The world of trade and trade finance continues to evolve through technology advancements, and that trend showed no signs of slowing in 2019. From komgo gaining momentum to essDocs replacing Swift’s TSU, to a new marketplace for trade credit insurance, we explore the tech that shaped trade finance in 2019.
New trade finance technology solutions have grown to form a substantial and popular part of GTR’s online and print content over the last few years. By analysing article views and the average time spent on page, we have gathered our top trade finance tech stories of 2019.
1) Commodity finance gets komgo. komgo, a blockchain-based platform for commodity trade finance banks, went live at the end of 2018 and picked up momentum last year. It aims to streamline trade and commodity finance, with its inception following two tests carried out on ING’s Easy Trading Connect platform in energy and soft commodities trading.
Founded as an independent venture in August 2018, its 15 shareholders include a mix of corporate and financial players: ABN Amro, BNP Paribas, Citi, Crédit Agricole, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Société Générale.
In addition to the existing letter of credit product and KYC module, komgo also added two more products to its platform in June: standby letters of credit and receivables discounting, further bolstering its offerings.
2) we.trade pilots aplenty. In March, GTR reported that banks had started to conduct live, commercial transactions on the we.trade blockchain platform for open account trade finance.
we.trade is a solution for managing, tracking and protecting open account trade transactions between SMEs in Europe. Powered by Hyperledger Fabric and built by IBM, it aims to digitalise the whole trade process from order creation to payment execution. SMEs, who will be able to use we.trade via their banks, can also use the platform to access financial services.
UniCredit in Italy and KBC Bank in Belgium were the first banks to reveal that they had used the platform, in a tinplate trade transaction between metal packaging producer Gruppo ASA and its supplier, Steelforce.
3) Driving standards in distribution. In April, we reported that a group of global financial institutions had joined together to drive standardisation for the distribution of trade finance assets on a new fintech platform called the Trade Finance Distribution (TFD) Initiative.
The TFD Initiative is led by Tradeteq, a technology platform launched last year, and aims to push more non-bank investors to the asset class, thereby giving banks more capacity to originate new trade finance lending. Participants include ANZ, Crédit Agricole, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered and SMBC. Five more financial institutions joined the initiative in June: ABN Amro, Commonwealth Bank of Australia, Crown Agents Bank, London Forfaiting Company and Natixis.
“If you think in terms of the structured credit world, there is a market for any bank product out there other than trade finance. You can purchase mortgage-backed securities, credit card debt, auto loans, anything which a bank provides, right now, this second. You cannot do this today with trade finance. But now that trade finance is being more digitalised, there is no reason why that asset class should not be available,” Christoph Gugelmann, founder and CEO of Tradeteq told GTR at the time.
4) essDocs replaces Swift’s TSU. At the end of 2018, Swift said it was in “discussions” about the future of its trade services utility (TSU) – the centralised matching and workflow engine that operates as the backbone for the bank payment obligation (BPO).
At that time, GTR learned that paperless trade platform provider essDocs could be the partner Swift was looking for to revive its TSU, although neither Swift nor essDocs were willing to confirm this.
Meanwhile, the BPO commercialisation group were working hard to increase adoption of BPO by the industry, but their efforts seemed to have come to naught when payments network Swift announced it would axe the TSU in April.
However, with essDocs’s announcement at the end of 2019 that several banks had commenced testing of its CargoDocs Transaction Matching Application (Cmatch), TSU’s replacement, it looks as if the BPO may yet live on.
essDocs’ co-founder Alexander Goulandris told GTR that Cmatch delivers a “future-proof offering”, as well as enables interoperability with blockchain platforms, something TSU doesn’t. “Essentially, we have copied the rules the TSU system uses, so if something matched in TSU it would match in Cmatch. But we’ve gone off and we’ve applied new design rules, so the solution is more user friendly, it has open APIs and the design is intuitive. It is simpler.” He added why he believes TSU failed to make a lasting impression: “The matching engine was limited in its scope, there was a lack of investment and there were issues on pricing; for some banks it seemed quite expensive.”
5) New insurance marketplace. A new digital marketplace for trade credit insurance went live in April, allowing financiers and corporates to request insurance with multiple underwriters.
LiquidX, which already operates a trade finance marketplace, worked with insurance broker Marsh and two underwriters, Euler Hermes and Atradius, to build the platform.
The LiquidX Trade Credit Insurance Marketplace aims to gives banks, non-bank investors and corporate suppliers the ability to directly access the trade credit underwriting market for insurance by enabling users to request quotes from multiple underwriters, and electronically execute and process insurance policies.
Glenn Kocher, managing director at LiquidX told GTR: “Today the process for the insured is expensive and opaque – you pick up the phone, call your broker, your broker goes out and talks to a bunch of underwriters, comes back with a bunch of quotes, and you have to try to figure out, how do you compare between them, and you don’t have any visibility or control of that process. And it takes a lot of time.”
6) Jasmine22 switches to Serai. In June, GTR learned that HSBC’s Jasmine22, a tech-based solution built on Google Cloud to support the trading needs of SMEs, was rebranded as Serai.
While little has been revealed about the venture since its inception in February, the solution is part of the bank’s technology investment into shaping the future of global trade, Vivek Ramachandran, CEO of the project, told GTR.
Trademark filings at the United States Patent and Trademark Office for Serai, indicated that it will involve “downloadable application software for a platform for an online network for small and medium-size businesses to connect and find financing services, namely loans”.
7) Linking up blockchains. Technology firm Quant Network launched what it hailed a “network of networks” to solve the problem of interoperability across blockchain platforms for trade and trade finance.
Revealed in September at Sibos, an annual banking conference run by Swift, Overledger Network uses the company’s Overledger operating system, a virtual blockchain that links existing blockchains and allows developers to build multi-chain applications.
Quant Network CEO Gilbert Verdian told GTR: “People have realised that they have to work together, so what is required is interoperability at scale.” He added that Overledger has already gained acceptance within financial services, following a partnership agreement signed in June with SIAchain, a private infrastructure leveraging on 570 European network nodes within SIAnet, a fibre optic network.
8) Matchmaking cross-border trading partners. Trade Club Alliance’s digital platform to “matchmake” cross-border trading partners was officially launched in October in London.
The platform, led by Santander, uses machine-learning technology to link up businesses that are looking to trade goods internationally by providing key market information such as rules on regulations, trade tariffs, currency analysis, market trends and shipping requirements, in a secure, online location. Companies are also able to seek advice on financial products from any one of the 14 alliance banks on the platform.
“This is a kind of startup,” Jon Barañano Gaviña, chairman of the Trade Club Alliance and business development director at Banco Santander told GTR at the event. “We are 14 banks coming together to explain to the world that we have created this ecosystem.”
Gaviña said that the bank’s initial aim was to create an efficient network for its customers looking to score sales overseas in regions lesser known to the bank, such as Africa and Asia, which meant it had to gain access to these markets. The key to achieving this is using local data supplied by the partner banks, he added.
9) HSBC rolls out trade finance tech. Over 2019, HSBC – the bank that our readers appear to be most interested in finding out more about – revealed two new tech solutions to help smooth the trade finance process: an anti-money laundering surveillance system for its global trade and receivables finance business and a new application programming interface (API) that enables its partner banks to issue local guarantees in markets where they do not have a presence.
Developed with fintech firm Quantexa, the AML system leverages big data, advanced analytics and automated monitoring to detect and intercept financial crime in international trade, doing so by combining customer and counterparty trade information, transactional data and external insights, such as company ownership information.
Meanwhile, the banking guarantee API allows HSBC partner banks to build applications for their customers, enabling them to have visibility of the status of their guarantees on their own banking platform, even though the guarantees are delivered by HSBC.
ING Bank and Standard Bank were the first two banks to have completed transactions using the technology.