BNP, Commerzbank and ING are leading a trade finance initiative, called Marco Polo which also involves trade finance technology specialist TradeIX and enterprise software firm R3.
They are piloting this trade finance solution leveraging distributed ledger technology after completing a proof-of-concept.
Nikolaus Giesbert, Divisional Board Member, Fixed Income, Currencies & Commodities and Trade Finance & Cash Management, Commerzbank AG said: “We are one of the first three banks to successfully perform the proof-of-concept acceptance tests which is a major achievement for us.
“We are pleased with how far the development has come in such a short timespan. Together we have proved, that blockchain technology will make trade finance faster and more transparent for all participants.”
More on Marco Polo
Since launching in September 2017, with BNP, Commerzbank and ING as its core banks, the Marco initiative has attracted significant interest from the global banking community. Additional banks – including Standard Chartered, DNB, and OP Financial Group – have joined in recent months.
The Marco Polo initiative developed its solution for post-shipment trade financing using:
- the TIX platform from TradeIX
- R3 Corda blockchain technology
- Microsoft, for the provision of its global cloud as the foundation to R3 and TradeIX.
Marco Polo enables end-to-end, real-time, seamless connectivity between trade participants. This eliminates previous data silos which all too often inhibited or prevented free flow of information – thereby causing inefficiencies and discrepancies.
Initially the solution is focused on three distinct areas of trade finance risk mitigation by provision of payment commitments based on the matching of trade data, payables finance, and receivables finance. Delivery occurs on TradeIX’s TIX Platform.
The collective ambition is to expand the initiative in 2018 to:
- include additional banks and third party service providers – such as credit insurers, ERP and logistics providers
- leverage the collaborative nature of the platform to create a fully interoperable open-sourced trade finance network.
“The tests ING ran as part of the proof-of-concept enabled us to see the value this solution could deliver in three separate areas of trade financing. The technology ran fast and smoothly and the positive results showed us we are on the right track and ready to take the next step by entering into a pilot,” said Ivar Wiersma, Head of Innovation ING Wholesale Banking.
TradeIX and R3
TradeIX aims its TIX platform at the US$8 trillion trade finance market. The TIX platform is an open one and provides applications, technology tools and core infrastructure for the trade finance ecosystem. This enables trade finance parties to connect more easily, flexibly and efficiently to the broader trade finance market, which includes:
- service providers
- B2B networks
- credit underwriters
- financial institutions.
R3 is an enterprise software firm working with over 200 banks, financial institutions, regulators, trade associations, professional services firms and technology companies to develop on Corda, its distributed ledger platform. R3 offers a global team of 140+ professionals in nine countries supported by over 2,000 technology, financial, and legal experts drawn from its global member base.
Corda represents more than two years of research and development undertaken by R3 and its members. Its focus is on the banking industry and meeting its highest standards. It (Corda) argues that this is applicable to any commercial scenario because it “records, manages and executes institutions’ financial agreements in perfect synchrony with their peers, creating a world of frictionless commerce”.
What does this mean
Michael Vrontamitis, Head of Trade, Europe & Americas, Standard Chartered describes Marco Polo in these terms: “The age of digital collaboration in trade finance has arrived and we see our participation in this initiative as an important component to accelerate this and drive financing deeper into global supply chains. This in turn enables greater availability of financing for small and medium enterprises.” In one sense he is correct.
Nevertheless, Marco Polo merely adds to the plethora of trade finance initiatives already under way. These include, inter alia: Batavia, Mitzuho, Commerzbank/Fraunhofer Institute, SEB, ModulTrade, NTT DATA and MUFG.
What is clear is that trade finance is the honeypot which attracts banks. And for good reason: trade finance is ugly to operate and expensive for all participants. To continue the analogy, blockchain is the pollen on which many aspirations are being assembled.