Digital trade finance consortium Contour is terminating its services, after being unable to raise sufficient funds from its bank shareholders to continue to sustain itself.

In a memo to its members dated October 27 and seen by GTR, the network says it will be discontinuing operations permanently as of November 30, and that users have until then to complete or migrate any outstanding transactions and download any required data before losing access to the platform.

“For over three years, we have provided the global trade industry with a best-in-class digital trade solution and take pride in what we have accomplished. We are very grateful for your support and belief in our vision to transform the industry,” the memo says, adding: “The investment climate has been incredibly challenging in the past year, and like many companies, it has affected our ability to raise funds and sustain our operations.”

GTR understands that Contour, which counts among its shareholders Bangkok Bank, BNP Paribas, Citi, CTBC, HSBC, ING, SEB, SMBC and Standard Chartered, as well as non-bank backers Bain & Company, CryptoBLK, R3 and Tis Intec, had sought to close a fresh funding round this year, which would have given it an additional two years of runway.

However, following months of negotiations, by late September, it became clear that not all of the banking titans behind the initiative were willing to top up its coffers, and none were willing to lead the round. Attempts by the management team to attract venture capital funding also failed to bear fruit, due in part to the company’s unwieldy ownership structure, CEO Carl Wegner tells GTR.

“Having a large group of investors without a lead investor makes it hard. It would be the lead investor who would manage the board and manage the round, and we’ve never had that,” he says.

As such, while Contour – which was set up as a standalone legal entity in 2020 – has not yet run out of cash entirely, the company has made the decision to call it quits.

“While we are still running, we would rather close things down earlier than we absolutely need to, so we can make sure everyone’s paid and made whole,” says Wegner. “We have always played at that level and we’re not going to finish owing people money. That’s not right. I want to make sure everyone feels that we closed properly.”

Industry buy-in

Contour started life as Voltron – a prototype trade finance application built on R3’s Corda blockchain platform in mid-2017. Launched a year later at Sibos in Sydney, it then underwent an extensive period of testing by over 80 banks and corporates, with trials in 17 countries and transactions spanning commodities, petrochemicals, energy, metals, retail goods and textiles, before going into full live production in October 2020.

The platform’s central offering is the letter of credit (LC), for which it managed to reduce processing time by as much as 90% during testing, from an average of 10 days to under 24 hours end-to-end. With a steady stream of banks signing up – Japan’s MUFG and South Africa-headquartered Absa CIB came on board as members in August this year – Contour seemed to have sufficient buy-in to make a real difference.

“We didn’t require people to become investors to join, because we wanted to democratise the platform to enable both big and small banks to participate,” Wegner tells GTR. “We did a really good job there: we have nine bank investors and 22 bank members, and the non-investors always felt completely comfortable because we kept that parity where everyone was the same. The commitment was that everyone gets the same price per country, so there was no arbitrage, and you could have competitors in the market. The small banks liked the fact that they could get the same service for their clients as the large global banks.”

Contour also succeeded in bringing onboard corporates across different trading corridors and industries, such as Posco International, South Korea’s largest trading company, which in June this year joined the network to digitise the end-to-end LC settlement process across its ecosystem of more than 80 subsidiaries in sectors including energy, steel, agricultural resources and component materials.

“On our platform, customers were willing to key in the data, because they saw the benefit of that collaborative nature,” says Wegner. “It’s interactive; they can co-draft with their beneficiary and their issuing bank, which saves sending documents back and forth. The feedback we got was that clients and banks loved the interoperability, and you don’t get that with a bilateral application.”

But despite an apparently obvious business case, bringing the cumbersome, paper-based trade system into the digital age has proven to be a more difficult task than many had anticipated.

A growing list of failed initiatives

In recent months, a once-exuberant landscape of collaborative initiatives has become littered with failures, including AP Moller-Maersk and IBM’s TradeLens, a blockchain-based supply chain ecosystem for containerised trade, Marco Polo Network, a consortium built on R3’s Corda that counted more than 30 banks as backers and members, and, a joint-venture open account platform owned by 12 European banks.

Contour, which bought’s rulebook following its demise, had positioned itself as “leading the charge” in the consolidation of the trade digitisation space. Plans for the short term included a move into open account trade as well as the launch of an embedded offering that would see a white-labelled version of the solution sit behind banks’ portals – essentially turning it into the “rails” for digitised trade finance.

Nonetheless, although the network achieved success in terms of initial take-up, the current tough environment for trade – and concurrent heightened internal competition for increasingly scarce budget within financial institutions – meant implementing the solution beyond a few trial runs became less of a priority for the banks involved.

“Proofs of concept are always 100% successful. What would be more impressive is someone saying they’d done the 10th transaction or 100th transaction, because that means you’ve actually done something. Commercialisation takes a lot more work and it takes time,” says Wegner.

“Integrating Contour into the back-office system involves cost and resources, and while some banks did it, and this was a trend that was happening, we just needed more time. Given another year, we would have been integrated into four or five more banks, and that would have changed things because Contour would have become the default for them.”

For the time being at least, though, banks seem to be turning away from wholesale, market-wide transformation initiatives in favour of creating their own in-house digital platforms. This approach, Wegner believes, is a mistake.

“This is a huge setback for the industry. Building things by yourself is not going to work. It has never worked before. The industry needs collaborative projects, particularly at a time when trade is becoming increasingly fragmented,” he tells GTR.

Although recent developments such as the entry into force of the UK’s Electronic Trade Documents Act have been hailed as a transformational opportunity to make trade a more modern, digital affair, Wegner calls for a “long-term commitment to commercialisation” to turn potential into reality.

“We are going to have to figure out a way to have the industry work together somehow, and there needs to be some leadership to shepherd everyone into moving in the same direction,” he says.

A glimmer of hope remains

From the end of November, Contour’s users will have to find alternative means to transact, which will likely mean returning to paper and emailed documents. Nonetheless, some hope remains that the network’s vision could yet be realised.

In the memo sent to its members, Contour says that it is “in discussions with other entities” to manage or take over the network, adding that “there may be a potential restart in the future with additional network and features”.

“Personally, I’m trying to find a successful home for the software, the network, and the amazing team of people we’ve built. We’re hoping that we can have some positive news soon, but to be prudent, we’re taking this decision now,” Wegner tells GTR.