A group of global commodity firms and banks will soon launch Forcefield, a commodity trade and finance platform powered by blockchain and internet of things (IoT) technology.
Accenture, ABN Amro, Anglo American, CMST International, Hartree Partners, ING, Mercuria and OCBC Bank are among the shareholders of a new independent legal entity created to finalise the platform deployment and operate as a market utility.
The entity is named Forcefield Applied Blockchain Solutions Holding PTE and has been incorporated in Singapore.
In short, Forcefield is a digital platform for managing and tracing commodities throughout the entire supply chain lifecycle. It utilises blockchain technology and smart IoT sensors to enhance security of title and reduce both risks and costs of handling physical inventory. It is also designed to facilitate the financing of the commodities.
“The platform can communicate with physical trade inventories through IoT sensors and near-field communication chips,” says ABN Amro in a statement. “As a result, the inventories, which are often collateral for loans, can be monitored very effectively, which will lead to more secure physical handling processes and a reduction of costs.”
Forcefield has been in the making for the past 12 months, having gone through a proof of concept phase with Accenture as the technology provider.
The new legal entity now aims to pilot the platform amongst shareholders in Q4 this year and launch to the broader market early next year.
The system will initially focus on refined metals, but functionality will be expanded across other dry bulk commodities.
Law firm Allen & Overy is advising on matters related to corporate and technology, the financing and commodity trading on the platform, and well as compliance and regulation.
“Forcefield is intended to mitigate systemic industry risks of the kind suffered in Qingdao through innovation,” says Tom Longmuir, counsel in Allen & Overy’s global banking and finance team, referencing the huge metals financing fraud which took place in Qingdao in 2014. “It will do this by implementing a blockchain-based title and traceability concept in relation to physical supply, moving trading and financing away from paper-based to electronic systems.”
The unveiling of Forcefield comes amid a growing focus in the trade finance industry on new technologies to improve the security and efficiency of commodity trading and financing.
komgo, a blockchain-based platform backed by some of the world’s largest commodity trade finance banks, went live in December. Several of Forcefield’s founders, including ABN Amro, ING and Mercuria, are also shareholders of komgo. Whereas komgo is focusing mainly on the exchange of documentation in relation to commodity trade finance, including standardising the know your customer process and digitising the letter of credit, Forcefield’s focus seems to be more on the tracking of physical commodities using IoT.
Other companies have been exploring this technology to improve the way commodities are financed. Arviem, for one, a technology company that uses IoT sensors to monitor cargo, recently became one of the first in the world to integrate logistics IoT data into a commercial trade finance service. The solution involves giving financiers the ability to track in real-time the exact location and condition of the goods they are financing – all the way from origin to the point of destination – in order to better assess risk and gain confidence to provide more and cheaper financing than they do today.
This is particularly useful for small and medium-sized companies, who typically struggle to get financing when they need it, if at all. For example, Arviem worked with a small commodities trader on a pilot that covered the transport of silver concentrates from Bolivia via a Chilean port to a smelter in Belgium. Typically, the trader would have to pay upfront at the mine in Bolivia but only be able to receive financing 15 days after the bill of lading is issued out of Chile. In Arviem’s pilot, on the other hand, the trader received financing as early as the issuance of a holding certificate at the mine.
In other sectors, too, some banks have been looking at the use of IoT to improve their lending patterns. Standard Chartered, for one, is currently piloting IoT-enabled smart distributor financing with large auto manufacturers in Asia. Through IoT sensors, the stakeholders can track exactly when a car is moved from one warehouse to another, or sold to the end customer, enabling the bank to extend appropriate tenors and limits to the distributor.