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The verification of collateral has long been one of the most challenging aspects of trade finance. Misrepresentation of goods or even degradation in quality can quickly lead to losses for traders and financiers. Veridapt recently signed an agreement with DMT, a pan-African collateral manager, to distribute its real-time collateral monitoring platform across the continent. In this Industry Perspective, GTR speaks with Veridapt’s vice-president of strategy and growth Damir Hasagic about how the partnership could help give comfort to financiers and insurers who might otherwise shy away from collateral-based lending.

 

GTR: What are some of the industry challenges your partnership is trying to address?

Hasagic: We spent a lot of time developing technology that bridges the physical and the digital. When it comes to collateral-based finance, the industry has been working mainly on the basis of know-your-client and self-declarations. What we do is provide real-time transparency to a party so that more capital can be unlocked because it’s considered safe to do so. That also means banks are much more likely to lend to smaller traders that often don’t have access to that type of finance at all.

Collateral management in the oil storage business is a question of trust and transparency. It is very important to have real-time visibility of storage facilities. The only way to do that is to deploy independent third-party technology – just a pure tech company with no financial interest in the transaction.

 

GTR: Do challenges with monitoring or verifying collateral and inventory contribute to the shortage of trade finance supply in Africa?

Hasagic: Definitely. In jurisdictions where perceived credit risk is high, such as Africa, major banks in Europe, the US and elsewhere are less inclined to take on new clients. This means a lot of small-to-medium-sized businesses are denied access to capital. Our technology corrects that.

 

GTR: Does your platform assist in providing additional assurances to the potential financiers and insurers of these inventories?

Hasagic: When we talk to underwriters and insurance brokers, they all like the idea of additional assurances. But many underwriters currently lack the confidence that a digital safeguard system is installed and being utilised. It’s like your house alarm: you can install the alarm, but that’s not the end game. You must have technology that will monitor for anomalies and send alerts when required. All this is complemented by collateral managers, such as DMT. They are the boots on the ground. Simply put, Veridapt is providing the tools and technologies that will help DMT to innovate, grow and adopt more efficient inventory management practices. That’s because our technology is designed to reduce operating and insurance costs, and minimise probability of theft, misappropriation, unexplained losses, quality deterioration and environmental risks.

 

GTR: Which are some of the key commodities where you see digital inventory/collateral verification being most useful?

Hasagic: DMT is well established in the oil sector, and it’s very much in our wheelhouse, so it makes sense for us to start there. But because we can measure any bulk commodity, we are progressing to soft commodities and metal warehouses as well.

Metals is an interesting sector. We used to think that the industry had all the conditions in place and didn’t necessarily require a solution like ours, but since several instances of fraud came to light last year, we’re looking at augmenting AI algorithms to automatically discover anomalies in those situations. We are not just another CCTV system for that market. So, in combination with collateral managers, it makes sense to make an impact in metals as well.

 

GTR: Can you explain how your platform embeds in an end-buyer? Does it replace physical inspections, or complement them?

Hasagic: Our technology was not developed to replace manual inspections, but rather to complement them with automation and 24/7 real-time monitoring capabilities. This allows collateral managers to optimise those inspections and even reduce their frequency.

The main idea is the technology platform helps facility operators, especially in the third-party terminals. It allows the operators of those facilities to attract more business by digitising the processes and offering a platform with a multi-party document exchange. The transparency that ensues then becomes a type of information exchange platform between facility operators, the trader and the financial institution. In our view, this allows the facility operator to attract more business and optimise their processes.