Seven European banks have come together to develop a shared platform that aims to make domestic and cross-border commerce easier for European SME businesses through the use of distributed ledger technology (DLT).
Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit signed a memorandum of understanding (MoU) to collaborate on the development and commercialisation of the platform, to be called Digital Trade Chain (DTC).
The platform is based on a prototype trade finance and supply chain solution originally developed by Belgian bank KBC, that GTR has learnt is built on an Ethereum system.
“During a workshop organised by KBC with SMEs some years ago, we learned that SM’s could not be helped with the traditional trade finance products for mitigating their risk on the counterparty, or getting appropriate working capital solutions for their business needs,” a spokesperson for KBC tells GTR.
“That’s how we came to DTC: we saw the potential benefits to offer appropriate solutions for SMEs in Belgium.”
DTC, which is focused on open account transactions between SMEs across Europe, is intended to connect the parties involved in a trade transaction – the buyer, buyer’s bank, seller, seller’s bank and transporter – online and via mobile devices. It aims to simplify trade finance processes for SMEs by addressing the challenge of managing, tracking and securing domestic and international trade transactions.
KBC has so far spent around four months on development work and run some trials with customers, but declined to reveal any more details subject to confidentiality. By partnering with other banks and forming the consortium, KBC hopes to scale up the offering and make it pan-European.
“We are trying to create a trading community were we have an authorised network so that customers can initiate transactions online through mobile devices. The idea is to track every stage of this open account transaction all the way through to payment notification in order to accelerate the order to settlement process,” head of global trade and receivables finance at HSBC, Andrew Betts, tells GTR.
“In order to make it effective and to make it work we need to scale it within the industry and the SME population across Europe. We have taken proprietary technology from KBC and have shared it across the consortium and are integrating it into our systems and procedures in order to create a truly pan European proposition.”
The consortium aims to have solid case studies and testing completed within the year. The initiative is currently co-owned by all seven banks. Management and maintenance of it, along with the decision on whether it will stay on an Ethereum base, will all be up for discussion through the course of the year as the project progresses.