeConnect's permissioned network was created using the Hyperledger Fabric architecture in collaboration 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 distributed ledger technology-based trade finance initiative that enables end-to-end trade and supply chain business functions such as open account, letters of credit, bank guarantees, bill collections, C2C andB2B transactions, bill discounting, reverse factoring, and invoice financing.
The permissioned platform, built by technology neutralFinacle Trade Connect and certified to run on all major distributed ledger technologies such as R3 Corda, Hyperledger, and Ethereum, runs on a fee structure that is proportional to transaction volume.
Finacle Trade Connect is pre-integrated with partners such as essDOCS and Traydstream to automate the approval of eTitle documents and document inspection and validation for trade finance and supply chain finance cycles. Additionally, it is in the process of being linked with VISAB2B Connect to enable the processing and settlement of B2Bpayments.
India Trade Connect was founded in India with the goal of establishing a global presence. Members include ICICIBank, 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.
Finally, India Trade Connect's major technology partner also offers a solution for KYC called Finacle IdentityConnect. This is a blockchain-based system that streamlines banks' KYC procedures. It enables the digitization of KYC processes, the facilitation of self-identification, the validation of national identity, and the establishment of a centralized repository of information.
5. Komgo
Komgo is a completely decentralized commodities trading finance network that is operational and based on the quorum blockchain architecture. Citi, ING, Credit AgricoleCIB, BNP Paribas, Societe Generale, ABN Amro, Macquarie, MUFG, Natixis, Rabobank, Gunvor, Mercuria, Koch, Shell, Total Trading, SGS, ConsenSys, and JupiterOpportunity Fund are among the company's investors and shareholders. The platform is presently used by more than150 businesses.
Komgo's consumers can choose from three distinct product families: Products related to digital trade finance (including Letters of Credit, Standby Letters of Credit, receivables discounting, and inventory financing) that enable 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 that standardizes and simplifies the procedure while protecting privacy by transferring data on a need-to-know basis: users and non-users alike benefit from a single source of trust for exchanging documents on a secure and private network in order to execute KYC duties.
A certification function that enables komgo users and non-users to authenticate their papers over the network. The letter of credit and standby letter of credit products, in particular, are highly developed, with over 20,000 LCsissued and a six-year track record. These volumes are expected to continue increasing as big corporations and institutions sign-on. Komgo, which was founded on the permission Quorum architecture, operates on a worldwide scale with offices in Geneva and Singapore and aims to build a US office in 2021. They earn money by charging membership fees and professional services costs for tasks such as integration.
6. Marco Polo (TradeIX)
The Marco Polo Network, which is powered by R3's Corda distributed ledger technology platform, comprises over 30 institutions with a global reach. The network's primary objective is to facilitate working capital financing solutions through the use of a distributed trade finance platform. Currently, this comprises receivables finance and payment obligations, both with and without financing, as well as payables finance — with the goal of eventually incorporating a payments product. Additionally, it enables safe, distributed data storage and bookkeeping, as well as identity management and asset verification. Through the use of APIs and legacy system compatibility, banks may simply link their corporate clients' ERP systems with the MarcoPolo ERP App. This contributes to the prevention of internal disturbances and facilitates contact with corporate clients.
Marco Polo's first transaction occurred in March 2019. These transactions, which were supported by the German banks Commerzbank and LBBW, involved the technology firm Voith, the pump and valve maker KSB, and the logistics firm Logwin. Since then, the network has grown to include over 35 financial institutions and other partners such as Accenture, Microsoft, Mastercard, and Pole Star.
Marco Polo works on a license-and-transaction-fee basis and is preparing to introduce supply chain finance solutions in late 2020.
7. Minehub
Minehub is intended to be the mining and metals industry's digital supply chain platform. The platform enables end-to-end coordination of physical commodities transaction post-trade settlement activities, including contracts, logistics, specifications, financing, and document management.
MineHub is based on the HLF 2.2 standard. While the first focus will be on allowing digital commerce between main players – sellers, purchasers, and lenders – the roadmap for 2021 also include assistance for inspectors, insurers, and agents.
Minehub has been involved in six raw material projects, including iron ore, copper concentrate, and scrap metal, including global businesses as well as small and medium-sized enterprises (SMEs) on six continents.
Minehub's global operations will operate on a two-tiered revenue model. A utility layer for operations teams will be available to everybody for a cheap subscription fee, while premium services will be priced on a more value-based basis.
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8. People’s Bank of China Blockchain Trade FinancePlatform / Bay Area Trade Finance Blockchain Platform
Initially dubbed the Bay Area Trade Finance BlockchainPlatform before expanding to other regions, the People's Bank of China Blockchain Trade Finance Platform is a collection of four blockchain applications: account receivables financing, bill rediscounting, tax filing, and international trade information collection. 48 banks have joined the China-focused platform. The Industrial andCommercial Bank of China, Bank of China, and China Construction Bank are the representative banks. Along with the main banks, the network now includes the BeijingFinancial Assets Exchange.
The platform's core DLT technology was created separately by the People's Bank of China's Digital CurrencyInstitute. They are now engaged in a cross-platform collaboration with the Hong Kong Monetary Authority's eTradeConnect. eTradeConnect, in turn, has a partnership with we.trade network, which helps the platform and its users expand their worldwide reach.
The non-profit nature of permissioned platforms enables them to focus on offering the most frequently requested features and applications to a large number of the most in need businesses. While the solution is aimed at SMEs, it is not limited to trade finance. Additionally, it includes supply chain receivables, central bank rediscounting, computerized tax filing, and international trade monitoring.
9. TradeFinex
TradeFinex may be thought of as a cross between a blockchain and a network of networks. TradeFinex links different platforms via its blockchain-agnostic middleware, which is powered by XinFin Network's XDC protocol. They are already operational with an agnostic integration for micro, small, and medium-sized enterprise (MSME)originators that connect them to decentralized liquidity pools via the proprietary tokenization technology for satisfying MSME funding requirements.
The network's worldwide reach is both permissioned and unpermitted: unpermitted for public verification but permissioned for selective data exchange. This hybrid method enables TradeFinex to give accredited investors with information on their virtual asset net worth in addition to the option to tokenize offline commitments from originators.
Validus (MAS-regulated in Singapore), Enigio, Ramco(Singapore), ITFA, and WOA are the existing players who pay network utility fees to obtain access to the platform.
TradeFinex intends to provide a liquidity aggregator service utilizing on-chain tokens in the future.
10. TradeWaltz (NTT Data)
TradeWaltz is a new platform developed by NTT data that enables all stakeholders in the extremely complex international trade ecosystem to share information and provide value to all users. TradeWaltz's mission is to build an information platform that secures international trade by exchanging electronic documents with assured transaction authenticity and delivering accurate information that users can access simply and safely whenever they need it.
As of March 2020, TradeWaltz was comprised of the following participants: MUFG Bank, Ltd., Sumitomo MitsuiBanking Corporation, Mizuho Bank, Ltd., Tokio Marine Nichido Fire Insurance Co., Ltd., Sompo Japan NipponkoaInsurance Inc., Mitsui Sumitomo Insurance Company, Limited, Sumitomo Corporation, Mitsubishi Corporation, Sojitz Corporation, Toyota Tsusho Corporation.
11. UAE Trade Connect
UAE Trade Connect (UTC), which is scheduled to deploy in December 2020, is a permissioned distributed ledger technology platform built on the Hyperledger Fabric architecture by Avanza Innovations. Eight banks have already expressed interest in participating in the product launch as a result of the proof of concept and pilot tests. FirstAbu 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 are among these banks. UTC will be administered and regulated by Etisalat, the UAE's national telecoms provider, which will serve as a neutral, state-owned organization responsible for growing the platform through the addition of additional banks and the development of new use cases.
UAE Trade Connect tackles a number of the difficulties associated with duplicate and fraudulent invoice financing that have caused significant challenges to the industry's banks. The industry-wide solution utilizes the blockchain network to check for duplicate and fraudulent invoices provided by banks.
UTC uses OCR and DLT to transform physical data into digital data. Numerous manual controls now used by banks will be automated using machine learning technologies. A security-first approach ensures that banks' sensitive data is secured throughout the solution, since it is not shared with any other banks in the chain, enabling banks and their clients to engage in a trusted marketplace. It will earn money by charging banks for each transaction verified.
12. We.Trade
we.trade is a trade finance consortium located in Europe with aspirations to expand internationally by 2021. We.tradecurrently has a number of live products, including Auto-Settlement: payment automation based on pre-agreed conditions; Bank Payment Undertaking (BPU): confirmation from the buyer's bank to make a payment to the seller; BPUFinancing: a financing option for the seller based on the BPU; and Invoice Financing: a financing option for the seller based on the 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, partial/multiple payment capabilities, and enhanced client directory, and insurance and logistics services.
We.trade has attracted a number of shareholders and other member organizations through its collaboration with IBM to build the permissioned network on the HyperledgerFabric platform. These include shareholders CaixaBank, Deutsche Bank, ERSTE Group, HSBC, KBC, Rabobank, Société Générale, UniCredit, Nordea, Santander, UBS, and IBM, as well as member organizations UniCredit Germany, Eurobank (Greece), CSOB (Czech Republic), KB (CzechRepublic), CSAS (Czech Republic), and CBC (Belgium).
13. Vakt
VAKT is a consortium of leading energy companies and banks, with the aim of transforming the global commodities trading industry. Traditionally, the post-trade process would involve both parties checking paperwork and changing records on separate, manual systems, which is time-consuming and error-prone.
Thoughtworks leveraged blockchain technology to build a digital platform, allowing all parties to manage that process in the same place for the very first time. This was an unprecedented and highly ambitious project, with each of the twelve organizations bringing their own business logic and API to factor into the platform. Thoughtworks helped VAKT design the platform’s infrastructure on AWS to support the new processes they would follow once launched.?
The organizations in the consortium are: BP, Equinor, Shell, Gunvor, Koch, Mercuria, ABN Amro, ING, Société Générale, Chevron, Reliance, Total.
14. TradeLens
Created by Maersk and IBM, TradeLens is an open supply chain platform supported by blockchain. It aims to:
Thanks to the elaborate IBM blockchain technology, TradeLens provides a single shared view of transactions without affecting privacy and confidentiality. As Maersk and IBM state, shippers, freight forwarders, port, and terminal operators, customs authorities, and other participants in supply chains will be able to easily and efficiently interact with one another. In addition, they will all have access to the relevant shipping data and documents, alongside IoT and sensor data that help detect temperature, container weight, and so on.
Companies and organizations from many parts of the world are engaged in the project and extremely enthusiastic about the concept behind it. Among the participants are the largest port and terminal operators, including PSA International (Singapore), International Container Terminal Services Inc (the Philippines), Patrick Terminals (Australia), Modern Terminals (Hong Kong), Port of Halifax (Canada), Port of Rotterdam (the Netherlands), Port of Bilbao (the Basque Country, Spain), PortConnect (New Zealand), PortBase (the Netherlands), terminal operators Holt Logistics at the Port of Philadelphia (the USA), and the global APM Terminals’ network.
The idea of modernized and automated record-keeping and information exchange, as well as simplified communication and interaction between the participants, appeals to a wide spectrum of companies. As a result, the TradeLens consortium has so much potential to attract even more members to the project.
15. Wave
Blockchain-based supply chain startup Wave graduated from the TechStars FinTech accelerator this week, in the process becoming the third firm to ink a deal with UK bank Barclays, which provides non-monetary support to the startup program.
Though the deal may not be as impactful to the industry at large as Barclays's attempt to lift its banking blockade on bitcoin businesses with the help of Chainalysis, the bank's interest in?Wave signals that enterprise banks may be interested in the application of the blockchain?to?trade finance.
Formerly called OGYDocs, Wave's product will be?leveraged by Barclays Corporate Bank?in a bid?to help business clients reduce costs associated with supply chain management. The deal brings a high-profile client to the startup, which is toiling on similar grounds as blockchain trade finance startups including Gazebo?and Skuchain.