Seven global financial institutions are building a new platform they say will become the “the first inclusive global multi-bank, multi-corporate network in trade finance”. The banks, which are all involved in separate blockchain initiatives, have opted for a different technology on this occasion.
ANZ, BNP Paribas, Citi, Deutsche Bank, HSBC, Santander and Standard Chartered announced today that they have entered a joint initiative to build a new platform called the Trade Information Network by the end of 2018.
The project, which has been underway for two years, was originally known as Wilson, but is now launching under its new name.
Speaking to GTR, Michael Vrontamitis, Standard Chartered’s head of trade for Europe and Americas, says the parties expect to begin pilots in the first quarter of next year before launching a production-ready platform later in 2019.
He explains that the Trade Information Network works as “an aggregation platform for submitting purchase orders and invoices to the banking industry”. This essentially means it will pull together the multiple procure-to-pay networks and supplier portals that exist in the market, and provide one platform where corporates around the world can submit and verify purchase orders and invoices to request trade financing from the banks of their choice.
“Every large buyer wants to use its own network,” Vrontamitis says. “If you think about it from a supplier’s perspective in Asia, for example: it may have 10 buyers in Europe and 10 buyers in Americas, all of which are using different networks. But on the Trade Information Network, the supplier can just connect once to deal with all its buyers.”
While the platform will make it easier for corporates to communicate with their banks, the ultimately goal is to enable banks to better assess risks and provide trade financing earlier in the supply chain. This is hoped to benefit more small and medium-sized enterprises, which have traditionally struggled to access trade finance.
By gathering purchase order and invoice data in one place, banks will also be able to check whether a document has already been financed, thus mitigating the risk of double-financing and fraudulent trade information across the industry – a challenge that continues to burden financiers today.
According to Vrontamitis, the parties are aiming to make the platform a utility for the industry as opposed to a profit-making venture. While the seven banks are now the founders of the network, more than 20 additional banks and a number of corporates from around the world have already been involved in the development phase, and once live, it will be open to any other bank or corporate to join.
The consortium emphasises that the network has an “open architecture and standardised connectivity” based on a governance model similar to Swift to achieve widespread adoption across the supply chain ecosystem.
From prototype to production
Having completed a prototype earlier this year, the consortium initiated a request for proposal in April, and subsequently chose CGI as its technology provider. The consortium says it selected CGI “due to its combination of deep trade finance, technology and business consulting expertise, and global presence”. A first version of the platform has now been built but will undergo further development over the next few months.
The project is just one amid a sea of consortium-led trade finance initiatives growing in influence. All the banks involved in the Trade Information Network are simultaneously exploring blockchain in one way or another to help optimise their trade finance operations.
Marco Polo and we.trade are two examples of blockchain-powered, multibank platforms for open account trade, which are currently being built by large-bank consortia. we.trade now has 12 shareholders, including Deutsche Bank, HSBC and Santander, and has entered its production phase. Marco Polo, meanwhile, is due to start piloting next month. This consortium is made up of 11 banks, including BNP Paribas and Standard Chartered.
Nevertheless, for the Trade Information Network, the founding banks decided to build it on cloud technology and not blockchain. Vrontamitis explains the reasoning behind this decision: “It’s not a technology project, it’s about solving a specific problem that we have identified, namely how to enable suppliers to get early financing in the supply chain. A lot of people start with technology and then identify the problem. We started with the problem, then came up with the request for proposal. Some of the vendors were pitching blockchain, some were not, and we selected one which we thought would meet the needs right now. This is something that we think will be deliverable and scalable today.”
Vrontamitis adds that the network could still be blockchain-enabled, and as blockchain develops the consortium may change the underlying technology.
He also emphasises that the Trade Information Network is remarkably different from some of the blockchain initiatives in that the financing itself still will happen outside of the network, using banks’ existing systems. It also doesn’t connect banks to each other.
“When you look at consortia such as Marco Polo, for example, they have an underlying blockchain exchange capability, they connect various parties and are building financing applications on the platform. It’s a much more complex project. The Trade Information Network doesn’t offer financing on the platform. It is essentially a way of allowing a corporate to submit purchase orders and invoices to the banking network. Once the corporate is on the platform, it can then connect to Marco Polo or other networks that are there or vice versa,” he says.