Commerzbank Arena

Yet another trade finance/blockchain initiative has emerged. Commerzbank and Fraunhofer-Institute for Material Flow and Logistics (IML) in Dortmund have begun a joint research project on digitisation of trade finance. International trade finance, and the underlying transactions, are becoming more and more a focus of digitisation initiatives. Corporates, banks and research institutions are becoming involved.

Bernd Laber, Commerzbank (
Bernd Laber, Commerzbank

Increasing global competition, changing customer demand and shorter product lifecycles put pressure on ever more efficient international supply chains. With digitisation gaining pace, multiple opportunities for process optimisation exist along supply chains. These especially involve enhanced data management and near real-time data availability.

Dr Bernd Laber, group executive Trade Finance & Cash Management Corporate Clients, Commerzbank said: “Our core competence in the trade finance business; cash management financing trade and risk management will continue to be of great relevance for our customers in the digital age. Teaming-up with the Fraunhofer Institute for Material Flow and Logistics grants the best possible insight into the currently extremely heterogeneous digitisation approaches along the logistic- and material flow processes of our customers.

“We are working on several projects and in a number of consortiums also with other international banks on the digitisation of bank products and bank services, and on applications for blockchain technologies. As a corporate bank the focus on future supply chains of our customers is of paramount importance and we will develop this in co-operation with Fraunhofer Institute“.

The trade finance/blockchain project

Commerzbank and Fraunhofer IML have agreed on a cooperation which aims to develop scenarios for future supply chains. IML will:

  • support the bank with the orchestration of these new processes
  • provide latest insights into the future of physical supply chains
  • identify routes for the future deployment of blockchain based technology.

Blockchain, or distributed ledger technologies, build decentralised databases. These can apply to the so-called Internet-of-Things applications (IoT) and Smart Contracts (automated processing of business cases). According to Commerzbank and IML, they constitute the basis for new:

  • trade ecosystems
  • new supply chain finance concepts
  • faster transaction processing
  • new solutions in working capital management.

Prof Dr Michael Henke, Director of the Fraunhofer Institute for Material Flow and Logistics (IML) commented: “Digitisation approaches in supply chain management as for example the development of smart containers which are autonomously able to route themselves, to communicate, to interact with logistic service providers and to initiate payments will offer new business potential for banks in financing, risk management and transaction banking.

“I am convinced that technologies like blockchain and smart contracts will become the central enabler for the intelligent interlinking of physical and financial supply chains. With Commerzbank as innovative cooperation partner we will elaborate new, fast and secure solutions for the supply chains of the future.”

Fraunhofer blockchain involvement

A year ago, the Fraunhofer Institute for Applied Information Technology (FIT) opened its Blockchain Lab. With customers coming from all sectors of business. In general, these customers want to know:

  • if there is any substance to the hype around blockchain technology
  • what it might mean for their industry?

Fraunhofer experts shed light on these issues, identify use cases and develop prototypes. For example, the experts in the Blockchain Lab have developed a prototype for handling global commodity trading. It documents each step of a transaction securely, transparently and traceably – from ordering through to delivery.

Banks have acted as certification authorities that guarantee, across national borders, the trading partners are solvent and can meet their contractual obligations. In the future, a FIT blockchain solution could assume this role. Blockchain is particularly appropriate for companies whose business models involve positions of trust and confidence.

Another area where FIT concentrates concerns secure proof of origin. For this blockchain technology holds out much promise for the likes of the logistics industry. It could document transport chains end to end, thereby guaranteeing the authenticity of the shipped object.

“In collaboration with our workshop participants, we’ve identified numerous potential applications. Although we’re still just working with prototypes, development can happen very quickly. That’s why it’s important to act now to adapt business models to the new technology and use the technology to optimize processes,” says FIT

What does it mean?

Blockchain trade finance initiatives are breeding. There is no shortage of examples identified by ET, from Maersk (shipping), Dubai Customs (port), Antwerp (port), AOS SAS (logistics), Mizhuo (bank), SEB (bank) and others. Big players are becoming involved – like Fraunhofer and IBM. The interest is intense, precisely because Blockchain is particularly appropriate where companies depend on business models requiring high levels of trust and confidence.

Balancing this must be practicality. Not all initiatives will bear fruit. Equally, competition is already intense for the ‘solution’ that trade finance users (and there are many types of participant) prefer … unless some mechanism appears which enables different blockchains to cooperate without loss of trust or uniqueness.

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Charles Brett
Charles Brett is a business/technology analyst consultant. His specialist areas include enterprise software, blockchain and enterprise mobility tech (including metering). Specific industry sectors of interest and experience include finance (especially systems supporting wholesale finance), telecommunications and energy. Charles has spoken at multiple industry conferences, has written for numerous publications (including the London Times and the Financial Times). He was the General Chair of the bi-annual High Performance Systems Workshop, 2005. In addition he is an author and novelist. His Technology books include: Making the Most of Mobility Vol I (eBook, 2012); Explaining iTunes, iPhones and iPads for Windows Users (eBook, 2011); 5 Axes of Business Application Integration (2004). His published novels, in the Corruption Series, include: The HolyPhone Confessional Crisis, Corruption’s Price: A Spanish Deceit and Virginity Despoiled. The fourth in The Corruption Series - Resurrection - has is now available. Charles has a B.A. and M.A in Modern History from the University of Oxford. He has lived or worked in Italy, Abu Dhabi, South Africa, California and New York, Spain, Israel, Estonia and Cyprus.


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