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Significantly reduced financial risk from cross border trade

This week, the blockchain based platform we.trade was launched with pilot Nordea customers making live trades. 

we.trade platform overcomes catch-22 problem in trade

Developed by Nordea in collaboration with eight other banks - Banco Santander, Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit, we.trade creates a platform that allows companies, from small- and medium-sized enterprises (SMEs) to large corporates, to make fast, easy, paperless and Know Your Customer (KYC) compliant trades. The aim is to fully automate the trading process and seamlessly connect the entire trade ecosystem. 

First of its kind

The launch of we.trade marks the completion of the first-ever bank guaranteed trade transaction on a multi-party blockchain network in Europe. The launch of we.trade marks the completion of the first-ever bank guaranteed trade transaction on a multi-party blockchain network in Europe. 

Patrik Zekkar, Head of Trade Finance & Working Capital Management at Nordea, says. “The we.trade platform creates trust in the trading system and reduces the catch-22 that occurs at the beginning of a trade. Do I ship products before I receive payment or do I as buyer pay before I receive the shipment? That was the kind of basic need we wanted to cover before building from there. Using blockchain technology of this kind and scaling it up to this level is a real first. This project has been running for 1.5 years and to reach the stage of running live DLT (Distributed Ledger Technology) blockchain transactions across Europe is quite important and a big breakthrough.”

Peace of mind for SMEs

Traditionally SMEs have faced a three-way trade off between bearing the risk, purchasing complex and expensive coverage or even turning down a business opportunity. The use of blockchain technology enables the automatic generation of payment instructions to be submitted to the debtor’s bank as soon as contractual conditions are met. This minimises the risk of payment delays which can be costly for both buyers and sellers. 

The we.trade platform also offers SMEs in particular, access to easy financing, the chance to avoid prepayments and a portfolio of different solutions that can help them wherever they are in the business cycle.

Magnus Montan, Head of Business Banking at Nordea, notes: ““With we.trade we have significantly reduced the financial risk of conducting cross border trade. This technology is a real breakthrough for small businesses in particular as it enables them to trade with other businesses that they may not have been able to trade with before due to risk and uncertainty.”

“This platform is a controlled and transparent environment that removes the unknowns from the trading process and creates trust. However, it’s not only the technology which protects customers and gives them visibility. A rule book and a legal structure have also been put in place stipulating the conditions for submitting transactions in we.trade. It’s a legal framework to find comfort in,” adds Magnus Montan.

Europe-wide trading ecosystem

The we.trade platform is based on collaboration of nine banks has made it possible to create a large Europe-wide trading ecosystem with a critical mass of customers to ensure a relevant and sustainable platform. This shared economy facilitated by a community of banks has been undertaken for the benefits of customers, especially SMEs. The intention is to bring other Nordic and European banks onto the platform in the future in a joint collaboration that will benefit all companies engaged in trade either domestically or across the region. 

No wonder Patrik Zekkar believes that, “This is massive disruptive change for the industry. This is just the beginning and I don’t think we can really foresee where it will take us. It’s not just about digitalising existing trade processes or part of the existing supply chain, it’s about totally changing the set-up of how we conduct our trade. It’s an order-to-payment set up – order all the way to cash.”

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CTMfile take: Zekkar is right, the we.trade initiative is about totally changing the set-up of how we conduct our trade, and we cannot see where it is going to lead to. But it will be very disruptive, for sure.

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This item appears in the following sections:
Trade & FSC Management
Financial Supply Chain Platforms
Trade Finance
Trade Transaction & Payment Services

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