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Trade finance platform Komgo has launched a secondary market product for originators and investors, the latest industry attempt to digitise traditional asset distribution processes.

After going live in 2018, Komgo’s initial focus was on streamlining commodity trade finance transactions.

Now the trade finance platform has expanded its product range, repurposing its existing Market solution to allow financial institutions to sell different types of trade finance assets to investors.

The move is aimed at digitising an entirely new market segment, with banks and non-bank funders still largely using manual processes to prepare and execute secondary risk participations for trade transactions.

“The potential of the secondary market is big, but to date has largely been untapped, stuck on emails and Excel spreadsheets. Now a tool exists,” says Izabela Czepirska, product manager at Komgo.

“The last mile of these transactions has stayed on emails, even within banks at the forefront of digitisation efforts… Banks can use the platform for price quoting, insurance requests, execution of documents and tracking until repayment,” Czepirska tells GTR.

Since launching the product in June, Komgo has onboarded roughly 10 asset sellers and about 200 buyers.

In the coming months, the firm’s focus will be on growing the number of sellers using the product and expects investors will follow.

“Buyers do not have to be part of the platform, they can still interact with the seller digitally, via Komgo, but do not have to pay us anything,” says Czepirska. “They could be insurance brokers, underwriters, large, small or boutique banks. It is not only for big buyers.”

The platform is offering the service via subscription, opting against a charge-per-transaction model.

The latest offering comes on top of Komgo’s existing products, namely Trakk for document fraud checking, Check for know your customer (KYC) and Konsole for trade finance.

 

Years in the making

Komgo first began to weigh up the possibility of servicing the secondary market three years ago, inviting a total of 13 trade finance banks to join monthly workshops aimed at creating a potential product.

“Initially, we asked these banks why Komgo should create this product. Why have previous efforts to digitise this aspect of trade finance not reached large-scale adoption? Within the fintech industry, there were significant failures on the primary side… as well as disappointments on the secondary market side,” says Czepirska.

Komgo then began consultations with a group of eight early adopters to start more “in-depth” discussions about how a secondary market product should be built. This work included the creation of a taxonomy, which Komgo expanded on and developed in conjunction with the International Trade and Forfaiting Association.

The taxonomy was essential for the development of Komgo’s latest product, helping create standard terms and definitions for both the primary and secondary trade finance markets: for instance, what constitutes a contingent asset, or the difference between corporate and FI risk.

“Outside of our group of early adopters, more banks, insurers, trade funds and other entities reviewed the work, so we could put every single name or nomenclature used in reference to trade finance assets in the final document,” Czepirska says.

“We then finished development of the product in May; it took a year and a half – it was a lot of work. Beyond the eight banks that sponsored its development, we are now onboarding new users; it is a network, so this process will take a while, but Citi have now joined. ING is a big user. There are participants who have helped us build, but do not use yet; there are also others who are not fully up to speed.”

Any product included within the taxonomy can be bought and sold on the platform, and Komgo expects banks to use it to sell commodity and non-commodity transactions.

The product launch comes amid wider efforts at Komgo to expand into new markets and sectors.

Last year, the platform acquired Canada-based Global Trade Corporation (GTC), which connects financial institutions and corporates by automating and digitising letters of credit, bank guarantees, documentary collections and supply chain finance.

Since buying a stake in GTC, Komgo’s portfolio for non-commodity trade finance transactions has grown and is “very big”, says Czepirska.

In recent months, Komgo opened an office in Miami to strengthen its presence in the US and Latin America.