A group of non-bank financiers and an insurance firm have formed a consortium to combat double-financing and fraud in trade finance using blockchain technology.
The World Blockchain Trade Consortium (WBTC), which has been launched this week, comprises Australia-based credit insurance brokerage firm NCI, fintech firms Incomlend and Portal Finance, as well as investment platform GTR Ventures.
Through WBTC, consortium members will co-operate on building a decentralised registry for invoices across multiple continents. The idea is that financiers can use this registry to cross-reference an invoice before committing to financing it, while keeping data private and secure.
The initiative is spearheaded by Singapore-based fintech company Trade Finance Market (TFM), which recently released the blockchain application that consortium members will initially use.
The application, called Invoice Check, works alongside existing workflows and is the first in a suite of distributed ledger technology (DLT) tools that TFM has developed – others include Collateral Check, an application to eliminate the duplication of warehouse receipts.
Invoice finance fraud remains major challenge for both banks and alternative lenders, who have limited ways to check if an invoice has already been financed by another funder. As a result, millions of dollars are lost to fraudulent invoices each year. Recent high-profile fraud cases involving the duplication of documents, including warehousing company Access World and the Qingdao fraud, have led to a growing number of financiers and fintech firms labelling blockchain technology as the only way forward for maintaining authenticity in the world of trade.
However, the success of blockchain ultimately relies on driving support from the industry, and WBTC is the first step in this attempt. Speaking to GTR about the decision to create the consortium, TFM’s executive director Raj Uttamchandani says that bringing together multiple players will facilitate faster growth of the registry – giving users access to more data – as well as the development of more blockchain tools to streamline trade and tackle fraud.
The consortium members thus far are all non-bank players, which TFM says enables it to address a wider range of issues within trade finance than other blockchain consortia, which to date have largely been driven by banks.
“When we created Invoice Check, we approached a lot of fintechs and stakeholders in the industry. We found that there was a community of people who wanted to utilise this, who were not in the banking environment per se,” says Uttamchandani. “Whilst we were talking to them about Invoice Check, they were asking about a lot of different use case scenarios for blockchain applications. We thought it would be good to have everybody under one roof to utilise the power of blockchain to solve problems today rather than creating a theoretical, conceptual model which may not be used in the future.”
That said, the consortium is also working with the banking sector: it has recently been approved as a member of APIX, the Asean Financial Innovation Network-backed platform, which links financial institutions and fintech firms. “We’re very happy to talk to anybody and everybody in the trade finance environment to solve problems that are relevant today,” says Uttamchandani, highlighting that the firm’s API allows for banks to easily connect their existing system architecture to the tool.
In the spirit of interoperability, WBTC says that more DLT applications for trade will be launched in 2019, with a view towards linking with other consortia in the global trade community.