Commerzbank, Bank of Montreal, Erste Group and CaixaBank have joined an initiative by UBS and IBM to build a new global trade finance platform powered by blockchain technology.

Under the name Batavia, the platform is an expansion of a proof of concept that IBM and UBS launched at Sibos in 2016 and have since concluded successfully.

The aim of the platform is to give organisations around the world a place to openly and easily build multi-party, cross-border trading networks worldwide. It will give participants in a trade transaction a shared, immutable record, which will improve transparency and efficiency, minimise the risk of errors and dispute as well as drive more trade business.

Among other things, transacting parties will be able to track the progress of a shipment. Agreements will be written into a computer code – a so-called smart contract – which enables payments to automatically be released incrementally along each step of the process. The platform will also facilitate the financing of transactions across all types of trade, whether goods are transported by air, land or sea.

Speaking to GTR, Fabio Keller, project lead for Batavia at IBM, says the development of the platform, which will be powered by the Hyperledger Fabric framework, has now commenced. The first phase involves the development of a minimum viable product (MVP) and the pilot transactions are scheduled to take place with customers next year. Only when pilots have concluded will the parties define the future timeline, including when the platform will go into production.

The four additional banks have joined to help scale up the project. Development will happen in consultation with transportation industry experts and the banks’ customers to ensure that the platform is flexible and intuitive and can be commercialised.

Keller expects to welcome new partner banks during this phase or immediately after. “The value sits in the network, and the larger the network, the better, so that we have real coverage over the whole globe. We would like to grow in a controlled manner, because if you have to find solutions among 50 banks, it’s impossible. You need to define the MVP with a small number of participants, then you can start growing,” he says.

A “cornerstone” of the platform will be connecting the smart contracts with the internet of things (IoT) sensors, which could automatically feed data (on, for example, the location of the goods) into the contract. This feature may however be tested only at a later stage, Keller says.

In a statement, the banks conclude that by helping to connect participants in a trading network, the platform has the “potential to transform global trade”.

The open nature of Batavia, the statement says, will encourage broad participation by many banks, vendors and regulators, and will help open new trade corridors and bring new players into the market.

For one, Jordi Fontanals, CaixaBank’s COO, notes that not only will blockchain drive digitisation in the trade space, but, “more importantly it paves the way for international projects in collaboration with multiple partners” and the opportunity to bolster the bank’s foreign trade services.