Tradeteq, a technology provider for trade finance asset distribution, has raised US$9.4mn in a series A funding round, which it will use to incorporate both bank-to-bank and credit insurance distribution into its trade finance distribution solution.

Originally launched in 2018, Tradeteq’s cloud-based platform allows originators to package trade finance products into standardised investments that can be bought and sold through private distribution networks and settled like common fixed income products.

The company says it intends to use this new funding, which comes from a consortium of US technology investors, to speed up its product development as well as expand its geographical reach.

“We had so far focused on the bank to capital market channel, which involves the repackaging of open account instruments into fungible notes such that they can be sold to pension funds, insurance companies and the likes,” Christoph Gugelmann, Tradeteq’s co-founder and CEO, tells GTR.

With this new investment, which brings the total amount raised since its launch to more than US$16mn, Tradeteq will now service the bank-to-bank channel, distributing letters of credit (LC) from one bank to another, for example, as well as move into credit insurance distribution.

“This involves largely the same workflow process, but the seller banks now face an insurance carrier,” says Gugelmann. “The idea is to have a ‘one stop shop’ for trade finance distribution across all relevant channels and all relevant products, instead of artificially segregating these markets, as is the case today.”

With the global trade finance gap expected to widen as a result of the impact of the Covid-19 pandemic and the incoming Basel IV rules, which mandate even higher capital requirements for banks, opening up additional sources of funding will be vital to increase capacity in the bank-intermediated market.

The originate-and-distribute model, which creates a secondary trade finance marketplace, is seen by many banks as an important means of opening up additional sources of funding, as well as presenting a compelling opportunity for an investor base that would not usually consider trade finance as an asset class.

While several banks have worked out ways of packaging up their trade book, or individual transactions, and placing them with investors, Tradeteq says that its solution allows for efficient and scalable distribution to other banks, credit insurers, and capital market participants, while reducing the costs associated with the execution of these financial transactions.

“Trade finance distribution is more than just allowing banks and investors to transact assets. It is about fundamentally transforming the way trade finance divisions, and the wider global trade ecosystem, operate,” says Gugelmann. “Greater automation and digitisation are key to increasing efficiency and unlocking the potential value of this market. This funding will allow us to ultimately reduce friction in the trade finance market.”

Gugelmann adds that the coming months will see Tradeteq onboard what he calls “leading trade finance players”, that he is not yet able to name, but which he says include a number of banks, along with a credit insurer.