Trade finance network options increasing and overlapping
by Jack Large
A major new trade finance network is coming from a gorup of seven major banks: ANZ, Banco Santander, BNP Paribas, Citi, Deutsche Bank, HSBC and Standard Chartered. They have announced a joint initiative to build a digital “Trade Information Network” by the end of 2018. The founding banks have signed a corresponding Memorandum of Understanding (MoU) and have agreed to work toward piloting the Network. They will introduce the Network at the SIBOS conference in Sydney, Australia, on 22 October 2018. The claim that, once operational, TIN will become the first inclusive global multi-bank, multi-corporate network in trade finance.
The Network aims to address the unmet demand for financing earlier in the supply chain by enabling corporates to easily and securely communicate trade information directly with banks of their choice. In order to develop a new industry standard in trade finance, the Network’s approach has been validated with extensive corporate and bank engagement. In addition to the founding banks, more than 20 additional banks from around the world are actively participating in developing the Network and several corporates have already expressed an interest in participating in pilots.
The press release claims that “the consortium conducted an ‘extensive selection process’ to find a technology provider and selected Canada-based tech heavyweight CGI. CGI’s offering in trade finance is Trade360, a Software-as-a-Service (SaaS) platform that counts ANZ among its largest global users, as well as a number of Canadian banks, such as Scotiabank, BMO and National Bank of Canada.”
The pilot version of the network is now complete and CGI will continue to support the development of the Trade Information Network.
The Network has open architecture and standardised connectivity based on a governance model similar to SWIFT to achieve maximum adoption across the supply chain ecosystem.
How will it work
Corporates will use a simple one-time registration process which will allow them to connect with all banks on the Network. And then will be able to submit and verify purchase orders and invoices to request trade financing from the banks of their choice. By providing those banks with access to trusted trade information, the Network will help to mitigate the risk of double financing and fraudulent trade information across the industry. This enables the relevant banks to better assess risks and provide trade financing earlier in the supply chain, including for small and medium-sized enterprises who have traditionally experienced difficulty in accessing trade finance.
Multiple trade platforms
The role of the Trade Information Network is to “address the unmet demand for financing earlier in the supply chain by enabling corporates to easily and securely communicate trade information directly with banks of their choice.” But that is where the role of TIN stops, the Press Release explains that, “Banks will provide financing outside of the Network using their existing systems.”
So corporates will still have to use the trade finance platforms such as:
- Batavia which uses the Hyperledger Fabric for its blockchain and IBM as the technology partner. It is aiming to cover open account trade finance and Letters of Credit. Banks involved include: UBS, Bank of Montreal, CaixaBank, Commerzbank and Erste Group
- Voltron which uses the R3 Corda technology platform and is aiming to digitise Letter of Credit. Banks involved include: Bangkok Bank, BBVA, BNP Paribas, HSBC, ING, Intesa, Natwest, Mizuho, Scotiabank, SEB, CTBC, and U.S. Bancorp.
- Marco Polo is a collaboration in which the technology partners are the R3 Corda platform and Trade IX which provides both payment solutions such as guarantees ands open account trade finance solutions such as receivable discounting and factoring. Banks involved include: Natwest, BNP Paribas, Commerzbank, ING, DNB, OP Financial, Bangkok Bank, SMBC, Standard Chartered Bank, and Natixis.
- We.trade platform which uses the Hyperledger Fabric for its blockchain and IBM as the technology partner. Banks involved include: Rabobank, Deutsche Bank, HSBC, KBC, Natixis, Societé Generale, UniCredit, Nordea, and Santander.
CTMfile take: The need for the Trade Information Network is so obvious - it raises two questions, the first is, “Why has it taken so long to put together?”, and the second is, “How can it be integrated direct into the banks’ existing trade finance platforms?”
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