Three banks have left the Batavia blockchain consortium to join we.trade, a similar trade finance initiative.
CaixaBank, Erste Group and UBS have become shareholders of the we.trade blockchain platform, thus bringing the number of banking shareholders to 12. They join Deutsche Bank, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, Société Générale and UniCredit.
Batavia will now cease to exist, but according to players involved in the initiatives, the move represents a decision to merge the two platforms, rather than shutting Batavia down.
we.trade, which went live in July, is a solution for managing, tracking and protecting open account trade transactions between SMEs in Europe. It connects parties involved in a trade deal in one place, helps SMEs initiate new trading relationships and provides them with easy access to a range of financing solutions.
Batavia, meanwhile, had a similar focus on simplifying open account trade finance. However, it aimed to cover all types of corporate clients and on a global scale. UBS was the bank that initiated the proof of concept for the platform in 2016, with Commerzbank, Bank of Montreal, Erste Group and CaixaBank subsequently joining the initiative. The consortium conducted its first pilot transactions in April, but did not specify a roll out date.
Both platforms are powered by Hyperledger Fabric and built by IBM.
Speaking to GTR, Beat Bannwart, head of strategic innovation and market development for corporate and institutional clients at UBS, says that by joining forces, the parties will be able to scale quicker while providing their clients with the best value proposition.
“The platforms have a lot of commonalities, which were increasingly uncovered as we developed them,” he says. “The two projects had different starting points, but if you look at them from a more holistic point of view, we eventually want to achieve the same. And, of course, there is the fact that we have developed the platform on the same technology and have the same provider.”
He adds that after establishing a strong European footprint for we.trade, the goal is still to create a global trade platform for all corporate clients.
The parties are now in discussion about which functionalities from Batavia will be incorporated into the we.trade platform. “The goal is to get a decent functionality put together from both initiatives,” Bannwart says.
With the addition of the three new banks, we.trade increases it market reach from 11 to 13 European countries. These are: Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the UK.
The existing banks in the consortium have either completed their first transactions or are in the process of doing so. Meanwhile, the new banks will now start looking at how to connect their existing infrastructures with the platform. According to Bannwart, UBS is now in discussions with clients about piloting in the platform in early 2019.
In a statement, we.trade – which was incorporated as an independent legal entity in April – says it will continue to expand and evaluate additional partners from both the banking and non-banking sectors. The vision, it says, is to have an “open and interoperable platform”.
The statement does not comment on why Commerzbank and Bank of Montreal, the two remaining banks in the Batavia consortium, have not joined we.trade as well.
Speaking about the merger, Jason Kelley, general manager blockchain services at IBM, says the “key to success with blockchain solutions lies within the strength of the network”.
“We are excited to see this success as a proof point that networks will continue to grow through an evolution of coming together in complementary areas to build broader ecosystems, and in many cases a network of networks,” he says.
The announcement certainly raises the debate over what will happen to the flurry of blockchain initiatives currently underway in the trade finance space, and whether more consolidation is bound to happen. While IBM’s two flagship trade finance platforms were Batavia and we.trade, R3 also has a number of similar initiatives, built on its Corda framework.
One of them, Marco Polo, also focuses on open account trade finance. Run by a consortium of 10 banks, it is expected to be commercialised next year. The first products that will be released on this platform are receivables discounting and factoring, with banks set to start piloting in October.
The other, Voltron, focuses on letters of credit, with HSBC and ING having conducted their first live transaction earlier this year. The next pilot phase, which is set to take place this quarter, will see other banks, including NatWest, BNP Paribas and Standard Chartered, test the platform as well.
Meanwhile, komgo, which has just launched, is tackling challenges in commodity trade finance, including the letter of credit. It will be based on Quorum, the enterprise-focused version of Ethereum.
“It’s hard to predict how exactly the market will look in two or three years,” says Bannwart at UBS. “Key for the client is that they have a unified customer experience. On the one hand there may be more consolidation in the market or alignment between the initiatives. On the other hand you can achieve this through interoperability. I am convinced you will see the platforms establishing interoperable networks.”