Batavia, a blockchain-based trade finance platform developed by IBM and a consortium of five banks, is moving closer to the market after its first live transactions were successfully carried out with corporate clients.
Using smart contracts and distributed ledger technology (DLT), the tool allows all participants in cross-border trade to manage their transactions: from closing trade agreements to tracking the cargo and automatically executing payments. With two pilot trades complete, Batavia will now move into the customer review phase.
An expansion of a proof of concept that IBM and UBS launched in 2016, the trade platform has now proven it can track and trace a live trade as it happens. In addition to UBS, the consortium includes Bank of Montreal, CaixaBank, Commerzbank and Erste Group, who joined the project last year.
The pilot transactions included two imports to Spain: cars from Germany and textiles from Austria. During the test-runs, Batavia enabled participants to monitor each stage of the trade as the goods travelled by road and sea. The parties hope Batavia will also be able to trace air freight by the time the product goes to market.
Car manufacturer Audi was one of the first firms to trial the platform. The company’s head of treasury Alexander Dietlmeier tells GTR: “We have been working for a long time on this innovative approach of a decentralised database. With the successful financial transaction based on blockchain through the Batavia platform we gained important experience and strengthened our knowledge on this field.”
The automotive firm hinted at further research into blockchain and fintech, but declined to provide further details. “We will extend the area of applications to further steps of the distribution process and its financial management,” says Dietlmeier.
Gleaning real-world use case information from consultation with the banking consortium, the IBM developers’ aim was to put together a platform which reduces barriers to trade for large and small businesses.
“The architecture allows companies of all sizes to participate,” Fabio Keller, project lead for Batavia at IBM, tells GTR.
“We have put a design in place where a transporter or a logistics guy is able to participate with way lower entrance barriers,” he explains, adding that because new users can adopt Batavia fairly easily, the network can grow quickly.
Batavia is built on the IBM Blockchain Platform, which is developed using Hyperledger Fabric – a blockchain framework hosted by the Linux Foundation. According to Keller, this framework was selected because of its scope for flexibility and potential for interconnectivity with technologies from a range of providers.
Despite the principle of data sharing, Keller emphasises the IBM team is “really sensitive” about network privacy: only parties privy to the particular trade transaction will have the access key to observe the blockchain ledger where the live updates appear.
In addition to providing a secure and private environment for managing trade deals, Batavia digitises – and speeds up – a historically slow and paper-based process. For instance, the platform facilitates the process of obtaining a letter of credit – which usually takes 10 to 14 days – in under one hour, perhaps even in “a couple of minutes”, explains Beat Bannwart, head strategic innovation, market development corporate and institutional clients at UBS.
In spite of the potential benefits of IBM’s existing hardware, Batavia has yet to prove its software can live up to the hype. One of its highly-anticipated functions – its capability to track physical world events via Internet of Things (IoT) connectivity – is not actually up and running at this point.
“While IoT devices have not yet been involved, [Batavia] has been designed to have them involved, clearly,” explains Keller, highlighting that the team will build in this capability in due course. IoT components, such as sensors, are small hardware nodes which could relay information about temperature, volume, timings and physical condition of the cargo.
While Batavia has proven a viable blockchain trade tool – at least in two test runs – its creators are coy about the date of its full commercial rollout. The roadmap is a closely-guarded secret and Batavia’s rollout date is “not yet exactly defined”, says Bannwart. Corporate users will be able to join the next round of testing on an invite-only basis.